2017 (5) TMI 233 - AT - Central Excise

Tribunal grants Cenvat credit for consultancy services in manufacturing processes

The Tribunal allowed the appeal by M/s Hindustan Zinc Ltd., overturning the denial of Cenvat credit on service tax paid for consultancy services related ... CENVAT credit - eligible input service - consultancy service with respect to laying of pipelines for supply of water from dams to the Dariba Mines of the appellant - Held that: - matter is covered by the ratio of the CESTAT decision in the appellant’s own case [2016 (7) TMI 1064 - CESTAT NEW DELHI], where it was held that water is essential in the manufacturing process, the pipelines are exclusively used for transport of water for the said purpose. The service tax paid is on services received w.r.t. pipelines - service tax paid under subject service viz. consultancy service is eligible for Cenvat credit by the appellant - appeal allowed - decided in favor of appellant. Issues:Appeal against denial of Cenvat credit on service tax paid for consultancy service related to laying of pipelines for water supply.Analysis:The case involved an appeal by M/s Hindustan Zinc Ltd. against the denial of Cenvat credit on service tax paid for consultancy service regarding the laying of pipelines for water supply to their Dariba Mines. The matter was previously addressed in the appellant's own case by the CESTAT, where it was observed that the service tax paid for services related to the transportation of water for manufacturing purposes is eligible for credit. The Tribunal emphasized that the definition of 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004 is broad and inclusive, covering services directly or indirectly used in or in relation to the manufacture of final products. The Tribunal rejected the lower authorities' reasoning that the services were not connected with manufacturing, citing a Bombay High Court decision to support the interpretation of the rules. The Tribunal concluded that the consultancy service in question was indeed related to the manufacturing activities of the appellant, making the service tax paid eligible for Cenvat credit.In light of the precedent set by the Tribunal's previous order and the interpretation of the relevant legal provisions, the Tribunal held that the consultancy service in question was directly related to the manufacturing activities of the appellant. Consequently, the impugned order denying the Cenvat credit was set aside, and the appeal was allowed with any consequential relief for the appellant. The Tribunal's decision reaffirmed the broad scope of 'input service' under the Cenvat Credit Rules, emphasizing that services used in or in relation to the manufacture of final products are eligible for credit, irrespective of their location. The judgment serves as a reminder of the importance of interpreting tax laws in a manner that aligns with the legislative intent and the broader objective of facilitating credit for services essential to manufacturing processes.