2006 (3) TMI 53 - Commissioner - Service Tax

Service Tax Cenvat/Modvat Input services - Cenvat credit is admissible to the appellant in respect of security and photography services as such services are covered under the definition of input service Rule 3 of Cenvat Credit Rules, 2004

Summary

Issues:
1. Interpretation of the definition of 'input service' under Rule 2(1) of the Cenvat Credit Rules 2004.
2. Admissibility of Cenvat Credit for security services and photography services.
3. Impact of disallowing Cenvat Credit on the cost of production and excise duty.
4. Compliance with the legal position established by the Hon'ble Supreme Court in previous judgments.

Analysis:
1. The appellant contended that the adjudicating authority did not interpret the definition of 'input service' under Rule 2(1) in its true import and meaning. The definition of 'input service' is wide and includes services used in post manufacturing activities or necessary for day-to-day business operations. The term 'in or in relation to manufacture' has a broad scope, covering all service inputs with a nexus to the manufacturing process. The appellant argued that the adjudicating authority's interpretation was baseless and not in accordance with the law.

2. The appellant argued that if Cenvat Credit is not permitted, the service tax element in the cost of production would be subjected to excise duty, contrary to the scheme and spirit of CENVAT. The appellant highlighted that security services and photography services are integral to manufacturing activities and should be eligible for Cenvat Credit. The appellant emphasized that all services on which service tax is required to be paid are covered under the definition of 'input service,' allowing for the credit of service tax paid on such services.

3. The appellant raised concerns about the discrimination and injustice caused by disallowing Cenvat Credit for security and photography services. The appellant referenced a previous legal position established by the Hon'ble Supreme Court, emphasizing the objective of the CENVAT scheme to reduce the cost of the final product by crediting the duty paid on inputs. The appellant argued that the expenses on security and photography services, forming part of the cost of production, should not be subjected to excise duty if Cenvat Credit is not allowed.

4. Upon reviewing the records and submissions, the Commissioner found that the distinction between services used in manufacture and those used in relation to manufacture is thin. The Commissioner agreed with the appellant's arguments that security services and photography services are part and parcel of manufacturing activities. The Commissioner held that Cenvat Credit is admissible for security services and photography services as they are used in relation to the manufacture and clearance of final products. The Commissioner concluded that the appellant is entitled to Cenvat Credit for these services in accordance with the Cenvat Credit Rules 2004.

In summary, the Commissioner allowed the appeal, granting Cenvat Credit to the appellant for security services and photography services based on the wide interpretation of 'input service' and their integral role in manufacturing activities. The decision aligned with the legal principles established by previous judgments and aimed to uphold the objectives of the CENVAT scheme.