2009 (8) TMI 172 - AT - Service Tax

Cenvat credit allowed for technical, commission, courier, C&F, maintenance services under wide 'input services' definition Rule 2(1) CCR 2004

CESTAT (Ahmedabad, AT) allowed the appeals and set aside the impugned order, holding that Cenvat credit of service tax is admissible for technical and ... Cenvat credit admissibility of service tax - definition of input services under Cenvat Credit Rules, 2004 - eligibility of credit for trial manufacture and R&D activities - C&F agent services as sale promotion - credit for courier services - credit for commission paid to foreign agents - credit for repair and maintenance and ancillary factory services - precedential effect of Larger Bench decisionsCenvat credit admissibility of service tax - definition of input services under Cenvat Credit Rules, 2004 - eligibility of credit for trial manufacture and R&D activities - Cenvat credit of service tax paid on Technical and Analysis services, including in respect of trial manufacture and R&D, is admissible. - HELD THAT: - The Tribunal held that the inclusive definition of 'input services' in Rule 2(1) of the Cenvat Credit Rules, 2004 is wide and covers services used in relation to activities integral to manufacture. Medicines undergo testing and technical analysis as part of the manufacturing process and many trial or R&D products do not reach commercial production but those activities remain part of manufacture and business activity. Consequently, service tax paid on Technical and Analysis services relating to such trial manufacture and R&D is covered by the definition and credit is admissible. The Tribunal rejected the Department's contention that credit is disallowed where goods have not reached commercial production, noting that the Crompton Greaves reliance lacked detailed findings.Credit admissible; departmental disallowance set aside.C&F agent services as sale promotion - definition of input services under Cenvat Credit Rules, 2004 - Cenvat credit of service tax paid on C&F agent services is admissible as a sale promotion/input service. - HELD THAT: - The Tribunal found that C&F agents perform functions-storage and supply to customers-that promote sales and therefore fall within the inclusive concept of input services. The Commissioner's view that C&F services cannot be considered sale promotion was rejected as incorrect on the facts and in law. The Tribunal applied the broad statutory definition to conclude admissibility.Credit admissible; departmental disallowance set aside.Credit for courier services - precedential effect of Larger Bench decisions - Cenvat credit of service tax paid on courier services is admissible. - HELD THAT: - The Tribunal relied upon earlier Tribunal decisions (including Deloitte Tax Services and CCL Products) which squarely covered courier services as eligible input services. Given those precedents and the inclusive definition, credit on courier services was held to be admissible.Credit admissible; departmental disallowance set aside.Credit for commission paid to foreign agents - sale promotion as input service - Cenvat credit of service tax paid on commission to foreign agents is admissible as a sale promotion/input service. - HELD THAT: - The Tribunal observed that services rendered by foreign commission agents promote sales and therefore fall within the inclusive concept of input services. Consistent with the broader approach to eligibility endorsed by the Tribunal's Larger Bench, such commission payments qualify for credit.Credit admissible; departmental disallowance set aside.Credit for repair and maintenance and ancillary factory services - definition of input services under Cenvat Credit Rules, 2004 - Cenvat credit of service tax paid on repair, maintenance and ancillary services (e.g., photocopier, air-conditioner, water cooler) is admissible. - HELD THAT: - The Tribunal accepted that without maintenance, repair and management a factory cannot run, and such services are therefore integral to business and manufacture. It relied upon earlier Tribunal and Supreme Court precedent recognising availability of credit for maintenance/repair services and held that the service tax paid on such services qualifies as input service under the inclusive definition.Credit admissible; departmental disallowance set aside.Final Conclusion: The impugned order denying Cenvat credit of service tax on the specified services is set aside; the appeals are allowed and the Cenvat credit availed by the appellant in respect of the cited services is held to be admissible with consequential relief. Issues:Admissibility of Cenvat credit on service tax paid on various services including Technical and Analysis Services, Commission to foreign agents, Courier services, and C & F Agent services.Analysis:1. The appellants, engaged in manufacturing medicaments, availed Cenvat credit of service tax on specific services. The Revenue contended that the credit was inadmissible, leading to an order for recovery with interest and imposition of a penalty.2. The appellant's advocate argued that the services for which tax was paid and credit taken fell within the definition of input services as per Rule 2(1) of Cenvat Credit Rules 2004. The advocate cited the definition, emphasizing various activities like market research, accounting, and quality control, to support the eligibility of the credit.3. The advocate relied on the decision of the Larger Bench of the Tribunal in ABB Limited case and several other judgments to establish that direct relation to manufacturing was not necessary for service credit eligibility.4. The Revenue argued that Technical Testing and Analysis services were for a product not commercially produced, making the credit inadmissible for manufacturing. Other services were to be assessed based on the Tribunal's Larger Bench decision.5. The Tribunal analyzed the manufacturing process of medicaments, highlighting the stages of testing and analysis products undergo. It disagreed with the Revenue's view that credit was inadmissible if goods did not reach commercial production stage. The Tribunal emphasized the wide definition of input services and the admissibility of credit based on the definition.6. The Tribunal found that C&F services played a role in sales promotion, making them eligible for credit. It also referenced Tribunal decisions on courier services and foreign commission agent services to support their admissibility. The Tribunal allowed credit for repair and maintenance services based on precedent decisions.7. Ultimately, the Tribunal concluded that the Cenvat credit on various services availed by the appellant was in order. The impugned order was set aside, and the appeals were allowed with consequential benefits.