2019 (12) TMI 391 - AT - Central Excise

Manufacturing Services Eligible for Credit: Tribunal Decision Emphasizes Nexus

The Tribunal allowed the appeal in favor of the appellant, holding that services provided for the operation and maintenance of essential systems in the ... CENVAT Credit - input services or not - service provided by them for operation and maintenance of thermal power station - case of Revenue is that appellants are not entitled to take credit on such services rendered by their suppliers - HELD THAT:- The maintenance of PDFACS systems by the contractors or the appellants in terms of thermal power station is undoubtedly under round the clock collection and supply of fly ash. Therefore, it is evident that service rendered by the contractors of the appellants are certainly in or in relation to the manufacture of cement by the appellant. As long as the services are used directly or indirectly in the manufacture of dutiable products by the appellants such services are to be deemed to be services rendered to them and the input services for that purposes. Tribunal has been consistently taking the view that the service rendered directly and used in the primary activity of the appellant or eligible to be treated as input service. The Tribunal in the case of Birla Corporation Ltd. [2014 (5) TMI 213 - CESTAT NEW DELHI] has held that services availed in respect of plant set up in the premises of NTPC for extraction and handling of fly ash is to be treated as service availed for procurement of inputs. The appellants are entitled to avail the input service credit on the activities performed by the contractors who are maintaining the systems to collect the fly ash generated in the thermal power plant - Appeal allowed - decided in favor of appellant. Issues:- Cenvat credit eligibility on services provided for operation and maintenance of thermal power station.Analysis:The case involved a dispute regarding the eligibility of cenvat credit on services provided for the operation and maintenance of a thermal power station by the suppliers of fly ash to a cement manufacturer. The appellant claimed that the services were directly related to the procurement of raw material, fly ash, essential for cement production. The appellant argued that the services were in relation to the manufacturer of fly ash in their factory, citing various case laws to support their claim. On the other hand, the respondent contended that the services were rendered at the thermal plant premises and had no connection to the cement manufacturing activity. The Tribunal analyzed the agreements between the parties and found that the suppliers were maintaining systems for fly ash collection and transportation, essential for the cement manufacturing process. The Tribunal noted that the services were used directly or indirectly in the manufacture of cement, making them eligible for cenvat credit. Relying on past decisions and considering the finality of a previous favorable decision for the appellant, the Tribunal held that the appellant was entitled to avail the input service credit on the activities performed by the contractors. Consequently, the appeal was allowed in favor of the appellant with consequential relief.This judgment clarifies the scope of input service credit eligibility concerning services provided for the operation and maintenance of essential systems in the manufacturing process. It emphasizes the direct or indirect use of services in the primary manufacturing activity to qualify for input service credit. The Tribunal's decision underscores the importance of analyzing the nexus between the services rendered and the manufacturing process to determine credit eligibility. The reliance on past decisions and the consideration of finality in a related case highlight the significance of precedent and consistency in tax disputes. Overall, the judgment provides valuable insights into interpreting and applying cenvat credit provisions in cases involving service utilization for manufacturing activities.