2009 (12) TMI 143 - AT - Service Tax

Cenvat Credit- Input service- The appellant was a 100 per cent EOU. It manufactures excisable goods i.e. electrical wiring, accessories. The entire production was exported out of India. Accordingly, the appellant had filed periodical refund claims for refund of service tax paid on input services used in the manufacture and sale of exported goods. However, the revenue sought to reject the refund claim on the services, namely 1. rent a cab 2. outdoor catering services 3. air travel booking 4. telephone/mobile services 5. steamer agent services on the ground that they did not qualify as input services as defined under rule 2(l) of the Cenvat Credit Rules. The case of the department was that the credit of service tax paid on services would be available only if such services were used in or in relation to the manufacture, whether directly and indirectly of the final products and the clearance of final products from the place of removal. In other words, the contention of the department was that the aforesaid services did not satisfy the means part of the definition of input service in Rule 2(l). Thus, the refund claim was rejected by the adjudicating authority. Commissioner (Appeals) upheld the order. Held that- the definition of input is exhaustive but is restrictive in scope. It treats all goods used in or in relation to manufacture of final product or for any other purpose within the factory of production, but certain goods which would be eligible as per definition have been excluded and certain goods which could be interpreted as not includible have been specifically included. Therefore, all goods other than specified as includible have to be shown to be used in or in relation to manufacture of final product or for any other purpose with in the factory of production. Thus the appellant was entitled to the Cenvat Credit availed on the services which were used in relation to the manufacture of final product or used in relation to the business activity and in the instant case the service used by the appellant were in relation to the business activity. Thus, the appellant were entitled to refund of service tax.

Summary

Issues Involved:
1. Rejection of refund claims for service tax on input services.
2. Definition and scope of "input service" under rule 2(l) of the Cenvat Credit Rules, 2004.
3. Applicability of various judicial precedents.
4. Eligibility of specific services for Cenvat credit.

Detailed Analysis:

1. Rejection of Refund Claims for Service Tax on Input Services:
The appeals were filed against the rejection of refund claims for service tax paid on input services used for manufacturing and exporting final products. The appellants, a 100% Export Oriented Unit, had their refund claims rejected on the grounds that certain services did not qualify as "input service" under rule 2(l) of the Cenvat Credit Rules, 2004.

2. Definition and Scope of "Input Service" under Rule 2(l):
The primary issue was whether services like rent-a-cab, outdoor catering, air travel booking, telephone/mobile services, and steamer agent services qualify as "input service" under rule 2(l) of the Cenvat Credit Rules, 2004. The definition of "input service" includes:
- Services used directly or indirectly in or in relation to the manufacture of final products.
- Services used in relation to business activities such as accounting, auditing, financing, recruitment, quality control, etc.

The appellants argued that the term "input service" has a broad scope and includes services that are indirectly related to manufacturing or business activities. They emphasized that the term "includes" in the definition is meant to expand the scope, not restrict it.

3. Applicability of Various Judicial Precedents:
Several judicial precedents were discussed to interpret the definition of "input service":

- Coca-Cola India (P.) Ltd. v. CCE: The Tribunal's decision, which was relied upon by the Commissioner (Appeals), was later reversed by the Bombay High Court, which held that services that form part of the assessable value of the final product should be eligible for Cenvat credit.
- ABB Ltd. v. CCE & ST: The Larger Bench of the Tribunal supported a broad interpretation of "input service."
- Maruti Suzuki Ltd. v. CCE: The Supreme Court's decision was distinguished as it dealt with the definition of "input" and not "input service."

4. Eligibility of Specific Services for Cenvat Credit:
The Tribunal examined whether the specific services in question qualify as "input service":

- Outdoor Catering Service: The Tribunal referred to the Larger Bench decision in GTC Industries Ltd., which allowed credit for outdoor catering services as they are related to business activities.
- Telephone/Mobile Services: Several Tribunal decisions supported the inclusion of telephone/mobile services as input services.
- Rent-a-Cab Service: Tribunal decisions like J.K. Cement Works and Cable Corpn. of India Ltd. supported the inclusion of rent-a-cab services.
- Air Travel Agent Service/Steamer Agent Service: The Tribunal in Force Motors Ltd. recognized these services as input services.

Conclusion:
The Tribunal concluded that the services in question are related to business activities and qualify as "input service" under rule 2(l) of the Cenvat Credit Rules, 2004. The appeals were allowed, and the appellants were entitled to the refund of service tax paid on these services.