Case Note & Summary
The Revenue filed an appeal against the order of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai dated 4-12-2007, raising the question whether service tax credit on services of repair, maintenance and civil constructions used in the residential colony of the factory is admissible under Rule 2(l) of CENVAT Credit Rules, 2004 when such services are not directly or indirectly related to manufacture. The respondent-assessee, M/s Manikgarh Cement, is engaged in the manufacture of cement. The Assessing Officer had disallowed the credit of service tax paid on repairs, maintenance and civil construction services used in the residential colony of the respondent-assessee on the ground that the said services were not covered under the definition of input service. The respondent-assessee appealed to the Commissioner Central Excise (Appeals) who rejected the appeal and upheld the order-in-original. The respondent-assessee then appealed to CESTAT, which allowed the appeal and set aside the orders of the lower authorities. The Revenue appealed to the High Court. The court considered the definition of 'input service' under Rule 2(l) of CENVAT Credit Rules, 2004, which includes services used in or in relation to the manufacture of final products, including services used for activities relating to business. The court held that the services used in the residential colony of the factory are used in or in relation to the manufacture of final product and are covered under the inclusive part of the definition. The court noted that the residential colony is essential for the factory's operations and the services are for upkeep of the same. The court dismissed the appeal, upholding the order of CESTAT and answering the question of law in favor of the assessee.
Headnote
A) Service Tax - CENVAT Credit - Input Service - Rule 2(l) of CENVAT Credit Rules, 2004 - Admissibility of credit on services used in residential colony - The issue was whether service tax paid on repair, maintenance and civil construction services used in the residential colony of a cement factory qualifies as 'input service' under Rule 2(l) of CENVAT Credit Rules, 2004. The court held that such services are used in or in relation to the manufacture of final product and are covered under the inclusive part of the definition, as the residential colony is essential for the factory's operations and the services are for upkeep of the same. The appeal by Revenue was dismissed and the order of CESTAT allowing credit was upheld. (Paras 1-6)
Issue of Consideration
Whether service tax credit on services of repair, maintenance and civil constructions used in the residential colony of the factory is admissible under Rule 2(l) of CENVAT Credit Rules, 2004 when such services are not directly or indirectly related to the manufacture of final product.
Final Decision
The appeal is dismissed. The order of CESTAT dated 4-12-2007 is upheld. The question of law is answered in favor of the assessee and against the Revenue.
Law Points
- Service tax credit on repair
- maintenance and civil construction services used in residential colony of factory is admissible as input service under Rule 2(l) of CENVAT Credit Rules
- 2004
- even if not directly related to manufacture
- because such services are used in or in relation to the manufacture of final product.
