Whether credit of service tax paid on various services like - supply of JCB for yard cleaning and internal road leveling, plastic removal and cleaning of yard, transplantation of old trees and leveling work, supply of chain dozer for waste yard are allowe

PJ/Case Laws/2012-13/1135

Case:- COMMISSIONER OF C.EX. , SALEM VERSUS ITC.LTD

Citation: - 2012 (26) S.T.R 92 (Tri-Chennai)

Issue: Whether credit of service tax paid on various services like - supply of JCB for yard cleaning and internal road leveling, plastic removal and cleaning of yard, transplantation of old trees and leveling work, supply of chain dozer for waste yard are allowed & can be considered as being used in manufacture of final products (paper & paper board) ?

Brief facts: - The Respondents are manufacturer of paper and paper boards. They have taken credit of service tax paid on various services like - supply of JCB for yard cleaning and internal road leveling, plastic removal and cleaning of yard, transplantation of old trees and leveling work, JCB chain dozer tractor for waste yard leveling work, JCB tractor & manpower supply for swimming pool cleaning work, plastic removal and cleaning of yard, trench work, supply of tractor, JCB for yard development work, draining work, drain cleaning work, waste yard work, waste yard leveling and filling work, supply of chain dozer for waste yard. Show-cause notice dated 19-2-2009 proposing denial of the credit of Rs. 78,124/- was issued. Original authority denied credit of Rs. 78,124/- in respect of service tax paid on the above activities, which was taken by them as credit. On an appeal by the party, the Commissioner (Appeals) set aside the order of the original authority.

Appellant Contention:- The Appellant submits that the above activities are not directly related to manufacture and clearance of final product and the same cannot be also considered to be activities relating to setting up, modernization, renovation and repairs of the factory or activities relating to their business as covered by the inclusive definition. Therefore, he seeks setting aside the order of the Commissioner (Appeals) and restoring the order of the original authority.

Respondent Contention :- The Respondent in reply of the notice submits that waste paper is one of the main raw materials used by them and waste paper yard is a leased area, use of JCB for leveling/filling and cleaning of yard is essential activities, which is integrally connected to receipt and storage and process of the raw materials, Activities like transplantation of old trees are in connection with expansion of factory. Most of the activities are directly relatable to handling of raw materials and rest of the activities are business activities used within the factory premises in connection with maintaining cleanliness and approach to different parts of the factory and to ensure proper communication. Therefore, the credit has been validly taken and the order of the Commissioner (Appeals) is legal and proper.

Reasoning of Judgment: The show-cause notice alleged that the credit has been taken on services, which cannot be considered as relatable to manufacturing activity directly or indirectly and that there was no nexus with the manufacturing activities. The original authority's order was proceeding on this line. The Commissioner (Appeals) has appreciated the fact that the respondents who are manufacturer of paper and paper boards are handling huge quantity of waste paper and the activities relating to upkeep of the waste yard, which included laying down roads, leveling, filling up etc. are part and parcel of activities having nexus to manufacture of excisable goods. He also took note of the fact that the activities like transplantation of old trees were in connection with expansion of the factory. Similarly, he held that the draining and maintenance of drain and swimming pool are related to maintenance of effluent plant. In the light of above factual finding, he treated the activities as input services and allowed the credit. The department has not adduced any evidence to contradict the factual findings of the Commissioner (Appeals) on the nature of activities and the purpose for which the same were undertaken. In this situation the decision holding that these services are to be treated as input services and extending credit call for no interference.

Decision: -Appeal rejected

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PJ/Case Laws/2012-13/1135

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