Whether Cenvat Credit allowable on Manpower supply service availed for plantation, maintenance of lawn ?

PJ/Case Laws/2012-13/1482

Case:- HINDUSTAN ZINC LTD. Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR

Citation:-2013(288) E.L.T. 406 (Tri.-Del)

Brief Facts:- Assessee is engaged in manufacturer of zinc and other excisable goods. The dispute relates to whether they are eligible for Cenvat Credit of service tax paid on Manpower supply service availed for plantation, maintenance of lawn, etc. The department being of the view that this service is not covered by definition of ‘input service, issued show cause notice for recovery of allegedly wrongly availed cenvat credit along with interest and also imposition of penalty.

Appellant contention:- The appellant pleaded that the permission to operate zinc smelter plant has been given by Rajasthan State Pollution Control Board vide letter dated 29-01-2010 subject to certain condition ,one of which was that the 33%of total area of the factory premises shall be covered by tree plantation , that in the term of the condition subject to which permission to set up zinc smelter plant was given by Rajasthan State Pollution Control Board, the appellant were bound to have tree plantation in 33% of total area and in the event of failing to meet this requirement, the permission to operate zinc smelter plant was liable to be cancelled and in that view of these, the service in question, availed by appellant is service used in or in relation to manufacturing of final product as appellant could not manufacture their final product without of availing of service, in the question, for maintenance of green cover. Appellant has pleaded that impugned order is not correct. Appellant also cited the judgment Hon’ble Andhra Pradesh High court in the case of ITC Ltd. reported as 2012 (TIOL) 199(AP) wherein it was held that service of the Manpower supply availed for plantation is eligible for Cenvat Credit. Appellant, therefore, pleaded that impugned order is not correct.

Respondent contention:-Respondent supported impugned order by reiterating the finding of Commissioner (Appeals) and pleaded that the service in question has no nexus with manufacturing of final product and hence it is not cover under the definition of input service.

Reasoning of Judgment:- We have considered the submission from both sides. The definition of ‘Input service ‘ as given in Rule 2(1) of Cenvat Credit Rules,2004 during the period of dispute covered the “service used by manufacturer where directly or indirectly in or in relation to manufacturing of final product and clearance of final product up to place of removal”. In my view expression would cover not only service which are directly manufacturing operation but would also covered the service which are indirectly essential for manufacturing operation like the service required for compliance with statutory provision. In these case permission given by Rajasthan State Pollution Control Board to appellant for operating zinc smelter plant, was subject to condition the appellant maintaining 33% of area as green cover tree plantation and on their failure to satisfy these condition, the permission granted was liable to be withdrawn. In this view, service received by appellant has to be treated as service compliance with necessary statutory provision subject to which manufacturing has been permitted. The service, in question, is therefore covered by definition of input service. Therefore the impugned order disallowing Cenvat Credit is not correct. The same is set aside. This appeal is allowed.

Decision:-Appeal allowed.

Comment:-The substance of this case is that where a service is availed on account of some statutory obligation it is indirectly related to the ‘manufacture of final products’ and consequently covered under the definition of input service for the purpose of availing the credit.

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PJ/Case Laws/2012-13/1482

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