2024 (10) TMI 1255 - AT - Central Excise

Denial of input service credit - ineligible capital services - maintaining medical centre (Ambulance room) - membership of Tamil Nadu Electricity Consumer Association - what constitutes services used directly or indirectly in relation to manufacture of final products ? - period April 2011 to March 2013 - HELD THAT - The words 'directly or indirectly in or in relation to manufacture' used in the definition of input service, should be given a very wide meaning, subject only to the restrictions placed by the CCR 2004. Credit of service tax of duty paid towards mandatory services availed by the appellant under various Acts or which are mandatory for manufacture of goods, would hence continue to be eligible for being taken as credit, as without availing the said services, the goods cannot be manufactured, without facing penal action or other disruptions. So they are integrally connected with the ultimate production of goods/ chemicals manufactured in their factory. Moreover, services availed are not used primarily for private use or consumption of any employee and the duty paid forms a part of the final price of the product on which tax is paid. In the KAKINADA SEAPORTS LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, SERVICE TAX AND CUSTOMS VISAKHAPATNAM-II 2015 (11) TMI 51 - CESTAT BANGALORE , the Division Bench examined the eligibility of taking cenvat credit on health care with ambulance facility, during the period 01/07/2012 to 31/03/2013. It was held ' provision of healthcare within the port area where accident can take place cannot be said to be having no nexus to the port service, therefore, the credit of Rs. 83,430/- is admissible.' Although it is not a universal rule to be followed in all situations, judicial comity or judicial propriety requires that the interpretation of law made by another Bench should be followed. Moreover, the issues involve a very low tax effect and relate to an Act / Rules that has already been eclipsed with the introduction of GST. Not much would be gained by protracting litigation. The impugned order is set aside - appeal allowed.

Summary

Issues:
- Availment of CENVAT credit on services like housekeeping, medical center service, and membership subscription of a club
- Interpretation of the definition of 'input service' under the Cenvat Credit Rules
- Applicability of exclusion clause under Rule 2(l) for denying credit on services primarily for personal use
- Eligibility of services related to maintaining a medical center and membership subscription for Tamil Nadu Electricity Consumer Association as input services
- Allegations of suppression of facts and intent to avail ineligible credit
- Imposition of penalty under Rule 15(2) of the CCR 2004 read with sec. 11AC(1)(b) of the Central Excise Act, 1944

Analysis:

The appeal challenged the Order in Appeal passed by the Commissioner of Central Excise (Appeals) regarding the denial of CENVAT credit on various services availed by the appellant, a manufacturer of chemicals. The appellant had availed service tax credit on services like housekeeping, medical center service, and membership subscription of a club. The issue revolved around the interpretation of the definition of 'input service' under the Cenvat Credit Rules, specifically whether the services in question fell within this definition.

The appellant's advocate argued that the services availed were integral to the manufacturing process and should be considered as input services. She highlighted that services like maintaining a medical center and membership subscription were necessary for compliance with laws like the Factories Act, 1948, and the Employees' State Insurance Act, 1948, to ensure employee safety. The advocate cited relevant case laws to support the contention that such services should be eligible for credit. Additionally, she refuted allegations of suppression of facts, asserting that the credit availed was duly accounted for and disclosed to the department.

The Authorized Representative for the respondent reiterated the points made in the impugned order, which denied the appellant's claim for CENVAT credit on certain services. However, the appellate tribunal, after considering the arguments and precedents cited, ruled in favor of the appellant. The tribunal emphasized a broad interpretation of 'services used directly or indirectly in relation to manufacture of final products,' allowing for the eligibility of services that are mandatory for the manufacturing process. Citing previous tribunal decisions, the judgment supported the appellant's claim for credit on services related to maintaining a medical center and membership subscriptions.

The tribunal also highlighted the principle of judicial comity, suggesting that interpretations made by other benches should be followed, especially in cases with low tax implications. Considering the nature of the issues and the impending introduction of GST, the tribunal set aside the impugned order and allowed the appeal. The appellant was granted consequential relief as per the law, and the penalty imposed under Rule 15(2) of the CCR 2004 was likely revoked.