2018 (1) TMI 913 - AT - Central Excise

CENVAT credit - input services - Club or Association Service - Health and Fitness Service - Held that - the disputed services were used and utilized by the appellant for accomplishing its business purpose. Since the period involved in this case is prior to March, 2011, benefit of Cenvat Credit under the un-amended definition of input service, should be available to the appellant in respect of the disputed services, inasmuch as, the Phrase i.e. activities relating to business was finding place in the inclusive part of such definition. The appellant had considered the element of service and service tax component thereon in determination of the cost of production and discharged the Central Excise duty liability on removal of the final product - credit to be allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of Cenvat Credit on service tax paid for Club or Association Service and Health and Fitness Service.

Analysis:
The appeal challenged the Order-in-Original denying Cenvat Credit on service tax paid for Club or Association Service and Health and Fitness Service. The Adjudicating Authority based the denial on the ground that these services did not meet the definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004.

The appellant argued that the disputed services were utilized for business objectives, making them eligible for Cenvat Credit as the phrase "activity relating to business" was part of the definition of input service. The appellant cited a previous decision by the Bangalore Bench of the Tribunal where Cenvat Credit was allowed on similar disputed services.

On the other hand, the Revenue contended that the disputed services lacked a nexus with the manufacture of the final product, thus making the Cenvat benefit ineligible for the appellant. The Revenue relied on previous Tribunal decisions to support their stance.

Upon review, the Tribunal found that the disputed services were indeed used by the appellant for business purposes. Considering the un-amended definition of input service applicable to the case period, the Tribunal concluded that the appellant should be entitled to Cenvat Credit for the disputed services, as the inclusive part of the definition included activities relating to business.

Additionally, the Tribunal highlighted a previous decision regarding the appellant's Bangalore Unit, where Cenvat Credit was allowed based on the consideration of service and service tax in the cost of production. The Tribunal reasoned that consistency in maintaining books of accounts across different units should warrant Cenvat Credit eligibility. The Tribunal distinguished the Revenue's cited cases, emphasizing that the Club Memberships and Health & Fitness Services in this case were directly related to facilitating smooth business operations and benefiting the employees, thus qualifying as input services for Cenvat Credit.

Ultimately, the Tribunal found no merit in the impugned order and allowed the appeal in favor of the appellant, setting aside the denial of Cenvat Credit on the disputed services.