When the paper manufacturing unit is under an obligation to maintain a colony, all the services received in maintaining such a colony would also be covered as input services; if a service or activity is relating to business, then it should be treated as an ‘input service’ in the light of the definition of ‘input service’.
CESTAT, SOUTH ZONAL BENCH, BANGALORE
ITC Ltd.
v.
CCE
STA No. 414 & 415/2008
RELEVANT EXTRACTS:
We have gone through the records of the case carefully. In broad terms, the appellants availed service pertaining to the maintenance of staff colony and plantation. The service tax paid on input services were taken as credit in terms of the Cenvat Credit Rules, 2004. The actual taxable services are - (i) renovation; (ii) repair and maintenance; (iii) security; (jv) labour supply; (v) advertising services; (vi) plantation works; (vii) rent a cab services; (viii) Business Auxiliary Services; and (ix) manpower recruitment The definition of 'input service' is reproduced herein below :-
"Rule 2 (1) of the Cenvat Credit Rules 2004 defines "input service" as follows:
‘Input service’ means any service,-
(i) used by a provider of taxable service for providing an ' output service; or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the] manufacture of final products and clearance of final products from the place of removal,
and includes services used in relation to setting up modernization, renovation or repairs of a factory, remises of provider of output service or an 6ffice relating to such , factory or premises, advertisement \ or sales promotion, market research, storage upto the place of removal, procurement of inputs, 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 on inputs or capital' goods and outward transportation upto the place of removal;"
The Commissioner (Appeals) has not accepted the contention of the appellants that maintenance of colony for the 'employees is an input service. According to him, the said view is far-fetched. He has stated that the maintenance of a residential colony is only obligatory activity in a situation exigent a service is in no way concern either directly or indirectly related to the manufacture of final products and hence held that such input services do not fall within the ambit of definition of 'input service* in terms of Rule 2 of the Cenvat Credit Rules, 2004.
The appellants had stated that the area in Which the factory is situated in a Scheduled Area, governed by Article 244 of the Indian Constitution and also Andhra Pradesh Scheduled Areas Land Transfer Regulation, 1959. There is a prohibition for sale and purchase of land. In this background, it is obligatory on the part of the appellants to provide residential accommodation in the vicinity of 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. When the appellant is under an obligation to; maintain a colony, all the services received in maintaining such a colony would also be covered as input services. In the light of the definition of input service, we do not agree with the Commissioner (Appeals) that the services undertaken like lawn mowing, garbage cleaning, maintenance of swimming pool, collection of household garbage-, harvest cutting, weeding, etc. cannot be considered as input services. When a colony has to be maintained, all the above services are to be considered as input services.
As regards plantar activities, a is seen that the appellant is a paper manufacturing unit. The major raw materials are different kind to soft wood trees. They have also explained the circumstances under which they had to invest during improvement research. It cannot be said that this activity does not have any nexus with the manufacturing activity. The whole things should be viewed in a broader perspective in the light of the definition of the 'input service'. According to the department, there is nothing on record to suggest that the cloned saplings sold to the farmers are sold back to the appellants after, growing into trees. If the department was not satisfied with the submissions of the appellants they could have gone into some verification., Simply discussing their averment is not acceptable. The appellant's contention that no one to one correlation is required to be shown under the Cenvat Credit Scheme to claim the credit is correct. It is not necessary that the farmers should sell their entire products to the appellants in order to-claim the input 'service credit by the assessee. In our view, all input Services enumerated are activities relating to business. The ratio of the Tribunal's decision. in Manikgarh Cement/case (supra) is also squarely applicable to the present case. If a service or activity is relating to business, then it should be treated as an 'input service' in the light of the definition of 'input service', in view of our above observations, we hold that that the appellants are entitled for the input service credit. Hence we allow the appeals with consequential relief if any.
As regards plantar activities, a is seen that the appellant is a paper manufacturing unit. The major raw materials are different kind to soft wood trees. They have also explained the circumstances under which they had to invest during improvement research. It cannot be said that this activity does not have any nexus with the manufacturing activity. The whole things should be viewed in a broader perspective in the light of the definition of the 'input service'. According to the department, there is nothing on record to suggest that the cloned saplings sold to the farmers are sold back to the appellants after, growing into trees. If the department was not satisfied with the submissions of the appellants they could have gone into some verification., Simply discussing their averment is not acceptable. The appellant's contention that no one to one correlation is required to be shown under the Cenvat Credit Scheme to claim the credit is correct. It is not necessary that the farmers should sell their entire products to the appellants in order to-claim the input 'service credit by the assessee. In our view, all input Services enumerated are activities relating to business. The ratio of the Tribunal's decision. in Manikgarh Cement/case (supra) is also squarely applicable to the present case. If a service or activity is relating to business, then it should be treated as an 'input service' in the light of the definition of 'input service', in view of our above observations, we hold that that the appellants are entitled for the input service credit. Hence we allow the appeals with consequential relief if any.
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