Excel Crop Care Limited Vs. C.C.E. - Court Judgment

Excerpt:

.....2005 and involves an amount of rs. 56,188/-. the department sought to deny the benefit on the ground that the phones are not installed in the factory premises and therefore, cannot be treated as input service in terms of the board's circular no. 59/8/2003 dated 20.6.03. learned advocate submits that the said circular was issued in the context of service tax credit rules, 2002 where there was a stipulation that telephone should be installed in the business premises. however, in the consolidated cenvat credit rules, 2004, applicable to credit of excise duty as well as service tax, there was no such stipulation. further, the tribunal has allowed this in the case of indian rayon industries ltd. vide their order reported in 2006 (4) sir 79 (tri). (b) credit of service tax on cha services availed for export___the appellant is exporting some portion of their goods and they are availing services of cha and the credit on service tax paid on such services is denied on the ground that services of cha are engaged in relation to the activity after removal from the factory and in the port area. the amount involved is 17,718/-. learned advocate submits that the definition of 'input.....

Judgment:

1. This appeal is against the order of the Commissioner (Appeals) No.122/2006(BVR-CE/AV/Comr(A)-IV)/Ahd dated 4.9.06, which substantially upheld the order of the original authority No. 29/D/20-5-06 dated 31.3.06.

3. The issues involved relate to admissibility of Cenvat credit of service tax paid on input services like use of mobile phones, use of CHA services for export, use of construction services in relation to advertisement availed by the appellants.

The appellant availed cenvat credit of service tax paid on mobile phone services in respect of the phones used by their own employees and officers. The dispute relates to the period March, 2005 to September 2005 and involves an amount of Rs. 56,188/-. The department sought to deny the benefit on the ground that the phones are not installed in the factory premises and therefore, cannot be treated as input service in terms of the Board's Circular No. 59/8/2003 dated 20.6.03. Learned Advocate submits that the said circular was issued in the context of Service Tax Credit Rules, 2002 where there was a stipulation that telephone should be installed in the business premises. However, in the consolidated Cenvat Credit Rules, 2004, applicable to credit of excise duty as well as service tax, there was no such stipulation. Further, the Tribunal has allowed this in the case of Indian Rayon Industries Ltd. vide their order reported in 2006 (4) SIR 79 (Tri).

(b) Credit of service tax on CHA services availed for export___The appellant is exporting some portion of their goods and they are availing services of CHA and the credit on service tax paid on such services is denied on the ground that services of CHA are engaged in relation to the activity after removal from the factory and in the port area. The amount involved is 17,718/-. Learned Advocate submits that the definition of 'input service' under Rule 2(1) is extended one and it includes activities relating to business. The service of CHA availed by them should be treated as relating to their business activity and therefore, credit should be extended.

(c) Credit of service tax on construction services in relation to advertisement: The appellant has got certain circles/gardens prepared and put up signboards advertising their product. For this purpose, they have availed the service of construction service providers. Since these construction services have been availed in relation to advertising their product, they claimed the same as input services and sought credit of service tax paid on such services. The amount involved is Rs. 11,370/-.

(d) Mandap keeper's services in relation to product development__Learned Advocate submits that they are not pressing this point at this juncture.

4. Learned SDR submits that input services, should be strictly construed as per the definition. The services rendered at port by CHAs are after clearance of the goods from the factory gate and hence cannot be treated as input service. The availing of construction services for the purpose of setting up of circles/gardens wherein signboards are set up cannot be treated as part of activity relating to advertising services.

6.1 As regards the input credit on mobile services, following the decision in the case of Indian Rayon Industries Ltd. cited supra, I allow the appeal.

6.2 The CHA services availed in respect of export does not have any nexus with the manufacture and clearance of the product from the factory. The business activities which are sought to be included in the extending arm of the definition, in my opinion, cannot include the services rendered at the port area. Therefore, the appeal on the aspect is rejected.

6.3 Similarly, setting up of circles/gardens away from the factory for the purpose of putting signboard cannot be considered as relating to activity in relation to advertisement. This can lead to a situation where any massive building built away from the factory premises where signboards were also put up can be treated in relation to advertisement of the product. While putting up a signboard is definitely a part of advertisement services the same cannot be, unrealistically, extended to various activities like setting up circles/gardens with the help of construction service providers. The appeal in this regard is also rejected.

7. The above disputes arise out of interpretation of differences and therefore, there is no justification for imposition of penalty on the appellant. Penalty sustained by the Commissioner (Appeals) is set aside.