Input services also cover services used in business of manufacture of final product

CESTAT, MUMBAI BENCH

Commissioner of Central Excise and Service Tax

versus

Lupin Ltd.

P.R. CHANDRASEKHARAN, TECHNICAL MEMBER

FINAL ORDER NOS. A/51-57/2012-WZB/C-IV(SMB)
STAY ORDER NOS. 125-128/2012-WZB/C-IV (SMB)
MISC. ORDER NOS. M/41-46/2012-WZB/C-IV (SMB)
APPLICATION NOS. E/STAY/832, 831, 833 and 375/2010-MUM.
& E/COD/324,E/COD/792-794/2010 & E/COD/323 & 322/2011-MUM
APPEAL NOS. E/343/2011-Mum and E/704,703,705
& E/342, 341 & 301/2010-Mum And E/341& 342/2011

APRIL  20, 2012

ORDER

There are four appeals along with stay applications and condonation of delay applications filed by M/s. Lupin Ltd., against order-in-appeal No. SB/20-25/LTU/MUM/2009, dated 30-11-2009 passed by the Commissioner (Appeals) of Central Excise and Service Tax, LTU, Mumbai. Against the said order they have filed a composite appeal within the time and, therefore, they, were directed to file separate appeals on account of which there was a delay of 59 days in filing the appeals. Considering the reason for delay is satisfactory, I allow the applications for condonation of delay in filing the appeals.

2. Against the very same order-in-appeal the department has also filed four appeals along with the applications for condonation of delay in three cases and the delay is 357 days. The reason for the delay is that the department has filed composite appeal against the impugned Order within time. The Registry directed them to file separate appeals and hence the delay in filing these appeals. As the explanation given is satisfactory, I allow the applications for condonation of delay.

3. The issue involved in this case is eligibility of Cenvat credit of the service tax paid on various input services viz –

The lower appellate authority allowed Cenvat credit in respect of these services except four namely, tour operator service, garden maintenance service, waste management service and repair of fan service. The reason for rejection in respect of these 4 services given by the lower authority is that these services are not integrally connected to the manufacture of final product and hence as per Rule 2(l) of the Cenvat Credit Rules, 2004, they are not “input services”.

4. The learned Advocate for the appellant submits that the tour operator service was used for transporting their staff from their residences to the factory and back which is integrally connected with the manufacturing activity.

4.1 Similarly, waste management service is a statutory requirement and to undertake this activity, they engaged the services of persons to remove the waste from the factory premises and transport the same to their effluent treatment plant. Since waste management is an integral part of manufacturing process, they are entitled for Cenvat credit.

4.2 As regards garden maintenance, being a chemical company, they required to maintain the factory premises neat and clean and it is for the purpose, they engaged the services. Since it is related to the business of manufacturing, they are entitled for credit.

4.3 As regards service tax paid on the repair of fan, fans are installed in the factory and maintenance being an integral part of manufacturing, they are entitled for input service credit.

4.4 The learned Advocate further submits that in their own case, in respect of “waste management service” and “tour operator service”, this Tribunal has allowed credit vide Order No. A/17/2011/SMB/C-IV, dated 15-12-2010 and Order No. A/165/2011/SMB/C-IV as reported in Lupin Ltd. v. CCE & ST Order No. A/165/11/SMB/C-IV, dated 5-5-2011. As regards “garden maintenance service”, she relies on the judgment of the Hon’ble High Court of Chhattisgarh in the case of Union of India v. H.E.G. Ltd. T.C. No. 53/2010, dated 7-7-2010 wherein the question arose as regards the eligibility to credit of the service tax paid on input services namely cleaning and maintenance of Garden, Pandal and Shamiyana Services etc. The Hon’ble High Court held that credit of the service tax paid is available in respect of the said services and the assessee is entitled for the same. As regards repair of fan, the learned Counsel relies on the judgment in the case of H.E.G. v. CCE [2012] 34 STT 362 (Bang.-CESTAT) this Tribunal held that maintenance and repair of photocopier, air conditioner, watercooler etc., are essential without, which the factory cannot run; therefore, the service tax paid on the services is admissible as credit. Accordingly, the learned Counsel prays that the Cenvat credit of the service tax paid on input service be allowed.

5. The learned AR appearing for the Revenue submits that the services such as Architects, courier service, construction service, catering service, manpower recruitment service, insurance service, advertisement service, telephone services Machine/ETP cleaning service, repair and maintenance service, photography etc. are not integrally connected with the manufacturing activity as defined in Rule 2(l) of the Cenvat Credit Rules, 2004. Accordingly, credit of service tax paid on such services cannot be availed and the explanation given in the order of the lower appellate authority is not correct in law.

6. I have carefully considered the rival submissions.

6.1 After hearing the arguments made by both the sides, I am of view that the appeals themselves can be disposed of at this stage. Therefore, after granting stay against the recovery of dues, I take up the appeals for consideration and disposal.

6.2 The Hon’ble High Court of Bombay in the case of CCE v. Ultratech Cement Ltd. [2010] 29 STT 244 (Bom.) considered the issue at length and held that the definition of input service under Rule 2(l) of the Cenvat Credit Rules, is very wide and covers not only services which are directly or indirectly used in or in relation to the manufacturing of final product but also after manufacturing of the final products. The definition covers not only services which are used in or in relation to the manufacture of the final product but also services used in the business of manufacture of the final product. Following the ratio of this Judgment, the input services on which Cenvat Credit has been availed by the appellant in the instant case qualifies as input service. In respect of many of these services, there are a large number of decisions passed by this Tribunal allowing such credit. In respect of photographic services, the learned, Advocate submits that the services were used for taking photograph of the machines to be submitted to the insurance company for obtaining insurance and, therefore it is related to the business of the manufacture. Similarly, in respect of dry-cleaning services, the same was used for dry-cleaning the uniform of their staff and therefore, forms part of business of manufacturing. With regard to construction, the same is undertaken for construction of premises for the manufacturing activity and it is directly connected with the business of manufacturing and similarly in respect of brokerage, the same is connected with commission paid to the brokers for selling products of the company which amounts to sales promotion. All other services detailed above qualify under input services definition and accordingly, I hold that the appellant is rightly entitled for Cenvat credit of the tax paid on these services.

7. In view of the above, I allow the appeals filed by M/s. Lupin Ltd. and dismiss the appeals filed by the Revenue.

NF