2015 (2) TMI 1166 - AT - Service Tax

Tribunal Allows Input Service Credit on Factory Rent, Emphasizes Direct Relation to Manufacturing

Commissioner of C. Ex., Delhi-III Versus Sunbeam Hi Tech Medicare

The Tribunal upheld the Commissioner's decision, allowing input service credit on service tax paid for factory rent. It emphasized the direct relation of ... Denial of Cenvat credit - Service tax paid for the rent of factory premises - No nexus with the manufacturing activity of the respondent - Held that:- no person shall answer in affirmative as the factory is directly related to the manufacturing activity of the assessee. This fact has been ignored by the Revenue while proposing to file this appeal before this Tribunal. On going through the Review order, it is found that they have not given any credence to the decision of Hon’ble High Court of Bombay in the case of CCE, Nagpur Vs. Ultratech Cement [2010 (10) TMI 13 - BOMBAY HIGH COURT]. In these circumstances, the impugned order does not have any infirmity and is upheld. - Decided against the revenue Issues:1. Appeal against allowing input service credit on service tax paid for factory rent.2. Nexus of rent paid for factory premises with manufacturing activity.3. Relevance of previous case laws in determining input service credit eligibility.Analysis:1. The appeal was filed by Revenue against the order allowing input service credit on service tax paid for factory rent. The respondent, a manufacturer of excisable goods, rented a factory and paid service tax on the rent, claiming Cenvat credit. A show cause notice was issued to deny the credit, alleging lack of nexus with manufacturing activity. The adjudicating authority upheld the denial, leading to duty demand, interest, and penalty. The Commissioner (Appeals) reversed this decision, allowing the credit. Revenue appealed, citing past tribunal decisions.2. The Tribunal analyzed the relevance of cited case laws and highlighted the High Court's ruling in Ultratech Cement, emphasizing that any service availed in the course of manufacturing entitles input service credit. The Tribunal distinguished the Manikgarh Cement case, where credit was denied for services unrelated to manufacturing. In the present case, the Tribunal emphasized the direct relation of the factory to manufacturing activity, criticizing Revenue for ignoring the Ultratech Cement judgment and failing to acknowledge this crucial aspect.3. Ultimately, the Tribunal upheld the Commissioner's order, dismissing Revenue's appeal. It concluded that the factory premises' rent was indeed connected to the manufacturing activity, rendering the impugned order valid. The Tribunal's decision was based on the direct relationship between the factory and manufacturing, in line with the principles established by the High Court's ruling in Ultratech Cement. The Tribunal's analysis focused on the factual nexus between the rented premises and the manufacturing process, affirming the entitlement to input service credit.