2010 (11) TMI 381 - AT - Service Tax

Cenvat credit - tour operator service - As regard the Cenvat credit on tour operator service the learned Counsel for the assessee contended that what is being considered for tour operators service is in fact transportation of their employees to their factory - The above fact is not disputed by the department - The tribunal in the case of Cable Corporation of India ltd. (2008 -TMI - 30004 - CESTAT MUMBAI ) allowed Cenvat credit on Rent-a-cab service used for bringing employees to work in the factory for manufacture of goods - It has to be considered as being used indirectly in relation to the manufacture or as a part of business activity - To this the learned JR pointed out that the decision has not reached finality since the department is contesting it - However he could not produce any order modifying or staying the operation of the said order - The above decision applies to the facts of the case. - Decided in favour of assessee.

Summary

Issues:
1. Eligibility of Cenvat credit on air travel agent services.
2. Eligibility of Cenvat credit on tour operator services.

Eligibility of Cenvat credit on air travel agent services:
The case involved an appeal by both the Revenue and the assessee against the denial of the credit of service tax on air travel agent services while allowing the Cenvat credit in the case of tour operator services. The assessee contended that air travel service was essential for the development of their products, citing a nexus with the manufacture of their products. They relied on tribunal decisions to support their claim. The department argued that the nexus was not proven. The Tribunal considered previous judgments and held that as the air travel was performed for the purpose of company business, the credit was admissible. The Tribunal analyzed the definition of inputs and concluded that the services were related to business activities, allowing the appeal in favor of the assessee.

Eligibility of Cenvat credit on tour operator services:
Regarding Cenvat credit on tour operator services, the department contended that there was no nexus with the manufacture of goods. The assessee argued that the service tax paid was used to transport their employees to the factory, which indirectly related to the manufacture or business activity. The Tribunal referred to a previous case where Cenvat credit on a similar service was allowed, emphasizing the transportation of employees for manufacturing goods. The department failed to provide any order modifying or staying the previous decision. The Tribunal found no issue with the Commissioner(Appeals)'s order and dismissed the appeal filed by the Revenue, upholding the decision to allow Cenvat credit on tour operator services for transporting employees.

In conclusion, the Tribunal allowed the appeal in favor of the assessee regarding the eligibility of Cenvat credit on air travel agent services based on the nexus with business activities. Additionally, the Tribunal upheld the decision to allow Cenvat credit on tour operator services for transporting employees to the factory, dismissing the appeal by the Revenue. The appeals and cross-objections were disposed of accordingly.