2016 (6) TMI 322 - AT - Service Tax

Appeal granted for input credit on gardening services in manufacturing batteries

The appeal was filed against the denial of input credit for service tax paid on gardening services for manufacturing storage batteries. The Tribunal held ... Input service credit - Gardening service as input service - Mandatory statutory obligation under the Factories Act and pollution control requirements - Eligibility for credit by a manufacturer discharging central excise duty - Penalty under Rule 13 - Precedential weight of High Court decision over earlier Tribunal decisionInput service credit - Gardening service as input service - Mandatory statutory obligation under the Factories Act and pollution control requirements - Eligibility for credit by a manufacturer discharging central excise duty - Penalty under Rule 13 - Denial of Cenvat/service-tax credit of service tax paid on gardening service and the penalty imposed under Rule 13. - HELD THAT: - The appellants are manufacturers registered with central excise, operating a factory subject to the Factories Act and statutory pollution control obligations under the Tamil Nadu Pollution Control Board, which mandate maintenance of greenery of the factory premises. Given that the gardening service was rendered to fulfil such mandatory statutory requirements, the Tribunal applied the binding guidance of the Hon'ble Karnataka High Court in CCE Bangalore v. Millipore India Pvt. Ltd. and consistent decisions of this Tribunal, holding that gardening service constitutes an input service for a manufacturer obliged by statute to maintain greenery. An earlier Tribunal decision relied upon by Revenue was rendered prior to the High Court precedent and therefore does not govern the present appeal. Applying this legal principle, the denial of credit was found to be unsustainable. Consequentially, the imposition of equal penalty under Rule 13 was set aside in relation to the disallowed credit that has been held admissible.Impugned order denying credit and imposing penalty set aside; appeal allowed with consequential relief.Final Conclusion: The appeal is allowed: gardening service held to be an admissible input service for the manufacturer bound by the Factories Act and pollution control requirements; denial of credit and the equal penalty under Rule 13 are set aside with consequential relief. Issues: Denial of input credit for service tax paid on gardening serviceAnalysis:The appeal was filed against the Commissioner (Appeals) order regarding the denial of input credit for service tax paid on the gardening service. The adjudicating authority had denied the credit and imposed a penalty. The appellants, engaged in manufacturing storage batteries for Automobiles/Motor Vehicles, were denied credit despite being registered with central excise and complying with relevant acts. The issue revolved around whether gardening service qualifies as an input service for the manufacturer under the Factories Act and the Tamil Nadu Pollution Control Board Act.The Tribunal referenced the decision of the Hon'ble Karnataka High Court in CCE Bangalore Vs Millipore India Pvt. Ltd. and its own ruling in JBM Auto System Pvt. Ltd. Vs CCE Chennai, both allowing credit on gardening services mandatory under the Factories Act. The Revenue relied on a previous Tribunal decision, which the Tribunal deemed inapplicable post the Karnataka High Court's ruling. Following the High Court decision, the Tribunal held that gardening service is indeed an input service for manufacturers covered under the Factories Act and the Pollution Control Board Act, making the appellants eligible for the input service credit. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.The judgment highlights the importance of aligning input credit denials with the specific requirements and regulations applicable to the manufacturer. It emphasizes the significance of legal precedent in determining the eligibility of services as input credits under relevant statutory provisions. The ruling provides clarity on the admissibility of input credit for services essential for maintaining statutory compliance and operational necessities within manufacturing facilities.