Definition of ‘input service’ upto 31-3-2011

Till 31-3-2011, definition of ‘input service’ as per rule 2(l) was as follows –

Rule 2(l) - “Input service” means any service –

(i)                   used by a provider of taxable service for providing an output service; or

(ii)                 used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products, upto the place of removal; (The words ‘from the place of removal’ have been replaced by ‘, upto the place of removal’ w.e.f. 1-4-2008).

and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal.

Note – Till 31-3-2008, ‘clearance of final product from the place of removal’ was defined as ‘input service’. Now, w.e.f. 1-4-2008, the words are ‘‘clearance of final products, upto the place of removal’. This is presumably done to avoid disputes regarding eligibility of Cenvat credit on ‘outward freight’. In my view, this had not resolved the dispute. Outward freight was still ‘input service’. See discussions later under ‘outward freight’.

1-1 Analysis of the definition

The definition of ‘input service’ as existing upto 31-3-2011 was broadly in two parts – first i.e. main part and second i.e. inclusive part. First part of the definition was restrictive in scope as it covered input services directly or indirectly used for providing output service or used in relation to manufacture or clearance of final product. However, second i.e. inclusive part of the definition expanded the scope much beyond the coverage of first part.

The inclusive part itself was of two sub-parts. The first sub-part gave some illustrations of input services while second part covered all services used in relation to ‘activities relating to business, such as - -‘. Some illustrations were given in second sub-part of the definition, but these were preceded by the term ‘such as’. It means these were only illustrations. Any service in relation to business would be ‘input service’.

Meaning of ‘includes’ and ‘in relation to’ - It is well settled that inclusive part expands the scope of main definition. The inclusive part can cover items which are not getting covered in main part of definition. It is also well settled that ‘in relation to’ widens the scope of definition. It is not restrictive [The case law is discussed in earlier paragraphs]

Any service in relation to business was ‘input service’ upto 31-3-2011 - Input services which have only remote or no nexus with output services or manufacture of goods can get covered so long as these are related to activities of business. This is also clear from the fact that service tax paid at Head Office and branches/depots can be utilised as Cenvat credit through the mechanism of ‘input service distributor’.

In CCE v. Shariff Motors (2009) 22 STT 419 (CESTAT), assessee was dealer in two wheelers and also was providing service to old vehicles as authorised service station. He paid service tax on GTA service in respect of inward transport of new vehicles. He availed Cenvat credit on the GTA service. The credit was utilised for payment of service tax on servicing of vehicles which included even old vehicles. It was held that definition of input service is wide enough to cover input service availed by assessee.

Any input service required to maintain quality and efficiency of output service was input service - If absence of the input service adversely impacts quality and efficiency of output service, it (input service) should be considered as eligible input or input service - para 3.1.2 of CBE&C circular No. 120/01/2010-ST dated 19-1-2010.

Service need not be received in factory or premises from where output service provided – In case of inputs and capital goods, Cenvat credit is eligible to manufacturer only if these are received in the factory. However, in case of input service, there is no such requirement. Input service need not be received in factory or premises of service provider.

In case of service provider, even there was no requirement that inputs and capital goods should be received in premises of service provider.

1-2 Coverage beyond manufacturing/service provision stage by inclusive clause

Following discussions are relevant only in respect of input services received upto 31-3-2011.

Inclusive definition clause of rule 2(l) extended scope of ‘input services’ even beyond stage of ‘manufacture’ or ‘provision of service’. The inclusive clause made it clear that services much earlier to manufacture or provision of service or even after manufacture and after provision of service will be eligible as service tax credit.

See earlier para for interpretation of ‘includes’

1-4 Services covered in inclusive part of the definition

The services that were covered in inclusive part of the definition were services in relation to –

(a)     Setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises

(b)     Advertisement or sales promotion

(c)     Market research

(d)    Storage upto the place of removal

(e)     Procurement of inputs

(f)      Activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal.

In fact, any service in relation to business of assessee was ‘input service’ upto 31-3-2011.

Activities relating to setting up, modernisation, repairs etc. - Activities in relation to setting up, modernization, renovation or repairs of following were eligible for Cenvat Credit - (a) a factory (b) premises of provider of output service or (c) an office relating to such factory or premises.

These may be relating to construction, erection, commissioning, and installation etc.

Services relating to marketing – The services of advertisement, sales promotion and market research were specifically mentioned in the definition as eligible input services. ‘Sales promotion’ should also cover selling agent’s commission, C&F Agent’s services etc. Even if it is held that the selling agent’s commission or C&F Agents services are not ‘sales promotion’, they would certainly get covered under ‘activities relating to business’.

In Coca Cola India v. CCE (2009) 22 STT 130 = 25 VST 473 = 242 ELT 168 (Bom HC DB), assessee was manufacturing concentrates of beverages. It was incurring expenditure on marketing and advertising. Its cost was included in price of concentrate sold by assessee (to bottlers who were bottling and selling the beverages). It was held that marketing and advertising services are input services and are eligible for Cenvat credit.

Procurement of inputs – These should cover services relating to commission of purchase agent, inward transport and insurance, storage and godown charges (if paid) etc.

Activities relating to business – All input services relating to ‘activities relating to business’ are eligible for service tax credit. Scope of this is very wide and is discussed in a later paragraph.

1-5 Services relating to ‘clearance’ of final product’

Services in or in relation to ‘clearance of final products, upto place of removal’ have been included in definition of ‘input service’ in respect of ‘manufacturer’ [The words were ‘clearance of final product from the place of removal’ upto 31-3-2008].

Clearance – This word has specific meaning in Central Excise, where ‘clearance’ means removal from the factory. Thus, expenses incurred for removal of final product from factory like loading final products in vehicles will get covered.

Place of removal – See discussions in earlier para.

Activities relating to business

1-6 All services relating to business were eligible for service tax credit. The words used in second sub-part of the inclusive part of the definition are ‘activities relating to business, such as -  -  -  -  -  ’.  The activities specifically mentioned were as follows –

·         Accounting, auditing, financing

·         Recruitment and quality control

·         Coaching and training

·         Computer networking

·         Credit rating

·         Share registry

·         Security

·         Inward transportation of inputs or capital goods and

·         Outward transportation upto the place of removal.

The use of word activities in the phrase ‘activities relating to business’ further signifies the wide import of the phrase ‘activities relating to business’. The rule making authority has not employed any qualifying word before activities like main activities or essential activities etc. Therefore, it must follow that all and any activity relating to business falls within the definition of input service provided there is relation between the manufacturer of product (concentrate in this case) and the activity. Therefore, the phrase ‘activities relating to business’ are words of wide import - Coca Cola India v. CCE (2009) 22 STT 130  = 25 VST 473 = 242 ELT 168 (Bom HC DB).

In Dell International Services v. CCE (2009) 22 STT 478 (CESTAT), it was held that the phrase ‘activities relating to business’ indicates that the interpretation of ‘input service’ should be done in a liberal way.

Further, these were only illustrations, as the words used are ‘such as’. The illustrations do not mean that only these services are covered under ‘activities relating to business’.

For example, the words used were ‘outward transportation upto the place of removal’. It does not mean outward freight after place of removal is excluded – CCE v. Vasavadatta Cement (2009) 23 STT 284 (CESTAT).

1-7 Meaning of ‘such as’

See discussions in an earlier para.

As per inclusive definition of ‘input service’ [rule 2(l)], all services used for activities relating to business’ were ‘input services’. The definition did not say ‘activities relating to business pertaining to manufacture or provision of output services’. Thus, all input services used in activities relating to business were ‘input services’, whatever may be its purpose.

1-8 Scope of ‘activities relating of business’

Some of the input services which may get covered under this head were as follows – (a) Telephone (b) Security Services (c) Travel Agents (d) Audit (e) Banking and financial services (f) Business Auxiliary Services (g) Commercial training (h) Consulting Engineer (i) CHA services (j) Management consultant (k) Manpower recruitment (l) Rent-a-cab (m) Storage and warehousing (n) Technical inspection and testing (o) Goods Transport Agency.

Expenses on which FBT paid are in relation to business - Fringe benefit tax (FBT) is paid on certain business expenses. If FBT is paid on some services, it means that those are related to business of assessee. Hence, such services are input service eligible for Cenvat Credit – Victor Gaskets v. CCE (2008) 14 STT 403 (CESTAT) [decision with reference to canteen services but applicable to all the input services].

Any expenditure incurred on ground of commercial expediency is for purpose of business – In S A Builders Ltd. v. CIT (Appeals) (2007) 158 Taxman 74 = 288 ITR 1 (SC), it was held that any expenditure incurred on ground of commercial expediency is allowable as business expenditure. ‘For the purpose of business’ is wider in scope than the expression ‘for the purpose of earning income, profits or gains’. ‘Commercial expediency’ is an expression of wide import and includes such expenditure as a prudent businessman incurs for purpose of business. The expenditure may not have been incurred under legal obligation, yet it is allowable if it was  incurred on grounds of commercial expediency – relying on Madhav Prasad Jatin v. CIT AIR 1979 SC 1291.

‘Wholly and exclusively for purpose of business’ does not mean ‘necessarily’. Ordinarily, it is for assessee to decide whether the expenditure should be incurred in course of his business. If it is for promoting business and to earn profits, it is allowable even though there was no compelling necessity to incur such expenditure. The expenditure is allowable even if sister concern is benefited by such expenditure – Sassoon J David & Co. v. CIT (1979) 118 ITR 261 = 1 Taxman 485 (SC).

Reasonableness of expenditure has to be adjudged from point of view of the businessman  and not of the revenue – CIT v. Walchand & Co. (1967) 65 ITR 381 (SC).

Management of Business is ‘activity relating to business’ - Management of business is an activity relating to business. Hence, all input services relating to ‘management of business’ should be eligible for service tax.

Meaning of ‘Management’ – ‘Management’ is generally understood to mean running the affair of an organisation in an organised and systematic manner. To be able to do this efficiently and effectively, management typically involves carrying out host of activities, functions and tasks at different levels. Thus, management would include tasks such as planning, organising, staffing, directing, controlling and coordinating. Management also invariably involves designing organizational structure around functions such as marketing, manufacturing, research and development and finance and/or business area such as product groups or geographical markets – View of Indian Institute of Management, Ahmedabad quoted and approved by CBE&C in MF(DR) section 37B order No. 1/1/2001-ST dated 27-6-2001.

Telephones at residences of executives - The use of telephones at residences of executives for official purposes should be considered as ‘activity relating to business’. Hence, the service tax credit should be eligible. Even if part of use of telephone is for private purposes, still it is a perquisite to employee and is ‘relating to business’. Even service tax paid on mobile phones will be eligible, if it is in relation to business.

Landline phones installed in residences of officers and directors of company is for business purpose and Cenvat credit is eligible – Keltech Energies v. CCE (2008) 14 STT  419 (CESTAT SMB) * ITC Ltd. v. CCE (2009) 20 STT 110 = 42 VST 383 (CESTAT SMB) * CCE v. Greaves Cotton (2009) 239 ELT 137 = 33 VST 94 (CESTAT SMB) * CCE v. Andhra Pradesh Paper Mills (2010) 254 ELT 354 (CESTAT SMB) * Ace Glass Containers v. CCE (2010) 250 ELT 110 (CESTAT SMB) – contrary view in Monnet Ispat v. CCE (2011) 30 STT 60 (CESTAT SMB).

Legally, the telephone need not be in name of manufacturer/service receiver (case law discussed under ‘Documents eligible for Cenvat Credit’). What is essential is that the input service should be utilised for purpose of business of person utilising Cenvat credit. It is advisable to take endorsement from employee on the invoice.

1-9 Meaning of ‘Business’

Business - (a) Commercial activity, a commercial organisation – Concise Oxford Dictionary (b) A commercial enterprise or establishment – Webster’s Concise Dictionary (c) Employment, occupation, profession or commercial activity engaged in for gain or livelihood – Black’s Law Dictionary.

1-10 Rule of Purposive construction

The aforesaid interpretation of ‘input service’ can also be supported on the basis of rule of purposive construction.

Purpose of wide definition of ‘input service’ - The purpose of wide definition of ‘input service’ has been stated by Finance Minister in para 148 of his budget speech on 8-7-2004 as follows, ‘I propose to take a major step towards integrating the tax on goods and services. Accordingly, I propose to extend credit of service tax and excise duty across goods and services’ – quoted in Coca Cola India v. CCE (2009) 22 STT 130  = 25 VST 473 = 242 ELT 168 (Bom HC DB).

Thus, the purpose is to move toward GST (Goods and Service tax).

Another basic purpose of Cenvat credit is to avoid cascading effect.

These purposes cannot be ignored while interpreting the definition of ‘input service’.

Press Note dated 12-8-2004 - Ministry of Finance, prior to introduction of Cenvat Credit Rules, 2004 circulated the draft rules inviting comments from the trade and industry. A Press Note dated 12-8-2004 was issued along with the draft rules which highlighted the salient features of Cenvat Credit Rules. The relevant extract is as under :—

‘(iii) In principle, credit of tax on those taxable services would be allowed that go to form a part of the assessable value on which excise duty is charged. This would include certain services which are received prior to commencement of manufacture but the value of which gets absorbed in the value of goods. As regards services received after the clearances of the goods from the factory, the credit would be extended on services received up to the stage of place of removal (as per section 4 of the Central Excise Act). In addition to this, services like advertising, market research etc. which are not directly related to manufacture but are related to the sale of manufactured goods would also be permitted for credit.

(iv) Full credit of service tax on services (such as telephone, security, construction, advertising service, market research etc.) which are received in relation to the offices pertaining to a manufacturer or service provider would also be allowed.’

[Noted and quoted in Coca Cola India v. CCE (2009) 22 STT 130 = 25 VST 473  = 242 ELT 168 (Bom HC DB) and CCE v. GTC Industries (2008) 17 STT 63 = 12 STR 468 = 89 RLT 197 = 2008 TIOL 1634 (CESTAT 3 member large bench)].

ZPN.8 Decision in Coca Cola and ABB had cleared mist over definition of ‘input service’

Definition of ‘input service’ was very wide upto 31-3-2011. Any service in relation to business was input service. Any relation to ‘manufacture’ or ‘provision of service’ is really not required. However, department was taking a restricted view and even in case of many decisions of Tribunal, restricted view was taken.

Decisions of division bench of Mumbai high Court in case of Coca Cola  and of 3 member large bench of Tribunal in case of ABB had cleared the mist and had brought out true interpretation of the term ‘input service’.

In Coca Cola India v. CCE (2009) 22 STT 130  = 25 VST 473 = 242 ELT 168 (Bom HC DB) and ABB Ltd. v. CCE (2009) 21 STT 77 = 15 STR 23 (CESTAT 3 member bench), various aspects of definition of ‘input service’ have been clarified. These are summarised below.

These views have been upheld and reiterated in CCE v. Ultratech Cement (2010) 8 taxmann.com 20 = 29 STT 244 = 2010-TIOL-745 = 36 VST 505 = 260 ELT 369 (Bom HC DB) [contrary view has been held in CCE v. Manikgarh Cement (2010) 7 taxmann.com 115 = 29 STT 230 = 2010-TIOL-720 (Bom HC DB)].

Karnataka High Court had granted stay against operation of CESTAT large bench decision in case of ABB on 10-12-2009 (244 ELT A91), but has finally upheld the order of Tribunal in case of ABB in CCE v. ABB Ltd. (2011) 44 VST 1 = 32 STT 141 = 12 taxmann.com 57 (Karn HC DB) [However, the reasoning of Tribunal was not accepted. It has been held that decision of Tribunal is valid only upto 1-4-2008.

In India Cement Ltd. v. CCE (2010) 249 ELT 530 (CESTAT), the bench did not agree with decision in case of ABB and the matter regarding Cenvat credit of service tax on outward freight was adjourned awaiting decision of Karnataka High Court on stay petition filed by department.

Luckily, decision of Bombay High Court is also on same lines as that of ABB decision and that decision continues to be valid.

Inclusive part expands scope of definition – The word ‘includes’ is generally used to enlarge the meaning of the preceding words and it is by way of extension, and not restriction [para 23 of decision of Bombay High Court and para 16 of decision of Tribunal in ABB]

Five parts of definition of ‘input service’ are independent of each other - The definition of ‘input service’ can be conveniently divided into following five categories, so far as the manufacturers are concerned -

(a) Any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products.

(b) Any service used by the manufacturer, whether directly or indirectly, in or in relation to clearance of final products, from the place of removal (now it is ‘upto the place of removal’ but that does not change the conclusion of decisions of Bombay HC and Tribunal).

(c) Services used in relation to setting up, modernization, renovation or repairs of a factory, or an office relating to such factory (or premises in case of service provider).

(d) Services used in relation to advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs.

(e) Services used in relation to activities relating to business and outward transportation upto the place of removal.

Both Bombay High Court (in case of Coca Cola) and Large bench of Tribunal (in ABB) have held that each of the limb of above definition is an independent benefit/concession. If an assessee can satisfy anyone of above, the credit of input service would be admissible even if the assessee does not satisfy the other limbs – quoted and followed in Semco Electrical v. CCE (2010) 24 STT 508 (CESTAT SMB) * Rashtriya Ispat Nigam v. CCE (2010) 26 STT 405 (CESTAT).

[Note - In case of service provider, clauses (a) and (b) above change but there is no change in clauses (c), (d) and (e) above and in any case, the basic principle is same].

Any activity relating to business is ‘input service’ - There is no qualification to the word ‘activities’. There is no restriction that activities relating to business should be relating to only main activities or essential activities [para 27 of Coca cola and para 13 ABB decision]. All activities relating to business fall within the definition of ‘input service’ – same view in Semco Electrical v. CCE (2010) 24 STT 508 (CESTAT SMB).

Meaning of ‘such as’ - The expression ‘such as’ is purely illustrative. ‘Such as’ means ‘for example’ or ‘of a kind that’ (Concise Oxford Dictionary). ‘for example’ (Chambers Dictionary) [para 14 of the decision in ABB and para 24 of decision in Coca Cola]

‘Valuation’ and ‘Cenvat Credit’ are independent of each other – Hon. Tribunal held that the two issues namely valuation and Cenvat credit are independent of each other and have no relevance to each other. The submission of revenue that Cenvat credit cannot be allowed for services if value thereof does not form part of value subjected to excise duty is clearly against the fundamental concept laid down by Supreme Court in All India Federation of Tax Practitioners and the OECD guidelines [para 21 of decision of Tribunal in case of ABB].

There is additional reason for holding that Cenvat credit is admissible on services even if the value thereof is not part of value subjected to duty. This is because the interpretation of the expression ‘input services’ cannot fluctuate with the change in definition of value in section 4 of Central Excise Act and cannot vary depending on whether goods are levied to duty under section 4A of Central Excise Act or tariff value under section 3(2) of Central Excise Act or the product attracts specific rate of duty [para 22 of decision of Tribunal in case of ABB].

If cost included in assessable value, Cenvat credit is available - It was observed by Hon. Tribunal that ‘question of denial of Cenvat credit does not arise if cost of (outward) freight is included in the transaction value’.

Thus, if a cost is included in assessable value, its Cenvat credit will be certainly eligible. However, even if it is not included, it will still be eligible if it is in relation to business of assessee.

Definition of ‘input service’ is not confined to ‘manufacture’ but has to be interpreted on basis of requirements of business - The definition of ‘input service’ has to be interpreted in the light of the requirements of business and cannot be read restrictively so as to confine only upto the factory or only upto depot of manufacturers.

Outward freight eligible for Cenvat credit – Tribunal, in case of ABB concluded that outward freight is ‘input service’ even if its cost is not included in assessable value of goods [In my view, if outward freight is not included in assessable value, assessee should be very careful while taking Cenvat credit since dispute regarding assessable value may arise].

However, the decision of three member bench of Tribunal had gone much beyond the issue of ‘outward freight’ and in effect, it has been held that any service in relation to business of assessee is its input service – same view in Semco Electrical v. CCE (2010) 24 STT 508 (CESTAT SMB) * Ultratech Cement v. CCE (2010) 258 ELT 266 (CESTAT SMB).

However, in CCE v. Sundaram Brake Linings (2010) 28 STT (CESTAT SMB), it was held that unless there is nexus between input service and manufacture, i.e. final product cannot emerge without use of the input service, it is not eligible.

2-1 Other decisions taking liberal view of ‘input service’

Following decisions are not valid in respect of services received on or after 1-4-2011.

Any input service required to maintain quality and efficiency of output service is input service - If absence of the input service adversely impacts quality and efficiency of output service, it (input service) should be considered as eligible input or input service - para 3.1.2 of CBE&C circular No. 120/01/2010-ST dated 19-1-2010.

Any service whose cost included in assessable value eligible for Cenvat credit - In CCE v. GTC Industries (2008) 17 STT 63 = 12 STR 468 = 89 RLT 197 = 2008 TIOL 1634 (CESTAT 3 member large bench), it has been held that, in principle, credit of service tax paid on those taxable services would be allowed that go to form a part of the assessable value on which excise is charged [Really, as stated in case of ABB Ltd., valuation and Cenvat credit are independent issues. However, in ABB’s case, it was observed that ‘question of denial of Cenvat credit does not arise if cost of (outward) freight is included in the transaction value’. Thus, if a cost is included in assessable value, its Cenvat credit will be certainly eligible] – followed in CCE v. CCL Products (2009) 22 STT 36 (CESTAT) * CCE v. Vikram Cement (2009) 22 STT 492 (CESTAT SMB) * Hindustan Coca-Cola Beverages v. CCE (2010) 24 STT 208 = 37 VST 351 (CESTAT) – same view in Korea Plant Service v. CCE (2010) 25 STT 400 (CESTAT SMB).

In CCE v. Alidhara Textoll Engineers (2009) 21 STT 60 = 239 ELT 334 (CESTAT SMB), the contract was for supply of machinery and its erection and commissioning at buyer’s premises. Assessee paid excise duty on whole transaction value including erection and commissioning charges. It was held that services received from sub-contractor for erection and commissioning of machinery is input service and is eligible for Cenvat credit.

Services received outside factory eligible if its cost included in cost of production - In CCE v. Vikram Cement (2009) 22 STT 492 (CESTAT SMB), it has been held that Cenvat credit of input services cannot be denied only because these were availed outside factory premises, if its cost is included in cost of production.

Outward freight eligible even if its cost is not included in assessable value - Outward freight is ‘input service’ even if its cost is not included in assessable value of goods.- ABB Ltd. v. CCE (2009) 21 STT 77 = 15 STR 23 (CESTAT 3 member bench) – followed in  CCE v. Vasavadatta Cement (2009) 23 STT 284 (CESTAT) [However, in my view, if outward freight is not included in assessable value, assessee should be very careful while taking Cenvat credit since dispute regarding assessable value may arise] [In India Cements Ltd. v. CCE (2007) 10 STT 271 = 216 ELT 81 = 8 STR 43 (CESTAT), the issue relating to service tax on outward freight was referred to a large bench].

Outward freight is eligible as input service even if its value is not included as valuation and Cenvat credit are two different issues - CCE v. Dhananjay Confectionery (2010) 26 STT 24 (CESTAT SMB).

One doubt is whether decision of large bench of Tribunal will apply after 1-4-2008, when the words ‘from the place of removal’ in the definition of ‘input service’ were replaced by ‘upto the place of removal’. Really, the decision of Tribunal in case of ABB Ltd. is entirely based on basic analysis of definition of ‘input service’. The words ‘from the place of removal’ or ‘upto the place of removal’ have not even been considered while deciding issue relating to eligibility of Cenvat credit on outward freight.

However, in India Cement Ltd. v. CCE (2010) 249 ELT 530 (CESTAT), the bench did not agree with decision in case of ABB and the matter regarding Cenvat credit of service tax on outward freight was adjourned awaiting decision of Karnataka High Court on stay petition filed by department.

In CCE v. ABB Ltd. (2011) 32 STT 141 = 12 taxmann.com 57 = 44 VST 1 (Karn HC DB), it has been held that outward transport  from place of removal is eligible only upto 1-4-2008.

Outward freight eligible – Outward freight eligible for Cenvat credit -  Triveni Engg v. CST (2010) 24 STT 43 (CESTAT) * Southern Auto Castings v. CCE (2010) 24 STT 108 (CESTAT SMB) * Bharat Alloys v. CCE (2010) 24 STT 113 (CESTAT) * Saint Gobain Vetrotex v. CCE (2010) 24 STT 226 (CESTAT) * Metal Fab v. CCE (2010) 24 STT 323 (CESTAT SMB) * U Flex v. CCE (2010) 24 STT 396 (CESTAT) * Daman Polyfab v. CCE (2009) 23 STT 459 (CESTAT SMB) * Coal Chem v. CCE (2010) 25 STT 289 (CESTAT SMB) * Emson Tool v. CCE (2010) 25 STT 439 (CESTAT SMB) * Kandoi Fabrics v. CCE (2010) 250 ELT 557 (CESTAT SMB) * Mahindra Sar Transmission v. CCE (2010) 250 ELT 373 (CESTAT SMB).  (No specific mention in order whether or not it was included in assessable value) .

Cargo handling services availed after clearance of goods from factory are eligible for Cenvat credit – CCE v. HEG Ltd. (2010) 28 STT 277 (CESTAT SMB).

In Inox Air Products v. CCE (2010) 28 STT 417 (CESTAT SMB), issue was kept pending as stay has been granted to decision of ABB by Karnataka High Court.

Outward freight eligible if its cost included in assessable value - In Ambuja Cements v. UOI (2009) 20 STT 182 = 236 ELT 431 = 40 VST 64 (P&H HC DB), it has been held that if freight charges form part of assessable value, price is F.O.R. destination, if ownership of goods remains with seller till delivery at customer’s doorstep, transit insurance is borne by assessee and property in goods is not transferred till delivery at doorsteps of customer, outward transportation is ‘input service’ and is eligible for Cenvat credit [reversing decision in Gujarat Ambuja Cement Ltd. v. CCE (2007) 8 STT 122 = 212 ELT 410 = 6 STR 249 (CESTAT), where it was held that outward freight is not an input service. Service tax paid on the cost of transportation from the factory/depots to the buyers' premises, would not be available as credit].

In PSG & Sons v. CCE (2008) 17 STT 445 (CESTAT SMB), it was held that when ownership and property in goods remained with seller till delivery of goods to purchaser at his doorsteps, assessee can take credit of service tax paid on freight for transportation to such place of delivery – relying on CBE&C circular No. 97/8/2007 dated 23-8-2007.

In Vardhman Special Steels v. CCE (2007) 8 STR 374 = 223 ELT 220 (CESTAT), it was held that if outward freight is included in assessable value, service tax paid on outward freight would be available as credit – same view in Hindustan Coca Cola Beverages v. CCE (2009) 22 STT 504 (CESTAT) * CCE v. Modern Laminators (2009) 23 STT 49 (CESTAT) * CCE v. Endurance Systems (2009) 23 STT 422 (CESTAT SMB) * Ramdas Ispat v. CCE (2010) 25 STT 446 (CESTAT SMB) * Automobile Corporation of Goa v. CCE (2010) 25 STT 407 (CESTAT SMB) * Inox Air Products v. CCE (2010) 25 STT 430 (CESTAT SMB) * Ultratech Cement v. CCE (2010) 27 STT 324 (CESTAT) * Aurangabad Auto Engg v. CCE (2010) 27 STT 333 (CESTAT SMB) * Priya Industrial Packaging v. CCE (2010) 29 STT 311 (CESTAT SMB) .

If sale is FOR destination, outward freight is eligible as input service even if excise duty is paid on MRP valuation basis under section 4A of CEA – L G Electronics v. CCE  (2010) 28 STT 183 (CESTAT).

In Datafield India v. CCE (2008) 17 STT 295 (CESTAT SMB), assessee had uniform CIF price all over India. The ownership of goods was transferred to buyer only at buyer’s premises. It was held that if excisable goods after removal from factory remain property of manufacturer and are transported on own risk upto premises of buyer, outward freight is ‘input service’ and is eligible for Cenvat credit (In other words, customer’s place is the ‘place of removal’ in such case).

In Maihar Cement Unit No. 1 v.  CCE (2007) 8 STR 391 (CESTAT), freight was paid for transport of final products from manufacturing factory to godown of C&F Agent, from where goods were sold. Removal was for ‘self’. It was held that Cenvat credit is available of service tax paid on such freight.

Inward transport – Service tax paid on GTA service for inward transport of inputs is eligible for Cenvat credit – Kerala Minerals v. CCE (2010) 25 STT 80 (CESTAT SMB).

Cenvat credit on GTA service available even if inputs/capital goods removed as such - Cenvat credit on GTA service is allowable even if inputs/capital goods removed as such – CCE v. Simplex Castings (2010) 25 STT 106 (CESTAT SMB) – relying on Chitrakoot Steel v. CCE (CESTAT SMB) (Final order No. 1420 dated 29-11-2007)

Air travel by executives – Air ticket service charges for company officers is eligible for Cenvat credit - CCE v. Fine Care Biosystems (2009) 244 ELT 372 (CESTAT SMB) * Semco Electrical v. CCE (2010) 24 STT 508 (CESTAT SMB) * Supreme Industries v. CCE (2010) 25 STT 427 (CESTAT SMB) * CCE v. Greaves Cotton (2010) 29 STT 123 (CESTAT SMB) .

Charges relating to company aircraft – Landing, parking, x-ray, aircraft maintenance etc. tendered by Airport Authority to manufacturer-assessee in connection with operations of aircrafts owned by manufacturers is input service and entitled to Cenvat credit - Force Motors v. CCE (2010) 26 STT 473 (CESTAT SMB).

Transport of employees – Bus service used to transport employees is ‘input service’ – CCE v. Haldyn Glass (2010) 24 STT 193 (CESTAT SMB) * Hindustan Coca Cola Beverages v. CCE (2010) 251 ELT 125 (CESTAT SMB).

Taxi for transport of employees -  Taxi for transport of employees is eligible input service - Ace Glass Containers v. CCE (2010) 250 ELT 110 (CESTAT SMB).

Real Estate consulting service - Real Estate consulting service is eligible as input service - Supreme Industries v. CCE (2010) 25 STT 427 (CESTAT SMB).

Overhaul of DG set – Overhaul of DG set is input service – Sanghi Industries v. CCE (2009) 236 ELT 617 (CESTAT SMB).

Input service not related to output service - In CCE v. Shariff Motors (2009) 22 STT 419 (CESTAT), assessee was dealer in two wheelers and also was providing service to old vehicles as authorised service station. He paid service tax on GTA service in respect of inward transport of new vehicles. He availed Cenvat credit on the GTA service. The credit was utilised for payment of service tax on servicing of vehicles which included even old vehicles. It was held that definition of input service is wide enough to cover input service availed by assessee.

Insurance charges – Insurance charges are eligible for Cenvat credit – CCE v. CCL Products (2009) 22 STT 36 (CESTAT) * CCE v. CCL Products (2010) 29 STT 179 (CESTAT SMB) * Jeans Knit v. CC (2011) 30 STT 434 = 9 taxmann.com 116 (CESTAT).

Insurance of plant and machinery is eligible for Cenvat credit - Finolex Cables v. CCE (2009) 22 STT 87 (CESTAT SMB).

Transit insurance is eligible as input service - CCE v. Raipur Rotocast (2010) 24 STT 58 (CESTAT SMB).

Transit insurance for captive power plant is eligible input service – Monnet Ispat v. CCE (2011) 30 STT 60 (CESTAT SMB).

Insurance for money in transit from factory to bank and bnak to factory is eligible input service - Monnet Ispat v. CCE (2011) 30 STT 60 (CESTAT SMB)

Vehicle insurance is input service - Hindustan Coca-Cola Beverages v. CCE (2010) 24 STT 208 = 37 VST 351 (CESTAT).

Group insurance health policy – Service tax paid on group insurance health policy of workmen/employees is eligible for Cenvat credit - Stanzen Toyotetsu India v. CCE (2009) 21 STT 321 = 44 VST 227 (CESTAT) * CCE v. Endurance Systems (2009) 237 ELT 204 (CESTAT SMB) * Stanzen Toyotetsu India v. CCE (2009) 23 STT 40 (CESTAT) * HEG Ltd. v. CCE (2009) 23 STT 157 (CESTAT SMB) * CCE v. Raipur Rotocast (2010) 24 STT 58 (CESTAT SMB) - view confirmed in CCE v. Stanzen Toyotetsu India (2011) 32 STT 244 = 12 taxmann.com 101  = 44 VST 234 (Karn HC DB).

Group insurance policy to cover statutory liability is eligible for Cenvat credit – CCE v. Micro Labs (2011) 32 STT 254 = 12 taxmann.com 82 = 270 ELT 156 (Karn HC DB).

Mediclaim insurance of employees - Mediclaim insurance service for employees is eligible for input service credit - Tecumsch Products v. CCE (2010) 26 STT 175 (CESTAT SMB) * Hindustan Coca-Cola Beverages v. CCE (2010) 24 STT 208  = 37 VST 351 (CESTAT).

Insurance premium for insurance of personnel working in factory is eligible - Monnet Ispat v. CCE (2011) 30 STT 60 (CESTAT SMB).

Insurance policy for workmen’s compensation - Insurance policy for workmen’s compensation policy taken for workers involved in the manufacturing process is eligible input service – CCE v. Mahamaya Steel Industries (2011) 264 ELT 248 (CESTAT SMB).

Travelling insurance – Insurance service to cover directors’ and officers’ foreign tours is input service if tour pertains to business of assessee and part of cost of assessee’s final product – CCE v. Dr. Reddy’s Laboratories (2010) 8 taxmann.com 28 (CESTAT).

Insurance service availed to cover directors’ and officers’ liability on foreign tour is eligible as input service - CCE v. Dr. Reddy’s Laboratories (2010) 29 STT 425 = 8 taxmann.com 28 (CESTAT SMB).

Banking and other financial service – Banking and other financial services received by assessee in respect of private placement of its preference shares is input service – prima facie view in Ahmednagar Forgings v. CCE (2011) 31 STT 195 = 10 taxmann.com 164 (CESTAT).

Banking service is ‘input service’ – CCE v. Hindustan Coca Cola (2010) 29 STT 506 (CESTAT SMB) – same prima facie view in Rohit Surfactants v. CCE (2009) 240 ELT 472 (CESTAT SMB) * Jeans Knit v. CC (2011) 30 STT 434 = 9 taxmann.com 116 (CESTAT).

Outward freight upto place of consignment agent - Place of consignment agent is ‘place of removal’ and hence service tax paid on GTA service availed upto place of consignment agent will be eligible for Cenvat credit – CCE v. Rajhans Metals (2009) 19 STT 246 (CESTAT SMB).

Canteen, subsidized foods, personal insurance eligible - In Millipore India v. CCE (2009) 22 STT 536 = 236 ELT 145 (CESTAT SMB), it was held that expenses like medical benefit, subsidized food, canteen bill etc. which form part of cost of final product as per CAS-4 will be eligible as input service. Medical and personal accident insurance, catering bills, personal accident policy is ‘input service’. Landscaping of factory garden is also ‘input service’, as definition of input service is very wide.

Landscaping service is input service - Landscaping service is input service – Xomox Sanmar v. CCE (2010) 28 STT 115 (CESTAT SMB) * Millipore India v. CCE (2009) 22 STT 536 = 236 ELT 145 (CESTAT SMB).

Outdoor catering/canteen service – Catering service is input service and is eligible – CCE v. GTC Industries (2008) 17 STT 63 = 12 STR 468 = 89 RLT 197 = 2008 TIOL 1634 (CESTAT 3 member bench) – followed in Finolex Cables v. CCE (2009) 22 STT 87 (CESTAT SMB) * CCE v. Haldyn Glass Gujarat (2009) 240 ELT 729 (CESTAT SMB) * Thiru Arooran Sugars v. CCE (2009) 23 STT 18 = 28 VST 110 (CESTAT SMB) * CCE v. Relpol Plastic (2009) 23 STT 32 (CESTAT) * Kirloskar Oil Engines v. CCE (2009) 23 STT 39 (CESTAT) * Cummins Generator Technologies v. CCE (2009) 23 STT 42 (CESTAT) * GKN Sinter Metals v. CCE (2009) 23 STT 71 (CESTAT SMB) * Hindustan Coca-Cola Beverages v. CCE (2009) 23 STT 460 (CESTAT SMB) * Ferromatik Milacron v. CCE (2009) 23 STT 200 (CESTAT SMB) * CCE v. Visteon Powertrain Control Systems (2009) 23 STT 301 (CESTAT SMB) * Dr Reddy’s Lab v. CCE (2010) 24 STT 90 (CESTAT) * CCE v. Panasonic Home Appliances (2010) 24 STT 116 (CESTAT SMB) * Jay Hind Industries v. CCE (2010) 24 STT 404 (CESTAT SMB) * Kirloskar Oil Engines v. CCE (2010) 24 STT 406 (CESTAT SMB) * Rane TRW Steering v. CCE (2010) 24 STT 403 (CESTAT SMB) * CCE v. Voltas Ltd. (2010) 27 STT 398 (CESTAT SMB) * CCE v. Dr. Reddy’s Laboratories (2010) 29 STT 425 = 8 taxmann.com 28 (CESTAT SMB).

This view has been upheld in CCE v. Ferromatik Milacon India (2011) 31 STT 432 = taxmann.com 273 =  36 VST 376 (Guj HC DB) * CCE v. Ultratech Cement (2010) 8 taxmann.com 20 = 29 STT 244 = 2010-TIOL-745 = 36 VST 505  = 260 ELT 369 (Bom HC DB)

Contrary view has been held in CCE v. Visteon Automotive Systems (2011) 32 STT 127 = 11  taxmann.com 391 (CESTAT SMB).

Not eligible if amount recovered from employees - In CCE v. Ultratech Cement (2010) 8 taxmann.com 20 = 29 STT 244 = 2010-TIOL-745 = 36 VST 505  = 260 ELT 369 (Bom HC DB)  However, it was held that where burden of service tax is borne by employee, the Cenvat credit will not be available.

In CCE v. JCB Manufacturing Ltd. (2011) 32 STT 230 (Mag) = 12 taxmann.com 365 (CESTAT SMB), it was held that if amount is recovered from employees, Cenvat credit is not available.

Canteen – Canteen is in relation to business of assessee. Fringe benefit tax (FBT) is paid on those expense, which means those are related to business of assessee. Hence, canteen service is input service eligible for Cenvat Credit – Victor Gaskets v. CCE (2008) 14 STT 403 (CESTAT).

Canteen services eligible for Cenvat credit - Stanzen Toyotetsu India v. CCE (2009) 21 STT 321 (CESTAT) * Stanzen Toyotetsu India v. CCE (2009) 23 STT 40  = 44 VST 227 (CESTAT) * Tata Motors v. CCE (2010) 24 STT 103 (CESTAT SMB) * Tecumsch Products v. CCE (2010) 26 STT 175 (CESTAT SMB) * Mahindra Sona v. CCE (2010) 24 STT 198 (CESTAT SMB) - view confirmed in CCE v. Stanzen Toyotetsu India (2011) 32 STT 244 = 12 taxmann.com 101 = 44 VST 234 (Karn HC DB).

Canteen is a statutory requirement. Hence, credit of service tax paid on canteen bills is allowable as it is ‘input service’ – Indian Card Clothing v. CCE (2008) 15 STT 79 (CESTAT SMB).

However, in Bajaj Electricals Ltd. v. CCE (2008) 14 STT 461, it was held that assessee has not made a prima facie case for complete waiver of pre-deposit of tax (in respect of service tax paid on canteen services) and he was asked to pre-deposit certain amount for admission of appeal.

Hire charges, courier, training, security eligible - In CCE v. Deloitte Tax Services (2008) 16 STT 449 (CESTAT), it was observed that definition of ‘input service’ is very wide. Services like equipment hiring, professional consultation, recruitment, security, telephone, transport, training, facility operation, courier, cafeteria, advertisement are all ‘input services’ (for providing Business Auxiliary Service).

Courier charges – Courier charges is ‘input service’ and is eligible – CCE v. CCL Products (2009) 22 STT 36 (CESTAT).

Manpower for generating electricity for factory as well as residential colony - In Sanghi Industries v. CCE (2009) 234 ELT 367 (CESTAT SMB), power plant was generating electricity which was supplied to residential colony, clinker unit, jetty and cement plant. It was held that Cenvat credit of service tax paid on manpower supply service supplied to power plant and operation and maintenance of power plant is eligible.

Housekeeping and maintenance of factory - Housekeeping of factory like toilet and water are basic requirements to run the factory. It is input service - Balkrishna Industries v. CCE (2010) 27 STT 19 = 254 ELT 301 (CESTAT SMB).

Insurance of residential buildings – Insurance of residential buildings is eligible as input service - – Ultratech Cement v. CCE (2010) 258 ELT 266 (CESTAT SMB).

Vehicles used in residential colony – Vehicles used in residential colony is input service – Ultratech Cement v. CCE (2010) 258 ELT 266 (CESTAT SMB).

Service tax on manpower supplied for operation of power plant - In Sanghi Industries v. CCE (2009) 19 STT 308 = 234 ELT 367 (CESTAT SMB), power plant was generating electricity which was supplied to residential colony, clinker unit, jetty and cement plant. It was held that Cenvat credit of service tax paid on manpower supply service supplied to power plant and operation and maintenance of power plant is eligible [The Cenvat credit was denied by department on the ground that electricity is not excisable goods].

All expenses upto port eligible in case of export - In CCE v. Rolex Rings (2008) 16 STT 193 = 230 ELT 569 (CESTAT SMB), it has been held that in case of exports, port is the ‘place of removal’ as exporter continues to be owner of goods till the same are exported. Hence, CHA and surveyor services which are relating to export business are eligible for Cenvat credit - followed in CCE v. Adani Pharmachem (2009) 19 STT 239 = 232 ELT 804 (CESTAT SMB), where it was held that CHA service in respect of export goods  is ‘input service’ and is eligible for Cenvat credit – also followed in Rawmin Mining v. CCE (2009) 18 STT 329 (CESTAT) * Vidyut Metallics v. CCE (2011) 31 STT  142 (Mag) (CESTAT SMB).

Port is place of removal and GTA service upto port is eligible – CCE v. Colour Synth Industries (2009) 22 STT 88 (CESTAT SMB) * CCE v. Fine Care Biosystems (2009) 244 ELT 372 (CESTAT SMB) * Cauvery Stones v. CCE (2010) 24 STT 400 = 257 ELT 152 (CESTAT SMB) * Modern Petrofils v. CCE (2010) 253 ELT 609 (CESTAT SMB).

Port is place of removal for exports and hence C&F service is eligible as input service – Adani Pharmachem v. CCE (2009) 238 ELT 179 (CESTAT SMB).

CHA service for export of goods - CHA service for export of goods is eligible for Cenvat credit – CCE v. Fourrts (I) Laboratories (2010) 24 STT 153 (CESTAT SMB) * CCE v. Adani Pharmachem (2009) 19 STT 239 = 232 ELT 804 (CESTAT SMB) CCE v. Chamundi Textiles (2010) 258 ELT 141 (CESTAT SMB).

CHA service for import of inputs  - CHA service for import of inputs is eligible input service – Nelsun Paper Mills v. CCE (2010) 28 STT 162 (CESTAT SMB).

Port/airport is place of removal in case of export - In case of exports, the place of removal is port where export documents are presented to customs office – Kuntal Granites v. CCE (2007) 215 ELT 515 = 2007 TIOL 930 (CESTAT) – quoted and followed in Rajasthan Spinning & Weaving Mills v. CCE (2007) 8 STR 575 (CESTAT). Hence, all expenses upto that place should be considered as ‘input service’.

Expenses relating to exports – Service tax paid on freight for empty containers for export of goods is eligible – CCE v. Nitin Spinners (2010) 24 STT 393 (CESTAT).

Transport for bringing employees to factory - In CCE v. Cable Corporation of India (2009) 19 STT 158 = 33 VST 270 (CESTAT SMB), it has been held that scope of definition of input service is much larger than being used directly or indirectly in relation to manufacture. In this case, it was held that rent-a-cab service used to bring employees to work in factory has to be considered as being used indirectly in relation to manufacture  or as part of business activity for promoting the business as any facility given to employees will result in greater efficiency and promotion of business – same view in  CCE v. J K Cement Works (2009) 20 STT 254 (CESTAT SMB) * CCE v. Hindustan Zinc (2009) 21 STT 285 (CESTAT SMB) * Stanzen Toyotetsu India v. CCE (2009) 21 STT 321  = 44 VST 227 (CESTAT) * Semco Electrical v. CCE (2010) 24 STT 508 (CESTAT SMB) * T G Kirloskar Automotive v. CCE (2010) 27 STT 127 (CESTAT SMB) * CCE v. Indian Furniture Products (2010) 28 STT 218 (CESTAT SMB) * J K Sugar v. CCE (2011) 31 STT  128 (Mag) = 270 ELT 225 (CESTAT SMB) - view confirmed in CCE v. Stanzen Toyotetsu India (2011) 32 STT 244 = 12 taxmann.com 101 = 44 VST 234 (Karn HC DB) * CCE v. T G Kirloskar Automotive  Ltd. (2011) 32 STT 251 = 12 taxmann.com 83 (Karn HC DB) .

Bus service used for transporting employees to factory is input service - CCE v. Haldyn Glass Gujarat (2009) 240 ELT 729 (CESTAT SMB) * CCE v. HEG Ltd. (2010) 24 STT 9 (CESTAT SMB) * CCE v. Hyderabad Industries (2010) 24 STT 348 (CESTAT SMB).

Rent-a-cab service – Rent-a-cab service is input service and eligible – Hindustan Coca-Cola Beverages v. CCE (2009) 23 STT 460 (CESTAT SMB) * Dr Reddy’s Lab v. CCE (2010) 24 STT 90 (CESTAT) * Hindustan Coca-Cola Beverages v. CCE (2010) 24 STT 208  = 37 VST 351 (CESTAT) * CCE v. Andhra Pradesh Paper Mills (2010) 254 ELT 354 (CESTAT SMB).

Expenses on which FBT paid are in relation to business - Fringe benefit tax (FBT) is paid on certain business expenses. If FBT is paid on some services, it means that those are related to business of assessee. Hence, such services are input service eligible for Cenvat Credit – Victor Gaskets v. CCE (2008) 14 STT 403 (CESTAT) [decision with reference to canteen services but applicable to all the input services].

Services of commission agent/broker – Commission Agents do promote sale and hence commission paid to them is eligible as ‘input service’ – prima facie view held in Metro Shoes v. CCE (2007) 10 STT 462 = 8 STR 502 (CESTAT) - same view in Bhoruka Gases v. CCE (2008) 224 ELT 449 (CESTAT) * CCE v. Nilkamal Crates (2010) 34 VST 365 (CESTAT SMB).

Services of commission agent is input service and is eligible for Cenvat credit – CCE v. Bhilai Auxiliary Industries (2009) 21 STT 474 (CESTAT) * Lanco Industries v. CCE (2009) 22 STT 380 (CESTAT) * CCE v. HEG Ltd. (2010) 24 STT 9 (CESTAT SMB) * Pan Asia Corporation v. CCE (2010) 25 STT 414 (CESTAT SMB).

Commission paid to overseas agent is input service eligible for Cenvat – CCE v. Ambika Forgings (2010) 259 ELT 593 (CESTAT SMB) * Vishal Natural Food Products v. CC (2011) 266 ELT 369 (CESTAT SMB).

Cenvat credit is available of entire commission paid to commission agent. It is not permissible to bifurcate the commission between pre-clearance and post clearance of goods as service of commission agent is one integrated service – Pan Asia Corporation v. CCE (2010) 25 STT 414 (CESTAT SMB).

Service of broker is input service - CCE v. Indorama Synthetics (2011) 32 STT 310 = 12 taxmann.com 302 (CESTAT)

C&F Agent – Services of C&F Agent is eligible input service for Cenvat credit – Cadilla Healthcare v. CCE (2009) 23 STT 224 (CESTAT).

Cargo handling services - Services of C&F Agent and cargo handling services are eligible – Mangalam Cement v. CCE (2010) 24 STT 315 (CESTAT SMB) * CCE v. CCL Products (2010) 29 STT 179 (CESTAT SMB).

Services of residential colonies eligible – Scope of input service is very wide to cover many activities indirectly used in or in relation to manufacture. Hence, service tax paid in respect of security services provided in colony is eligible -  CCE v. Hindustan Zinc (2009) 21 STT 285 (CESTAT SMB) * GHCL Ltd. v. CCE (2009) 23 STT 89 = 242 ELT 468 (CESTAT SMB).

In ITC Ltd. v. CCE (2009) 22 STT 282 (CESTAT), assessee was under obligation to maintain colony for its employees (engaged in plantation of soft wood trees which was input for manufacture of paper) since there was prohibition in acquiring plot/flat in that area as it was a ‘Scheduled Area’. It was held that all services received in maintaining such colony would be ‘input service’ as it has nexus with manufacturing activity.

In a contrary view, in CCE v. Ultra Tech Cement (2009) 21 STT 470 (CESTAT SMB), it was held that security services in residential colonies of assessee is not an input service, as it is not in a place and for a purpose connected with business activities of manufacturer - same view in ISMT Ltd. v. CCE (2011) 32 STT 229 (Mag) = 12 taxmann.com 434 (CESTAT SMB) .

In another contrary view, in CCE v. Manikgarh Cement Works (2010) 24 STT 1 (CESTAT SMB), it was held that services of construction, repairs, cleaning etc. received in residential colony is not input service as it has no relation with manufacture of excisable goods. This view has been upheld in CCE v. Manikgarh Cement (2010) 7 taxmann.com 115 = 29 STT 230 = 2010-TIOL-720 (Bom HC DB) – followed in Hindustan Zinc v. CCE (2011) 270 ELT 111 (CESTAT) * CCE v. Century Cement (2011) 32 STT 222 (Mag) = 12 taxmann.com 401 (CESTAT SMB)

Landline phones at residences of officers and directors eligible - Landline phones installed in residences of officers and directors of company is for business purpose and Cenvat credit is eligible – Keltech Energies v. CCE (2008) 14 STT  419 (CESTAT SMB) * ITC Ltd. v. CCE (2009) 20 STT 110  = 42 VST 383 (CESTAT SMB) * CCE v. Greaves Cotton (2009) 239 ELT 137 = 33 VST 94 (CESTAT SMB) * HEG Ltd. v. CCE (2009) 23 STT 157 (CESTAT SMB) * CCE v. Andhra Pradesh Paper Mills (2010) 254 ELT 354 (CESTAT SMB) * Ace Glass Containers v. CCE (2010) 250 ELT 110 (CESTAT SMB).

However, in International Testing Centre v. CCE (2009) 18 STT 153 (CESTAT SMB), it was held that credit is not available in respect of service tax paid on telephones installed at residence of proprietor.

Mobile phones eligible for Cenvat Credit – Earlier Service Tax Rules required ‘installation’ of telephones in the business premises. Hence, CBE&C had clarified vide circular No. 59/8/2003-ST dated 20-6-2003 that Cenvat credit will not be available in case of mobile phones. Now there is no such requirement. Hence, service tax paid on mobile phones will be eligible for Cenvat credit w.e.f. 10-9-2004, so long as these are used for ‘activity relating to business’ – view confirmed in Indian Rayon v. CCE 2007 (6) STT 328 = 4 STR 79 (CESTAT SMB) – followed in Nice Telecommunication v. CCE (2007) 8 STT 159 (CESTAT) * Excel Crop Care v. CCE (2007) 9 STT 249 = 7 STR 451 (CESTAT SMB) * Rajasthan Textile Mills v. CCE (2007) 10 STT 349 = 7 STR 400 = 215 ELT 362 (CESTAT SMB) * CST v. Stic Travels (2007) 8 STR 495 (CESTAT) * Maini Precision Products v. CST (2008) 12 STT 182 (CESTAT SMB) * CCE v. Ultra Tech Cement (2008) 15 STT 28 (CESTAT SMB) * Vasavdatta Cement v. CCE (2008) 223 ELT 90 (CESTAT SMB) * CCE v. GKN Sinter Metals (2008) 16 STT 182 (CESTAT SMB) * N K Paper Tube v. CCE (2008) 16 STT 250 (CESTAT SMB) * Mundra Port & SEZ Ltd. v. CCE (2009) 18 STT 314 = 33 VST 107 (CESTAT) * Grasim Industries v. CCE (2009) 18 STT 381 (CESTAT SMB) * Wiptech Peripherals v. CCE (2008) 232 ELT 621 (CESTAT SMB) * CCE v. J K Cement Works (2009) 20 STT 254 (CESTAT SMB) * CCE v. Stanzen Toyotetsu (2009) 20 STT 69 (CESTAT SMB) * ITC Ltd. v. CCE (2009) 20 STT 110  = 42 VST 383 (CESTAT SMB) * CCE v. Hindalco Industries (2009) 21 STT 388 (CESTAT SMB) * CCE v. BSBK P Ltd. (2009) 22 STT 31 = 29 VST 145 (CESTAT SMB) * Finolex Cables v. CCE (2009) 22 STT 87 (CESTAT SMB) * CCE v. Hindustan Coca Cola Beverages (2009) 22 STT 100 (CESTAT) * CCE v. Showa Engineering (2009) 240 ELT 736 = 27 VST 242 (CESTAT SMB) * CCE v. Greaves Cotton (2009) 239 ELT 137 = 33 VST 94 (CESTAT SMB) * CCE v. Wheels India (2009) 23 STT 91 (CESTAT SMB) * CCE v. T G Kirloskar Automotive (2009) 23 STT 99 (CESTAT SMB) * CCE v. Ultratech Cement (2009) 23 STT 241 (CESTAT SMB) * CCE v. HEG Ltd. (2010) 24 STT 9 (CESTAT SMB) * CCE v. K L Steels (2010) 24 STT 22 (CESTAT SMB) * DIC India v. CCE (2010) 24 STT 99 (CESTAT SMB) * CCE v. Showa Engg (2010) 24 STT 379 (CESTAT SMB) * Sidel India v. CCE (2010) 25 STT 433 (CESTAT SMB) * Supreme Industries v. CCE (2010) 25 STT 427 (CESTAT SMB) * CCE v. Axiom Impex (2010) 26 STT 289 (CESTAT SMB) * Bombay Burmah Trading Corpn v. CCE (2010) 26 STT 43 (CESTAT SMB) * URSS Tech Services v. CCE (2010) 24 STT 192 (CESTAT SMB) * Port Officer, Gujarat Marine Board v. CCE (2010) 28 STT 208 (CESTAT SMB) * Ace Glass Containers v. CCE (2010) 250 ELT 110 (CESTAT SMB) * Automag India v. CCE (2011) 32 STT 134 (CESTAT SMB).

There is presumption that mobile phones are used in connection with business of assessee. Hence, Cenvat credit of service tax paid on mobile phones is available unless department proves that the use was not for purpose of business of assessee – Telenet Systems v. CCE (2009) 23 STT 205 (CESTAT SMB).

In para 8.3 of CBE&C Circular No. 97/8/2007-ST dated 23-8-2007, it is reiterated that Cenvat credit is available of service tax paid on mobile phones.

The view has been confirmed in CCE v. Excel Crop Care (2009) 20 STT 164 (Guj HC DB) * CCE v. Ultratech Cement (2010) 29 STT 281 (Bom HC DB).

Decision of Tribunal in case of Mundra Port has been upheld in CCE v. Mundra Port and SEZ Ltd. (2010) 27 STT 431 = 39 VST 60 (Guj HC DB).

In Force Motors v. CCE (2009) 22 STT 530 (CESTAT SMB), employees were allowed use of mobile upto a limit and excess use was debited to the account of employees. It was held that Cenvat credit is allowable upto the allowable limit.

Mobile phones in name of employees eligible for Cenvat - In Wiptech Peripherals v. CCE (2009) 19 STT 306 (CESTAT SMB), it was held that Cenvat credit on mobile phones will be eligible even if the cell phones are in name of employees, if the phone is used for business of assessee.

Telephones at head office – Telephones at Head Office is eligible input service - CCE v. Fourrts (I) Laboratories (2010) 24 STT 153 (CESTAT SMB)

Internet services eligible – Cenvat credit is available in respect of internet services, as it is utilised for information relating to manufacture, sale and despatch – Universal Cables Ltd. v. CCE (2007) 7 STR 310 (CESTAT).

Maintenance, AMC services - Maintenance, AMC services are eligible – CCE v. CCL Products (2009) 22 STT 36 (CESTAT). Maintenance and repair services are eligible as without these services factory cannot run – Cadilla Healthcare v. CCE (2009) 23 STT 224 (CESTAT).

AMC charges for maintenance are eligible - CCE v. CCL Products (2010) 29 STT 179 (CESTAT SMB).

System maintenance service is eligible input service - Hindustan Coca Cola Beverages v. CCE (2010) 28 STT 326 (CESTAT SMB).

Computer maintenance service is eligible as input service - * Jeans Knit v. CC (2011) 30 STT 434 = 9 taxmann.com 116 (CESTAT).

Maintenance and repair services provided during warranty - Maintenance and repair services provided during warranty are eligible as it is legal obligation of assessee – CCE v. Danke Products (2010) 26 STT 56 (CESTAT SMB).

Vehicle maintenance – Vehicle maintenance services are eligible as input service – Hindustan Coca Cola Beverages v. CCE (2010) 28 STT 326 (CESTAT SMB) * CCE v. Hindustan Coca Cola (2010) 29 STT 506 (CESTAT SMB) * Jeans Knit v. CC (2011) 30 STT 434 = 9 taxmann.com 116 (CESTAT) * J K Sugar v. CCE (2011) 31 STT  128 (Mag) = 270 ELT 225 (CESTAT SMB).

Car repair service is eligible as input service - CCE v. Chamundi Textiles (2010) 258 ELT 141 (CESTAT SMB).

Garden services – Garden and cleaning services are eligible, if in relation to business - HEG Ltd. v. CCE (2009) 23 STT 157 (CESTAT SMB).

Garden creates better atmosphere and environment which increases working efficiency. Garden maintenance is eligible input service – ISMT Ltd. v. CC (2010) 24 STT 326 (CESTAT SMB) * Larsen and Toubro Ltd. v. CCE (2010) 25 STT 318 (CESTAT SMB) * Balkrishna Industries v. CCE (2010) 27 STT 19 = 254 ELT 301 (CESTAT SMB) * Reliance Industries v. CCE (2010) 28 STT 155 (CESTAT SMB) * Kirloskar Oil Engines v. CCE (2010) 258 ELT 123 (CESTAT SMB) * Rane TRW Steering Systems v. CCE (2011) 32 STT 129 = 11  taxmann.com .390 (CESTAT SMB).

There is contrary view in CCE v. Sri Rama Vilas Service (2011) 271 ELT 317 (CESTAT SMB).

In Brakes India v. CCE (2010) 29 STT 50 (CESTAT SMB), service tax paid on maintenance of garden was held as input service since maintenance of garden was statutory requirement as per consent given by State Pollution Control Board. 

House keeping – House keeping is input service and is eligible - * Rane TRW Steering Systems v. CCE (2011) 32 STT 129 = 11  taxmann.com .390 (CESTAT SMB).

Repairs of equipment in canteen – Repairs of deep freezer in canteen is input service - Reliance Industries v. CCE (2010) 28 STT 155 (CESTAT SMB).

Pest control – Pest control service used in factory premises is eligible as input service - CCE v. Hindustan Coca-Cola Beverages (2010) 26 STT 48 (CESTAT SMB) * Hindustan Coca-Cola Beverages v. CCE (2010) 24 STT 208  = 37 VST 351 (CESTAT).

Construction of new plant – Construction services for factory building and office building is eligible as input service - prima facie view in Suzuki Motorcycle v. CCE (2011) 31 STT  100 (Mag) = 10 taxmann.com 183 = 267 ELT 216 (CESTAT).

GTA service availed for transport of iron, cement, steel etc. for civil work of new plant is eligible – CCE v. Videocon Industries (2010) 24 STT 392 (CESTAT SMB).

R&D and trial manufacture – Even trial manufacture and R&D conducted in respect of drugs which do not reach market have to be considered as part of manufacturing process and business activity and hence input services used are eligible for Cenvat credit – Cadilla Healthcare v. CCE (2009) 23 STT 224 (CESTAT).

Courier service – Courier service is eligible as it is in connection with business activities of assessee - CCE v. HEG Ltd. (2010) 24 STT 9 (CESTAT SMB).

Security services – Security services for plant area, residential and mining area are eligible - GHCL Ltd. v. CCE (2009) 23 STT 89 = 242 ELT 468 (CESTAT SMB).

Security services for security of goods in godown are eligible – CCE v. Hindustan Coca-Cola Beverages (2010) 26 STT 48 (CESTAT SMB) * CCE v. Hindustan Coca-Cola (2011) 271 ELT 314 (CESTAT SMB).

Security services at depot is eligible input service - Hindustan Coca-Cola Beverages v. CCE (2010) 24 STT 208  = 37 VST 351 (CESTAT).

Construction services for residential quarters for staff - Construction services for residential quarters of staff is eligible input service – Lakshmi Vilas Bank v. CCE (2010) 27 STT 145(CESTAT SMB).

Inspection charges for construction of staff quarters is eligible input service – Port Officer, Gujarat Marine Board v. CCE (2010) 28 STT 208 (CESTAT SMB).

Showroom is place of removal if sale takes place from showroom, and all services in showroom are eligible for Cenvat - In Metro Shoes v. CCE (2008) 14 STT 280 = 2008-TIOL-417 (CESTAT), assessee was selling shoes from its showrooms. It was held that showroom is the ‘place of removal’. Hence all expenses upto sale of  goods at showroom like GTA, warehousing facilities, C&F agents, insurance, internet services, security, courier services, telecom services, pest control services, bank services etc. are eligible for Cenvat credit. Only services which are directly and wholly attributable for traded goods will not be eligible.

Services at depot - In Mangalam Cement v. CCE (2007) 8 STR 639 (CESTAT), strong prima facie view was held that if services relate upto the depot, service tax credit will be available.

Cargo handling expenses and C&F agent services relating to depot are eligible as input services – Mangalam Cement v. CCE (2010) 24 STT 315 (CESTAT SMB).

Place of consignment agent is ‘place of removal’ and hence service tax paid on GTA service availed upto place of consignment agent will be eligible for Cenvat credit – CCE v. Rajhans Metals (2009) 19 STT 246 (CESTAT SMB).

Windmills for generation of electricity which are away from factory - In PSG & Sons v. CCE (2009) 243 ELT 411 (CESTAT SMB), assessee availed Cenvat credit in respect of erection, commissioning and installation of windmills for generation of electricity. This was supplied to grid and corresponding quantum was withdrawn at the factory. It was held that the services availed at windmill are not ‘input services’ – relying on L G Balakrishnan v. CCE (2009) 13 STR 498 = 33 VST 204 (CESTAT).

Services in relation to aircraft used for conveyance of officers – Assessee was using aircraft for conveyance of its officials. The aircraft was stationed at airport and availed various services from Air port Authority of India (AAI). In Force Motors v. CCE (2009) 23 STT 160 (CESTAT SMB), it was held that these are in relation to business activity of assessee and eligible for Cenvat credit.

Dry cleaning of uniforms of employees - Dry cleaning of uniforms of employees in medicine factory is input service as wearing of clean uniform/clothing is mandatory under Drugs and Cosmetics Act - CCE v. Fourrts (I) Laboratories (2010) 24 STT 153 (CESTAT SMB).

Chartered Accountant’s service – Professional services of CA are eligible as input service - CCE v. Andhra Pradesh Paper Mills (2010) 254 ELT 354 (CESTAT SMB).

Advertisement expenses – Advertisement expenses for sales promotion are eligible as input services – CCE v. SAS and Co. (2010) 258 ELT 253 (CESTAT SMB).

Event management – Event management service relating to sales promotion activity is eligible input service -  Hindustan Coca Cola Beverages v. CCE (2010) 251 ELT 125 (CESTAT SMB) (prima facie view).

These decisions are not valid in respect of services received on or after 1-4-2011.

2-3 My views

Apart from the fact that definition of ‘input service’ was very wide and it included any service in relation to business of assessee, following factors need consideration.

Purpose is to move towards GST - The purpose of wide definition of ‘input service’ has been stated by Finance Minister in para 148 of his budget speech on 8-7-2004 as follows, ‘I propose to take a major step towards integrating the tax on goods and services. Accordingly, I propose to extend credit of service tax and excise duty across goods and services’.

The integration of Cenvat credit of excise duty and service tax is a pre-cursor to GST (Goods and Service Tax), where intention is to eliminate distinction between goods and services. The whole scheme of credit of ‘input service’ is designed from this point of view.

Avoiding cascading effect of taxes - One basic purpose of Cenvat credit is to avoid cascading effect. These purposes cannot be ignored while interpreting the definition of ‘input service’.