2010 (1) TMI 288 - AT - Service Tax

Tribunal affirms credit for essential services in safeguarding goods

The Tribunal rejected the Revenue's appeal and upheld the entitlement of the respondents to avail the credit of service tax on 'Security Agency Service' ... Eligibility of Cenvat credit on input services - input service in relation to manufacture or storage of final products - security agency services and pest control services as input services - precedential value of Tribunal decisionsEligibility of Cenvat credit on input services - security agency services and pest control services as input services - input service in relation to manufacture or storage of final products - Allowability of service tax credit on security agency and pest control services availed by the assessee during 01/2006 to 10/2006 - HELD THAT: - The Tribunal examined whether security agency services and pest control services availed by the assessee were input services in relation to the manufacture and storage of final products. The authority found that security services were engaged to ensure safety of goods stored in the assessee's godown and pest control services were engaged to maintain a clean and healthy environment at the factory premises, preventing pests from entering areas where final products are manufactured and stored. The Tribunal relied on its earlier Division Bench decision in Final Order No. 1003/2009 dated 1-5-2009 concerning the same assessee, and on the reasoning in CCE, Mumbai v. GTC Industries Ltd., which treated comparable services as relating to the assessee's business and within the definition of input service. Applying that precedent and the factual conclusion that the services were availed in relation to manufacture and storage of final products, the Tribunal concluded that the credits were eligible.Revenue's appeal rejected; the respondents are entitled to the Cenvat credit of service tax paid on security agency and pest control services for the period 01/2006 to 10/2006.Final Conclusion: The Tribunal dismissed the revenue appeal and upheld the view that security agency and pest control services constituted input services in relation to manufacture and storage of final products, entitling the assessee to Cenvat credit for the period 01/2006 to 10/2006. Issues:1. Irregular availing of credit of service tax on 'Security Agency Service' and 'pest control service' during a specific period.2. Appeal against the vacation of the Order-in-Original by the Commissioner (Appeals) regarding the confirmation of demand and penalty imposed.Analysis:1. The original authority had confirmed the irregular availing of credit of service tax on 'Security Agency Service' and 'pest control service' during a particular period, amounting to Rs. 1,05,042/-, along with interest and a penalty under Rule 15(3) of Cenvat Credit Rules, 2004. The Commissioner (Appeals) vacated this order, leading to an appeal by the Revenue seeking to restore the original authority's decision.2. The Revenue contended that the 'security agency service' and 'pest control services' were not directly or indirectly related to the manufacturing process of the final products of the assessee, as they were utilized for the safety and cleanliness of the premises where the goods were stored. However, during the hearing, it was established that the security services were essential for safeguarding the goods in the godown, while pest control services were necessary to maintain a healthy environment in the factory premises where the final products were manufactured and stored.3. The Tribunal referred to a previous Final Order in the case of the same assessee, where it was held that the respondents were entitled to credit of service tax paid on these services. Citing the decision in CCE, Mumbai v. GTC Industries Ltd., the Tribunal emphasized that services like outdoor catering, when undertaken in relation to the business activities of the assessee, fall under the definition of 'input service.' Relying on this precedent, the appeal filed by the Revenue was rejected, upholding the entitlement of the respondents to avail the credit of service tax on the mentioned services.This detailed analysis of the judgment highlights the issues of irregular availing of service tax credit and the subsequent appeal against the vacation of the original order, providing a comprehensive understanding of the legal reasoning and precedent relied upon by the Tribunal in reaching its decision.