2018 (2) TMI 1745 - HC - Central Excise

Garden maintenance services qualify as input services under Rule 2(l) of CENVAT Credit Rules 2004

Rane TRW Steering System Ltd. Versus The Commissioner of Central Excise and Central Tax, Chennai Outer Commissionerate

The Madras HC held that garden maintenance services qualify as input services under Rule 2(l) of the CENVAT Credit Rules, 2004. The court ruled that the ... CENVAT Credit - input services - Garden Maintenance Service - interpretation of Statute - Rule 2(l) of the CENVAT Credit Rules - scope of inclusive definition of 'input services' - Meaning of the word, 'integral' - whether garden maintenance service is an 'input service', falling under the 'input service', an inclusive definition? Held that:- All the input services used in relation to modernisation, renovation or repairs of a factory, advertisement or sales promotion, security, legal services, etc., are included in the inclusive definition of input services. Requirement of 25% of the green belt is mandatory, for the very purpose of existence and consequently, manufacture of the final product. It is not only the process of manufacture which results in the production of excisable goods, attracting duty, but the input services which are integrally connected with the manufacture of such final products, should also be considered, so as to give effect to the inclusive definition of input services. Such input services may not in all cases, be in or in relation to manufacture of the final product, but they may be integrally connected and that there should be nexus with manufacture. The garden maintenance service would fall within the definition of 'input service', in terms of Rule 2(1) of the Cenvat Credit Rules, 2004 - the Tribunal was not right in denying input service credit availed on garden maintenance service - decided in favor of assessee. Issues Involved:1. Eligibility of Garden Maintenance Service for Input Service Credit under Rule 2(l) of the CENVAT Credit Rules, 2004.2. Applicability of precedents in the appellant's own case before and after the amendment of CENVAT Credit Rules, 2004.Issue-Wise Detailed Analysis:1. Eligibility of Garden Maintenance Service for Input Service Credit under Rule 2(l) of the CENVAT Credit Rules, 2004:The primary issue revolves around whether Garden Maintenance Service qualifies as an 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004. The appellant argued that garden maintenance is essential for preventing air pollution and complying with statutory requirements, such as those imposed by the Tamil Nadu Pollution Control Board, which mandates maintaining a green belt.The court examined the definition of 'input service' both before and after the amendment effective from 1/4/2011. Before the amendment, the definition included services related to 'setting up' and 'activities relating to business.' Post-amendment, these terms were deleted, which the revenue argued excluded garden maintenance from being considered an input service.However, the court referred to several precedents, including the Supreme Court's interpretation in cases like Collector of Central Excise vs. Solaris Chemtech Limited and Doypack Systems (Pvt) Ltd. vs. Union of India, which emphasized a broad interpretation of terms like 'in relation to' and 'includes.' The court noted that even after the amendment, services integral to the manufacturing process, such as those mandated by environmental laws, should still qualify as input services.The court also considered decisions from other High Courts and Tribunals, such as Millipore India Pvt. Ltd., which recognized garden maintenance as an essential service for running a factory and thus eligible for input service credit.2. Applicability of Precedents in the Appellant's Own Case Before and After the Amendment of CENVAT Credit Rules, 2004:The appellant cited its own previous case, Commissioner of Central Excise and Service Tax, Large Tax Payer Unit, Chennai vs. M/s. Rane TRW Steering Systems Ltd., where garden maintenance services were considered input services under the pre-amendment rules. The revenue argued that this precedent was inapplicable post-amendment.The court, however, found that the rationale in the appellant's previous case and similar cases like Millipore India Pvt. Ltd. and Mukand Ltd. still applied. These cases established that services necessary for statutory compliance and integral to the manufacturing process should qualify as input services, regardless of the amendment.Conclusion:The court concluded that garden maintenance service qualifies as an 'input service' under the amended Rule 2(l) of the CENVAT Credit Rules, 2004. It held that the Tribunal erred in denying the input service credit for garden maintenance and set aside the demand for recovery. The substantial questions of law were answered in favor of the appellant, and the appeals were allowed.