Whether Cenvat credit of service tax is allowed for the service tax paid on input services vis, insurance for public and product liabilities, insurance for laptop computers, consultancy services, clearing and forwarding services, banking commission, Main

PJ/Case Laws/2011-12/1003

Prepared By:
CA. Rajani Thanvi &
Kavita Thanvi

Case: - ROTORK CONTROL (INDIA) PVT. LTD. v/s COMMR. OF C. EX., CHENNAI

Citation: - 2010 (20) S.T.R. 684 (Tri. - Chennai)

Issue:-Whether Cenvat credit of service tax is allowed for the service tax paid on input services vis, insurance for public and product liabilities, insurance for laptop computers, consultancy services, clearing and forwarding services, banking commission, Maintenance of water coolers and house-keeping of area within factory premisesetc?

Brief Facts:-The appellant was manufacturer of Electrical Manual Value Actuators and has been availed credit of service tax paid on services such as insurance for public and product liabilities, building and machinery, maintenance of water coolers, manpower agency, consultancy services, clearing and forwarding services, banking commission etc. Notices were issued to him for negation of ineligible credit of Rs. 102578/- together with interest. The commissioner allowed credit with respect to services such as insurance for building and machinery, maintenance of water coolers within factory premises, housekeeping of the area within the factory premises holding that these were in relation to business activity and hence entitled to credit. However, he disallowed credit in respect of services such as insurance for public and product liabilities, consultancy services, clearing and forwarding services, banking commission, insurance for laptop computer, annual maintenance contract for computer, printer maintenance contract and mediclaim insurance. So assessee and the respondent both are in appeal before the Tribunal.

Appellant’s Contention:- The appellant was contended that:-

-theservices in dispute have formed part of the cost of production which is the cost accounting principle for determination of the cost of production.
- the insurance for public and product liabilities is a service in relation to manufacturing activity, and that consultancy services are essential inputs in relation to the manufacturing activity as such services have been availed in obtaining ISO certification of the assessee’s products.
- Clearing and forwarding services was input services, which has nexus with manufacturing activity and that banking commission was an input service.
- Insurance for laptop computer/annual maintenance contract for computer/printer maintenance contract was also input services on which credit is admissible in the light of earlier decisionsgiven by the Tribunal.

Respondent’s Contention:-

The respondents argued thattheservices such as maintenance of water coolers within factory premises and housekeeping of the area within the factory premises are not covered under the purview of input services.

Reasoning of Judgment:-The Hon’ble Tribunal said that theServices availed by the assessee was expenses falling within para 4.1 of CAS-4 which defines “cost of production”, which consist of Material consumed, Direct Wages and Salaries, Direct Expenses, Works Overheads, Quality Control cost, Research and Development cost, Packing cost, Administrative Overheads relating to production. Hence, the appeal was allowed to the assessee.

Decision:

The revenue appeal rejected and assessee’s appeal was allowed.

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PJ/Case Laws/2011-12/1003

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