2011 (2) TMI 644 - AT - Service Tax

Court rejects credit for garden maintenance as input service under Central Excise Tariff Act

STANADYNE AMALGAMATIONS PVT. LTD. Versus COMMISSIONER OF C. EX., CHENNAI

The judge upheld the order of the Commissioner (Appeals) regarding the entitlement of manufacturers of lubricating or cooling pumps for IC Engines to ... CENVAT credit - whether the appellants are entitled to credit availed by them in respect of services used for maintaining gardens - Appellants are manufacturer of lubricating or cooling pumps - the term ‘input services’ is a relative term and there should be some nexus between the services utilized and the activities of manufacture of final products. In the present case, the link is very remote. The claim of the appellants that the service of maintaining garden is indirectly used in relation to the manufacture is thus difficult to accept - Decided against the assessee. Issues:1. Entitlement to credit for services used in maintaining gardens under Chapter sub-heading 84133010 of the Central Excise Tariff Act.Detailed Analysis:Issue 1: Entitlement to credit for services used in maintaining gardensThe case involved an appeal against the order of the Commissioner (Appeals) regarding the entitlement of the appellants, manufacturers of lubricating or cooling pumps for IC Engines, to credit for services used in maintaining gardens. The original authority had disallowed the credit, leading to a demand of Rs. 52,145/- along with penalties. The Commissioner (Appeals) upheld the demand for CENVAT credit but set aside the penalties.The appellant's advocate argued that the services should be considered as input services as they were used indirectly in relation to the manufacture of final products, citing relevant case laws. He contended that maintaining the garden was a mandatory requirement under Pollution Control Board regulations, justifying the treatment of these services as input services.The advocate further argued that since the impugned services had suffered service tax as Business Support Service, they should be considered part of the business activities of the appellants for tax purposes, emphasizing consistency in treatment by the department.In contrast, the SDR supported the order of the Commissioner (Appeals) and referenced a Tribunal decision that concluded services associated with maintaining gardens could not be treated as input services in the manufacture of excisable goods.After considering both sides' submissions and reviewing the records, the judge found that the landscaping services for maintaining gardens could not be deemed as used in or in relation to the manufacture of final products, specifically safety valves in this case. The judge emphasized the need for a nexus between the services utilized and the manufacturing activities to qualify as input services. The judge highlighted that the definition of input services did not encompass all services paid for by the assessee and required a direct link to the manufacturing activities.The judge distinguished the case law cited by the appellant's advocate, stating that the decisions were not applicable to the present case, as the context and facts differed. While acknowledging the decision regarding outdoor catering services as input services, the judge concluded that the rationale could not be extended to the current scenario. Ultimately, the judge upheld the order of the Commissioner (Appeals) and rejected the appeal, emphasizing the lack of a sufficient nexus between maintaining gardens and the manufacturing activities of the appellants.