Whether repair and maintenance services used for air-conditioning plant for office space of the factory would be eligible for Cenvat credit?

PJ/Case Laws/2012-13/1116

Case: BRY ASIA PVT. LTD. V/S COMMISSIONER OF CENTRAL EXCISE, DELHI-III

Citation: 2012 (26) S.T.R. 333 (Tri.-Del.)

Issue:- Whether repair and maintenance services used for air-conditioning plant for office space of the factory would be eligible for Cenvat credit?

Brief Facts: - Aappellant are engaged in the manufacture of dehumidifier for industrial use. The point of dispute in this case is as to whether the repair and maintenance services used for air-conditioning plant for the office space of their factory would be eligible for Cenvat credit or not.

The Original Adjudicating Authority as well as the First Appellate Authority took the view that the services, in question, have no nexus with the manufacture of the final products, have denied the Cenvat credit and have confirmed the Cenvat credit taken along with interest and also imposition of penalty on them.

Hence, appellant is before the Tribunal.

Appellant’s Contention: - Appellant contended that the air-conditioning plant in the factory is used for air-conditioning of the office space where the employees of the factory work, that the services of repair and maintenance of such air-conditioning plant have to be treated as activities related to their manufacturing business, as the employees in the office were working in connection with the their manufacturing business, that the services, in question, have direct nexus with the manufacturing business of them and hence, in view of the judgment of the Hon'ble Bombay High Court in the case of Commissioner of Central Excise, Nagpur v. UltraTech Cement Ltd. [2010 (20) S.T.R. 577 (Bombay) = 2012 (260) E.L.T. 369 (Bom.), the services, in question, have to be treated as covered by the definition of "input services". He, therefore, pleaded that the impugned order is not correct.

Respondent’s Contention: - Revenue argued that the services, in question, have no nexus with the manufacturing business of the final products, that the manufacture of the final products was possible without air-conditioning of the office space of the factory premises, that the Cenvat credit has been correctly denied in respect of these services, that in this regard, he relies upon the judgment of the Hon'ble Apex Court in the case of Maruti Suzuki Ltd. v. C.C.E., Delhi-III [2009 (240) E.L.T. 641 (S.C.), the judgment of the Hon'ble Tribunal in the case of Commissioner of Central Excise, Nagpur v. Manikgarh Cement Works [2010 (18) S.T.R. 275 (Tribunal-Mumbai), the judgment of the Tribunal in the case of C.C.E., Chennai v. Sundaram Brake Linings reported in 2010 (19) S.T.R. 172 (Tribunal-Chennai) and the judgment of the Tribunal in the case of Ellora Times Ltd. v. C.C.E., Rajkot reported in 2009 (235) E.L.T. 661 (Tri.-Ahmd.) = 2009 (13) S.T.R. 168 (Tri.-Ahmd.), that in all these judgments, it has been held that a service can be treated as covered by the definition of' input services" only if such service has nexus with the manufacture of final products and that in this case, the services of repair and maintenance of the air-conditioning plant for office space of the factory, has no nexus with the manufacture of final products. He, therefore, pleaded that there is no infirmity in the impugned order.

Reasoning of Judgment: - The Tribunal held that there is no dispute that the air-conditioning plant, in respect of which repair and maintenance services had been used, was for air-conditioning of the office space of the factory, which is used by the employees of the Appellant, who work in connection with the manufacturing business of the appellant. In their view, the air-conditioning of the office space and the repair and maintenance services availed for the same have nexus with the manufacturing business of the appellant, more so, when the definition of 'input service' specifically includes the Services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or office relating to such factory or premises. Moreover, air-conditioning of an office space not only in-creases the efficiency of the staff but may also be essential for the computer systems installed therein.

It was observed that the Bombay High Court in para 35 in the case of C.C.E., Nagpur v. Ultratech Cement Ltd. has held that all the services used in relation to the manufacturing of final products are covered under the definition of input services and the definition of input services covers all the services which are used in relation to the business of manufacture of final products. On this basis, the Hon'ble Bombay High Court in this cases held that the service of outdoor catering having nexus with the business of manufacture of final products would be covered by the expression "activities related to business".

The Tribunal held that in the present case, during the period of dispute, definition of "input services" covered the "activities related to business" and in their view, the repair and maintenance of the air-conditioning plant for the office space has to be treated as activities having nexus with the manufacturing business of the appellant. There is difference between the "activities having nexus with the manufacturing business" and the "activities having nexus with the manufacture of the final product", the former expression is much wider. For determining as to whether a particular service availed by a manufacturer is covered by the definition of 'input service', it has to be examined as to whether that service has nexus with the manufacturing business of the assessee. On the other hand, for an 'input' to be cenvatable in respect of manufacture of a final product, that input must have nexus with the manufacture of the final product. In their view, the judgment of the Apex Court in case of Maruti Suzuki Ltd. v. C.C.E., Delhi-III cited by the Revenue, which is on the question of eligibility for Cenvat credit of fuels used for generation of electricity, which instead of being used in the factory for manufacture of final product, was sold outside or was used in other Joint Ventures of the assessee (MUL), cannot be applied in the case of input services, which need not be used inside the factory and whose definition, during the period of dispute, included "activities relating to business" which has been interpreted as "all activities relating to manufacturing business of the Assessee", which is a expression much wider than the expression 'manufacture of final product'.

Decision: - Appeal allowed.

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PJ/Case Laws/2012-13/1116

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