2009 (11) TMI 142 - AT - Service Tax

Cenvat Credit- Input services- The assesee availed the Cenvat Credit of service tax paid on (a) construction service,(b) repair and maintenance service, (c) manpower recruitment service, and (d) clearing service, all of which were provided by the respective service providers at the residential colony outside the assessee s factory. The employees of the assessee reside in the said colony. The residential building were constructed, old residential buildings were repaired and maintained, security guards for the colony were recruited by a manpower recruiting agency. The adjudicating authority held the said services to be outside the purview of the definition of input service given under rule 2(l) and accordingly disallow the Cenvat Credit. Commissioner (Appeals) allowed the Cenvat Credit. In the light of the decision of Maruti Suzuki Ltd. v. CCE 2009 -TMI - 34348 - SUPREME COURT held that- as the assessee has not established nexus between any of the four services and the manufacturer or clearance of excisable goods, the benefit of Cenvat Credit in respect of such service cannot be allowed. But no penalty is imposed. The appeal is disposed of.

Issues Involved:
1. Eligibility of CENVAT credit on services used in a residential colony situated outside the factory premises.
2. Interpretation of the definition of "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004.
3. Applicability of the Supreme Court's decision in Maruti Suzuki Ltd. v. CCE to the present case.
4. Relevance of the High Court's decision in Coca-Cola India (P.) Ltd. v. CCE to the present case.
5. Imposition of penalties in interpretative cases.

Issue-wise Detailed Analysis:

1. Eligibility of CENVAT Credit on Services Used in a Residential Colony:
The respondent had availed CENVAT credit on service tax paid for services such as construction, repairs and maintenance, manpower recruitment, and cleaning services in a residential colony outside the factory premises. The original authority disallowed the credit, stating these services did not qualify as "input services" under Rule 2(l) of the CENVAT Credit Rules, 2004. However, the appellate authority allowed the credit, recognizing these as "input services."

2. Interpretation of the Definition of "Input Service":
The department argued that for a service to qualify as an "input service," it must have a nexus with the manufacture and clearance of excisable goods. They cited the Supreme Court's judgment in Maruti Suzuki Ltd. v. CCE, which emphasized that the inclusive part of a definition should satisfy the main part's requirements. The respondent's counsel distinguished this case from Maruti Suzuki Ltd., arguing that the place of use is irrelevant for "input services" and that the definition of "input service" should be considered independently, as supported by the High Court's ruling in Coca-Cola India (P.) Ltd. v. CCE.

3. Applicability of the Supreme Court's Decision in Maruti Suzuki Ltd. v. CCE:
The Tribunal found that the Supreme Court's ruling in Maruti Suzuki Ltd. was applicable. The judgment stated that any item in the inclusive part of a definition should meet the main part's requirements. Thus, for a service to be considered an "input service," it must be used in or in relation to the manufacture or clearance of final products, directly or indirectly.

4. Relevance of the High Court's Decision in Coca-Cola India (P.) Ltd. v. CCE:
The respondent relied on the High Court's decision in Coca-Cola India (P.) Ltd., which allowed credit if any one of the five limbs of the definition of "input service" was satisfied. However, the Tribunal held that the Supreme Court's ruling in Maruti Suzuki Ltd. implicitly overruled this interpretation. The definition of "input service" must be considered in its entirety, and services listed in the inclusive part must still meet the main part's requirements.

5. Imposition of Penalties in Interpretative Cases:
The Tribunal decided not to impose penalties on the respondent, acknowledging that the case involved rival interpretations of the law. It noted that in similar interpretative cases, penalties have been waived.

Conclusion:
The Tribunal concluded that the respondent failed to establish a nexus between the services and the manufacture or clearance of excisable goods. Consequently, the benefit of CENVAT credit for these services was disallowed. However, penalties were waived due to the interpretative nature of the case. The appeal was disposed of accordingly.

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