Court allows Cenvat credit for service tax on manpower supply service for plant operations.

The court ruled in favor of the appellants, allowing them to claim Cenvat credit for service tax paid on manpower supply service for plantation and lawn maintenance. The judge determined that the service was essential for statutory compliance related to operating the zinc smelter plant, thus falling within the definition of 'input service' under the Cenvat Credit Rules, 2004. The decision overturned the previous denial of Cenvat credit and penalties imposed by the Asstt. Commissioner and Commissioner (Appeals), emphasizing the importance of services indirectly necessary for manufacturing operations and statutory compliance.

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Issues:
Whether the appellants are eligible for Cenvat credit of service tax paid on manpower supply service for plantation and maintenance of lawn.
Whether the service in question is covered by the definition of 'input service' under Cenvat Credit Rules, 2004.

Analysis:
The dispute revolved around the eligibility of the appellants, who are manufacturers of zinc and other excisable goods, for Cenvat credit of service tax paid on manpower supply service for plantation and lawn maintenance. The jurisdictional Asstt. Commissioner had denied the Cenvat credit and imposed penalties, a decision upheld by the Commissioner (Appeals) leading to the current appeal.

During the hearing, the appellant's counsel argued that the service in question was essential for compliance with the conditions set by the Rajasthan State Pollution Control Board for operating the zinc smelter plant. It was highlighted that failure to maintain 33% green cover could lead to cancellation of the plant's operation permission. The counsel cited a judgment supporting the eligibility of manpower supply service for plantation activities for Cenvat credit.

On the other hand, the Departmental Representative supported the impugned order, stating that the service lacked nexus with the manufacture of the final product and thus did not fall under the definition of 'input service'.

The judge, after considering both sides' submissions, interpreted the definition of 'input service' under the Cenvat Credit Rules, 2004. The judge emphasized that services indirectly essential for manufacturing operations, including those required for statutory compliance, should be considered under the definition. In this case, the service for maintaining green cover as mandated by the Pollution Control Board was deemed necessary for statutory compliance linked to the manufacturing activity. Therefore, the judge concluded that the service in question fell within the ambit of 'input service' and set aside the impugned order, allowing the appeal in favor of the appellants.

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