2017 (2) TMI 841 - AT - Service Tax

CENVAT credit - Garden Maintenance service - Brokerage Charges paid by the company for getting residential garden for Japanese employees in Bangalore - Golf Membership fee - Cargo Handling Charges for Japanese expatriation and repatriation - Pandal and Shamiana charges - denial on the ground that the impugned services are not covered by the definition of input service u/r 2(l) of CCR 2004 as the same is not directly or indirectly in or in relation to manufacture and clearance of goods - Held that - any service which is used by the manufacturer whether directly or indirectly in or in relation to manufacture of final products and clearance of final products up to the place of removal fall in the definition of input service - the Madras High Court in the case of CCE v. Rane TRW Steering Systems Ltd. 2015 (4) TMI 704 - MADRAS HIGH COURT has held that House Keeping and Garden Services where an employer spends money to maintain their factory premises in an eco-friendly manner the tax paid on such services would form part of the cost of final products and the same would fall within the ambit of input services - Cenvat credit of service tax paid on Garden Maintenance Service allowed. Brokerage charges - Held that - Brokerage charges paid by the company for getting residential accommodation for Japanese employees in Bangalore is also related to the business of the company and fall in the definition of input service - credit allowed. Golf Club Membership Fee - Cargo Handling Charges for Japanese expatriation/repatriation - Pandal/Shamiana Charges - Held that - the appellant is not entitled to Cenvat credit of service tax paid on these three services as these services are not integrally connected with the business of the assessee and therefore the appellants are not entitled to Cenvat credit on these three services. Equal penalty on the appellant is set aside and a penalty of 1000/- u/r 15 of CCR 2004 imposed. Appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
Whether the appellant is entitled to Cenvat credit on various input services like Garden Maintenance, Golf Club Subscription, Cargo charges, Shamiana service, and Brokerage charges.

Analysis:
The appeal was filed against the Order-in-Appeal upholding the disallowance of Cenvat credit on certain input services by the Commissioner (Appeals). The appellant, engaged in manufacturing motor vehicles, argued that the services in question were used directly or indirectly in relation to their manufacturing activity, making them eligible for input tax credit. The appellant cited various authorities to support their claim, emphasizing the broad definition of 'input service' under Rule 2(l) of Cenvat Credit Rules, 2004. On the other hand, the AR contended that the services like Golf Club Membership fee and Cargo Handling charges were not related to the manufacturing process. The AR relied on a judgment emphasizing that the input services must be integrally connected with the business to qualify for credit.

The key issue revolved around the interpretation of the definition of 'input service' under Rule 2(l) of Cenvat Credit Rules, 2004. The definition includes services used directly or indirectly in or in relation to the manufacture of final products. The Tribunal analyzed each service individually to determine their eligibility for Cenvat credit. It was held that services like Garden Maintenance and Brokerage charges for residential accommodation were integral to the business and qualified for credit based on precedents and the broad interpretation of 'input service'. However, services like Golf Club Membership fee, Cargo Handling Charges for expatriation/repatriation, and Pandal/Shamiana charges for a festival inside the factory premises were deemed not integrally connected with the business, thus not eligible for credit.

Additionally, the Tribunal addressed the penalty imposed on the appellant under Rule 15 of Cenvat Credit Rules, 2004. The appellant argued that the penalty was excessive, citing the maximum penalty limit during the relevant period. The Tribunal agreed and reduced the penalty from equal to &8377;1000, in accordance with the clear provisions of Rule 15.

In conclusion, the Tribunal partially allowed the appeal, granting Cenvat credit on Garden Maintenance and Brokerage charges, while denying credit on Golf Club Membership fee, Cargo Handling Charges, and Pandal/Shamiana charges. The penalty was reduced to &8377;1000. The appeal was disposed of accordingly.