2010 (3) TMI 375 - AT - Service Tax

Cenvat credit on input services: garden maintenance and plant housekeeping allowed; insurance and tour travel remanded for verification.

Cenvat credit entitlement clarified for specific input services: garden maintenance services qualify as input services because they improve factory ... Denial of Cenvat credit on the input services viz. Insurance on company vehicles, tours & travels, factory garden maintenance and plant housekeeping services - factory garden maintenance and plant housekeeping services - manufacture of final product and not falling under the definition of 'Input services' - insurance service and tours & travels - failed to provide any records in respect of these service - HELD THAT:- With regard to Insurance service and tour & travel service no documents were provided to the lower authorities. Therefore, I remand the matter back to the original adjudicating authority to examine the documents and if it is found that these documents confirm that the service tax paid is in relation to the vehicle used by the Company or its employees, then Service Tax credit de allowed. With regard to the garden maintenance service, I find that this Tribunal has held in the case of I.S.M.T Ltd. [2009 (12) TMI 124 - CESTAT, MUMBAI] that a garden creates a better atmosphere and environment which increases the working efficiency of the factory. This Tribunal has held in the case of I.S.M.T Ltd. that the appellants are entitled to garden maintenance service. More over, in this case the credit is denied only holding that the same is not covered under the definition of Rule 2(1) of the CCR, 2004. Hence, I do not find any force in the arguments of ld. SDR. Accordingly, I allow the Cenvat credit on garden maintenance service. With regard to plant housekeeping service, the argument of ld. SDR is that the plant can run without housekeeping of the plant. In other terms without toilet and water facilities a plant can run. The argument of the SDR has no force, as providing the facilities of toilet and water are the basic requirement to run the factory and non-providing these facilities may affect the production, hence maintenance of house keeping service is essential and are related to the manufacturing activity. In appellant's own case the Jt. Commissioner vide Order No. 50/ST/JC/2008 dated 31-7-2008 has held that housekeeping charges for plant and plant office are entitled for input service credit. Allow Cenvat credit on garden maintenance and plant housekeeping services - With regard to insurance charge services and tours & travels services, I remand back the matter to the lower authorities. Issues: (i) Whether Cenvat credit on garden maintenance services is admissible as an 'input service' for manufacture of final products; (ii) Whether Cenvat credit on plant housekeeping services is admissible as an 'input service' for manufacture of final products.Issue (i): Whether garden maintenance service qualifies as an input service and is eligible for Cenvat credit.Analysis: The Tribunal examined precedent finding that garden maintenance improves factory environment and working efficiency and thus has a sufficient nexus with manufacturing activity. The Tribunal rejected the opposing view that the definition of input service cannot extend to such activities by noting higher court consideration (Coca Cola) and following the Tribunal's earlier decision in ISMT Ltd. The lower authority had denied credit solely on the ground that the service did not fall under Rule 2(1) of the Cenvat Credit Rules, 2004.Conclusion: Cenvat credit on garden maintenance service is admissible in favour of the assessee.Issue (ii): Whether plant housekeeping service qualifies as an input service and is eligible for Cenvat credit.Analysis: The Tribunal considered the functional nexus between housekeeping (including basic facilities such as toilets and water) and uninterrupted manufacturing operations, observing that lack of such services may affect production. The Tribunal also noted an earlier favourable order in the appellant's own case holding housekeeping charges as eligible input service.Conclusion: Cenvat credit on plant housekeeping service is admissible in favour of the assessee.Final Conclusion: The Tribunal allows Cenvat credit for garden maintenance and plant housekeeping services; issues of credit on insurance and tours & travel services are remitted to the adjudicating authority for examination of documentary evidence.Ratio Decidendi: Services that have a direct or functional nexus to the manufacturing process by improving the working environment or providing essential facilities constitute 'input services' and are eligible for Cenvat credit under the applicable rules.