Appellate Tribunal disallows credit for gardening services in manufacturing. Penalty reduced on non-disclosure.

The Appellate Tribunal CESTAT, Chennai, disallowed the extension of credit for service tax on gardening services for manufacturers of motor vehicle parts, citing the lack of nexus between gardening services and the manufacturing business. The Tribunal reduced the penalty imposed on the assessees for non-disclosure of availing credit from an ineligible service provider to Rs.20,000/-, considering subsequent disclosure. The Tribunal partially allowed the Revenue's appeal and dismissed the assessees' cross-objection for lack of substantial grounds.

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Issues: Revenue's grievance over extension of credit of service tax for gardeners and helpers; Admissibility of credit for gardening services in relation to manufacturing activity of motor vehicle parts; Justification of penalty for non-disclosure of availing credit from ineligible service provider.

In this case, the Appellate Tribunal CESTAT, Chennai, addressed the Revenue's challenge regarding the extension of credit of service tax for gardeners and helpers utilized by the assessees, who are manufacturers of motor vehicle parts. The Tribunal noted that the assessees failed to establish a nexus between gardening services and their manufacturing business, as per the precedent set by the Hon'ble Bombay High Court in CCE, Nagpur Vs. Ultratech Cement Ltd. The Tribunal emphasized that to claim credit, services must be connected to the business activity. Consequently, the Tribunal found no established link between gardening services and the manufacturing operations of the assessees, leading to the disallowance of the credit for such services.

Regarding the penalty imposed on the assessees for non-disclosure of availing credit from an ineligible gardener service provider, the Revenue argued for the penalty's justification due to the lack of disclosure in the service tax credit/debit entry register. However, the Tribunal considered the period of demand and the assessees' subsequent disclosure of availing CENVAT credit on gardener services from December 2008 onwards. As a result, the penalty was reduced to Rs.20,000/- from the initial amount. The Tribunal partially allowed the Revenue's appeal in this regard.

Furthermore, the Tribunal dismissed the cross-objection filed by the assessees, deeming it as mere comments or replies to the Revenue's appeal without presenting any substantial grounds for consideration. The judgment was dictated and pronounced in open court, concluding the proceedings in this matter.

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