2016 (9) TMI 474 - AT - Central Excise

Cenvat Credit Eligibility Expanded for Factory Services: Tribunal and Supreme Court Decisions

Commissioner of Central Excise, Nagpur Versus International Combustion (I) Ltd.

The Tribunal upheld the eligibility of the respondent for Cenvat Credit on services provided within the factory premises, including landscaping, catering, ... Demand - disallowance of Cenvat Credit - service tax paid by the service provider in relation to the cleaning services, garden maintenance service, civil and construction work, painting work, fencing work etc. - Held that:- by applying the ratio of decisions of the Hon'ble High Court of Karnataka in the case of Millipore India Ltd. and Stanzen Toyotetsu India Pvt. Ltd. a wherein it has held that the service tax paid on the services rendered for landscaping factory garden, catering bill, canteen etc. have to be considered as service rendered in relation to the manufacturing activity and the Larger Bench of the Supreme Court in Ramala Sahkari Chini Mills Ltd. [2016 (2) TMI 902 - SUPREME COURT] where the word include is generally used to enlarge the meaning of the preceding words and it is by way of extension, and not with restriction. Therefore, the First Appellate Authority was correct in coming to a conclusion that the respondent is eligible for availment of Cenvat Credit on the services rendered by various service providers which were within the factory premises. - Decided against the Revenue Issues:- Disallowance of Cenvat Credit for service tax paid by the service provider in relation to various services within factory premises.- Interpretation of the word 'includes' in the context of Cenvat Credit availability.Analysis:1. The appeal was filed by the revenue against the First Appellate Authority's order setting aside the Order-in-Original confirming demands for disallowance of Cenvat Credit for service tax paid by the service provider for services like cleaning, garden maintenance, civil work, painting, and fencing within the factory premises.2. The Tribunal relied on previous judgments to establish that services provided within the factory premises related to manufacturing activities are eligible for Cenvat Credit. The revenue contended that these services did not contribute to the manufacturing of the final product, emphasizing the need for a nexus between the services and manufacturing activity.3. The Tribunal upheld the view that services like landscaping, catering, and canteen within factory premises are considered related to manufacturing activities. This stance was supported by the Larger Bench in GTC Industries, emphasizing the broad interpretation of services related to manufacturing.4. The issue of interpreting the word 'includes' in the context of Cenvat Credit availability was referred to the Larger Bench of the Supreme Court. The Supreme Court, in a judgment dated 19.02.2016, clarified that the term 'includes' is used to expand the meaning of preceding words without restrictions, allowing for a broader interpretation.5. Applying the Supreme Court's interpretation, the First Appellate Authority's decision to allow Cenvat Credit for services within the factory premises was deemed correct. Consequently, the appeal by the revenue was rejected, affirming the eligibility of the respondent for Cenvat Credit on services provided by various service providers within the factory premises.