Whether credit is available on travelling expenses of officials and office maintenance?

PJ/Case Law/2013-14/2003

Case:- JINDAL PIPES LTD. Vs COMMISSIONER OF CENTRAL EXCISE, MEERUT-II

Citation:- 2013 (30) S.T.R. 473 (Tri. - Del.)

Brief facts:- The facts of the case were that the department had denied the credit of service tax paid as the service tax on travelling expenses and facility management services holding that the same could not be treated as input services in relation to the activities undertaken by the applicants. Accordingly the demand along with interest stood confirmed and penalty stood imposed.

Appellant’s contentions:- The learned Advocate for the applicants submitted that the services of travelling agent had been utilized for transporting the officers and staff on official duties. He relied on the Stay Order No. 177/2010-SM(BR) dated 10-5-2010 in the case of M/s. Good luck Steel Tubes Ltd. in Excise Appeal No. 379/2010 [2010 (20)S.T.R.829 (Tri.-Del.)] wherein in similar circumstances, the credit had been allowed.

In respect of credit on service tax on management facility service, he submitted that the same related to maintenance of office and maintenance of office was essentially and integrally connected to the manufacturing activity taking place in the factory. He submitted that their office was registered as input service distributor and no objection had been raised about the eligibility of credit taken by the office and therefore, denial of credit taken by the factory based on the invoices raised from the office was not correct.

Respondent’s contentions:- The learned SDR drew the attention to the relevant portions of the finding of the Commissioner (Appeals) and submitted that the activities relating to which service tax had been taken as credit did not had nexus with the manufacturing activity of the appellants.

Reasons of judgment:- The Hon’ble Judge carefully considered the submissions from both sides and perused the records. The order of the original authority and the order of the Commissioner (Appeals) did not clearly bring out the category under which the service tax had been paid for the disputed service. Before concluding whether the services utilized by the applicants were inputs services or not, it was necessary that the nature of the activity ought to had been clearly brought out and the category under which the service tax had been paid by the service provider should had been spelt out. From the perusal of the order, prima facie, the activity on which service tax had been paid by the service provider which had been taken as credit by the applicants related to business activity closely linked to manufacturing activity. Maintenance of office could not be said to have no nexus with the manufacturing activity. The services availed in relation to travel and tour of the company officials and staff on office work could not be held to have no nexus with the business activity of the applicants.

Therefore, he held that the applicant had made out a case for waiver of pre-deposit of dues as per the impugned order. Accordingly, there should be waiver of pre-deposit of dues as per impugned order and stay of recovery thereof till disposal of the appeals.

Decision:- Stay granted.
Comment:- The analogy drawn from the case is that Cenvat credit is available on travelling agent arranging official tour for staff or officials as the said activity is related to the manufacturing activity. Also, Maintenance of office could not be said to have no nexus with the manufacturing activity as without office it is very difficult to run factory and other manufacturing activities and accordingly the cenvat credit was allowed.

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PJ/Case Law/2013-14/2003

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