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The Commissioner of Central Excise Versus M/s. Hyderabad Industries Ltd., The Customs, Excise and Service Tax Appellate Tribunal

2015 (7) TMI 510 - MADRAS HIGH COURT

Cenvat credit - input services - service tax paid on the services of tour operators/travels for transporting the staff working at their factory (pickup and drop) - Held that:- this Court dealt with the issue in a batch of appeals [2015 (3) TMI 736 - MADRAS HIGH COURT] held in favour of the assessee by following the decision of the Bombay High Court in the case of CCE - Vs - Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT], wherein all the contentions raised by the Revenue have been c .....

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ice tax which is borne by the consumer.

The cenvat credit availed by the assessee on rent-a-cab services is admissible and, therefore, no interference is called for with the order passed by the Tribunal. - Decided against the revenue. - C.M.A. No. 837 of 2010 - Dated:- 18-6-2015 - R. Sudhakar And K. B. K. Vasuki,JJ. For the Appellant : Mr. Xavier Felix For the Respondents : No Representation for R-1 JUDGMENT ( Delivered By R. Sudhakar, J.) This Civil Miscellaneous Appeal is filed by t .....

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ur operators/travels for transporting the staff working at their factory (pickup and drop) treating them as 'input service'? 2. Whether the second respondent was correct in law in applying the ratio of the decision in the case of CCE, Chennai - Vs - Thirumalai Chemicals Ltd., as reported in 2009-TIOL-1739 CESTAT MAD, which was appealed before the Hon'ble High Court, Madras in October, 2009 and SR No.99190 of 2009 has been allotted. 2. The facts, in a nutshell, are as follows: The fir .....

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re of excisable goods and, therefore, a show cause notice was issued on the first respondent and after adjudication, order was passed demanding payment of ₹ 53,407/- for wrongful availment along with interest and imposed penalty of ₹ 2,000/-. Aggrieved by the said order, the assessee pursued the matter before the Commissioner (Appeals), who allowed the appeal. As against the said order of the Commissioner (Appeals), the Department filed appeal before the Tribunal. 3. The Tribunal fol .....

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Aggrieved by the said order of the Tribunal, the Revenue has filed the present appeal before this Court. 4. Heard learned Standing Counsel appearing for the Revenue and the learned counsel appearing for the assessee and perused the materials placed before this Court. 5. The core issue involved in this appeal is "whether the assessee can utilise the cenvat credit facilities in respect of rent-a-cab services, used for transporting the employees to and from the place of work, as input service .....

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td. - Vs - CCE (2009 (240) ELT 641 (SC)). The Bombay High Court, in Ultratech's case (supra) came to the conclusion that the decision of the Larger Bench of CESTAT in the case of CCE - Vs - GTC Industries Ltd. (2008 (12) STR 468) is correct law, however, with a rider that where the cost is borne by the worker, the manufacturer cannot take credit of that part of the service tax which is borne by the consumer. 7. For better clarity, the relevant portion of the decision of the Bombay High Court .....

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on or repairs of a factory) as well as services rendered after the manufacture of final products (such as advertisement, sales promotion, market research etc.) and includes services rendered in relation to business such as auditing, financing ... etc. Thus, the substantive part of the definition "input service" covers services used directly or indirectly in or in relation to the manufacture of final products, whereas the inclusive part of the definition of "input service" cov .....

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tly, the definition of input service is not restricted to services used in or in relation to manufacture of final products, but extends to all services used in relation to the business of manufacturing the final product. 29. The expression "activities in relation to business" in the definition of "input service" postulates activities which are integrally connected with the business of the assessee. If the activity is not integrally connected with the business of the manufactu .....

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c/substantive part of the definition is so wide that it would cover innumerable items as "input" and to avoid such contingency the Legislature has incorporated the inclusive part after the substantive part qualified by the place of use. For example, one of the categories mentioned in the inclusive part is "used as packing material". Packing material by itself would not suffice till it is proved that the item is used in the course of manufacture of final product. Mere fact tha .....

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e have referred to two considerations as irrelevant, namely, use of input in the manufacturing process, be it direct or indirect as also absence of the input in the final product on account of the use of the expression "used in or in relation to the manufacture of final product". Similarly, we are of the view that consideration such as input being used as packing material, input used as fuel, input used for generation of electricity or steam, input used as an accessory and input used a .....

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Unless and until the said input is used in or in relation to the manufacture of final product within the factory of production, the said item would not become an eligible input. The said expression "used in or in relation to the manufacture" have many shades and would cover various situations based on the purpose for which the input is used. However, the specified input would become eligible for credit only when used in or in relation to the manufacture of final product. Hydrogen gas u .....

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ion would constitute relevant consideration per se. They become relevant only when the above crucial requirement of being "used in or in relation to the manufacture" stands complied with. In our view, one has to therefore, read the definition in its entirety." 31. In our opinion, the ratio laid down by the Apex Court in the case of Maruti Suzuki Ltd. (supra) in the context of the definition of 'input' in rule 2(k) of 2004 Rules would equally apply while interpreting the ex .....

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' would make no difference in applying the ratio laid down in the case of Maruti Suzuki Ltd. (supra) while interpreting the scope of 'input service'. Accordingly, in the light of the judgment of the Apex Court in the case of Maruti Suzuki Ltd. (supra), we hold that the services having nexus or integral connection with the manufacture of final products as well as the business of manufacture of final product would qualify to be input service under rule 2(l) of 2004 Rules. 32. As rightl .....

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, in the facts of the present case, use of the services of an outdoor caterer has nexus or integral connection with the business of manufacturing the final product namely, cement. Hence, in our opinion, the Tribunal was justified in following the Larger Bench decision of the Tribunal in the case of GTC Industries Ltd. (supra) and holding that the assessee is entitled to the credit of service tax paid on outdoor catering service. 33. It is argued on behalf of the revenue that not only the ratio b .....

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e' not only means services used directly or indirectly in or in relation to manufacture of final products, but also includes services used in relation to the business of manufacturing the final products. Therefore, while interpreting the words used in the definition of 'input service', the ratio laid down by the Apex Court in the context of the definition of 'input' alone would apply and not the judgment in its entirety. In other words, by applying the ratio laid down by the .....

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acture of final product, but also includes other services, which have direct nexus or which are integrally connected with the business of manufacturing the final product. In the facts of the present case, use of the outdoor catering services is integrally connected with the business of manufacturing cement and therefore, credit of service tax paid on outdoor catering services would be allowable. 35. The argument of the revenue, that the expression "such as" in the definition of input s .....

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ice seeks to cover every conceivable service used in the business of manufacturing the final products. Moreover, the categories of services enumerated after the expression 'such as' in the definition of 'input service' do not relate to any particular class or category of services, but refer to variety of services used in the business of manufacturing the final products. There is nothing in the definition of 'input service' to suggest that the Legislature intended to defin .....

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covered under the definition of 'input service' and in the present case, the outdoor catering services being integrally connected with the business of the manufacture of cement, credit of service tax paid out on catering services has been rightly allowed by the Tribunal. 36........... 37........... 38. We concur with the above decision of this Court in the case of Coca Cola India (P.) Ltd. (supra). However, in that case, this Court has also held that the cost of any input service that f .....

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t input service forms part of the cost of the final product, then credit of service tax paid on such input service would be allowable. 39. The Larger Bench of CESTAT in the case of GTC Industries Ltd. (supra) has also observed that the credit of service tax would be allowable to a manufacturer even in cases where the cost of the food is borne by the worker. That part of the observation made by the Larger Bench cannot be upheld, because, once the service tax is borne by the ultimate consumer of t .....

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