TMI Blog2009 (5) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... - 13-5-2009 - T.K. JAYARAMAN, TECHNICAL MEMBER and M.V. RAVINDRAN, JUDICIAL MEMBER G. Shivadas for the Appellant. V.P.C. Rao for the Respondent. ORDER T.K. Jayaraman, Technical Member. - These appeals have been filed against the Order-in-Appeal Nos. 20 21/2008 dated 27-5-2008, passed by the Commissioner of Customs, Excise Service Tax (Appeal - III), Hyderabad. 2. We heard both the sides in the matter. 3. The issue relates to service tax credit availed by the appellants on input services. Two show-cause notices dated 18-10-2006 and 11-4-2007 have been issued to the appellants for proposing to recover the credit of duty availed on input service utilized for maintenance of staff colony, plantation and ILTD. The period of dispute is from October 2005 to January 2007. The Order-in-Original confirmed the recovery of the credit. The appellants approached the Commissioner (Appeals) who passed the impugned Order-in-Appeal confirming the recovery of credit but dropping the penalty. The appellants are highly aggrieved over the impugned order. Hence they have come before the Tribunal for relief. 4. The learned Advocate urged the following points:- (i) The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uire, and sell those seedlings to farmers to grow into trees. The appellants had buy-back agreements with the farmers. They provide support in the form of extension services giving technical advice to the farmers and buy back the wood. (iv) The appellants maintain a godown outside the factory in which they collect and store the raw materials required for manufacture. The activities used in the godown are relating to the business of the appellants. For the above activities, the appellants received certain services like renovation, repairs and maintenance, security, labour supply, advertising services, plantation works, rent-a-cab services, Business Auxiliary Service and manpower recruitment service. The appellants availed service tax credit on the input service used for maintenance of colony, plantation activity and ILTD. The said availment of credit is in dispute now. (v) Our attention was invited to rule 2(l) of the Cenvat Credit Rules, 2004 which defines "input service". It was stated that the expression used is - "Used by manufacture whether directly or indirectly, in or in relation to the manufacture of final products". The scope of the expression 'used by the manufacturer' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ains the term 'wholly and exclusively for the purpose of the business or profession'. And the same has been the subject-matter of detailed scrutiny by the courts in various decisions. In all the cases involved, the courts discussed the basic principle of 'commercial expediency'. The courts laid down the law that if an expenditure is commercially required to be incurred with a view to benefit the trade and to facilitate the carrying on the business, such expenditure will be allowed as deduction under section 37 of the Income-tax Act, 1961. The following judgments were relied on: (a) CIT v. Malayalam Plantations Ltd. [1964] 53 ITR 140 (SC) (b) CIT v. Mysore Iron Steel Ltd. [1978] 115 ITR 219 (Kar.) (c) CIT v. Nainital Bank Ltd. [1966] 62 ITR 638 (SC) (d) ITAT v. B. Hill Co. (P.) Ltd. [1983] 142 ITR 185 (All.) (e) Greaves Cotton Co. Ltd. v. CIT [2005] 279 ITR 42/149 Taxman 180 (Bom.). Thus, any service received and which is commercially required for the purpose of carrying on the business of the manufacturer, will be covered by the expression 'activities relating to business'. It was urged that the appellants were right in taking credit on the man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the light of the above decisions, I accept the contention of the assessees that they are eligible to avail input service tax credit, set aside the impugned order and allow the appeal." The above decision of the Tribunal has been followed in the following cases: (a) Victor Gaskets India Ltd. v. CCE [2008] 14 STT 403 (Mum.-CESTAT). (b) CCE v. Manikgarh Cement [Appeal No. E/478/2008-Mum., dated 18-7-2008]. (c) CCE Raipur v. Century Cement [E/Stay/1668-1669/2008-SM(BR) in E/Appeal No. 1684-1685/2008-SM(BR), dated 17-9-2008]. The decision in the case of Victor Gaskets (supra) which was passed in turn following Manikgarh Cement case (supra) has also been upheld by the Larger Bench of the Tribunal in the case of CCE v. GTC Industries Ltd. [2008] 17 STT 63 (Mum.-CESTAT)(LB). (ix) In the following decisions which have been held that a manufacturer or a service provider can take Cenvat credit of input service required in relation to the business of manufacturing or providing output service: (a) CCE v. Deloitte Tax Services India (P.) Ltd. [2008] 16 STT 449 (Bang.-CESTAT). (b) Keltech Energies Ltd. v. CCE [2008] 14 STT 419 (Bang.-CESTAT). (c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivity and hence allowed as input services. On the contrary, the input services claimed for credit are well beyond the scope of the definition. The maintenance of colony is neither an activity relating to business nor an activity relating directly or indirectly to manufacture of final product or clearance of final products from the place of removal. Hence the activity does not fall within the ambit of the definition of the term input service'. The cloned saplings are sold by the appellants to the independent farmers for cultivation into plantations. Plantation activity is held by the farmers who are at liberty to sell the trees grown out of the cloned saplings in the open market. There is no nexus between plantation activity and the business conducted by the assessee. Hence they are not entitled for the Cenvat credit of service tax paid on service relating to plantation activities. Input relief is to neutralize cascading effect of tax but not to extend the same for unconnected/unrelatable inputs/services at the expense of the tax liability. 6. We have gone through the records of the case carefully. In broad terms, the appellants availed service pertaining to the maintenance of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the factory. Such an accommodation is not provided, it would not be feasible for the appellants to carry on the manufacturing activity. We do not agree with the finding of the Commissioner (Appeals) that providing colony for the employees is not directly or indirectly connected with the manufacturing activity of the appellants. The factual situation is to be appreciated. We also take note of the expression 'activities relating to business' used in the definition of 'input service'. The scope of the definition of input service is very wide. It encompasses a variety of services which relate to not only manufacture of final products but also several activities relating to business. Some of the activities are also enumerated. We note the following expressions: "...activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal;" The use of the expression "as such" indicates that list of activities given therein are only illustrative and not exhaustive ..... X X X X Extracts X X X X X X X X Extracts X X X X
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