By TIOL News Service

MUMBAI, AUG 22, 2014: THE appellant are engaged in manufacture of man-made fabrics. They also have a captive power plant, the coal for which is brought by rail. For the purpose of transportation of coal to their factory they got a railway siding constructed at Village Namli on Ratlam Chittor Section. For construction of the railway siding they received Engineering consultancy service and during the period from June 2008 to March 2010 they took CENVAT credit of Rs.76,695/- of the service tax paid by the service providers.

Revenue is of the view that this service has no nexus with manufacture of final product and so the lower authorities denied the credit.

Before the CESTAT the appellant submitted that the service received has to be treated as used in or in relation to procurement of inputs and that in any case this service is covered by the term 'activities relating to business' and hence the credit is admissible. Reliance is also placed on the decisions in Maruti Suzuki Ltd. 2009-TIOL-94-SC-CX, Ultratech Cement Ltd. 2010-TIOL-745-HC-MUM-ST, 2010-TIOL-1067-CESTAT-MUM , 2010-TIOL-1227-CESTAT-MUM .

The Revenue representative while reiterating the conclusion of the lower authorities submitted that the construction of railway siding at railway station Namli far away from the factory has no nexus with the manufacture of final product and, therefore, the order needs to be upheld.

The Bench referred to the case laws cited by the appellant and observed –

++ The construction of railway siding at railway station Namli is only to facilitate the transportation of coal to the appellant's factory and, therefore, this service has to be treated as service used in or in relation to procurement of input.

++ The definition of input service during the period of dispute read as a whole makes it clear that the said definition not only covers the services which are used directly or indirectly, in or in relation to manufacture of final product, but also covers other services which have direct nexus or which are integrally connected with the business of manufacture of final product.

++ The transportation of coal, which is necessary for generation of electricity in the captive power plant, is in my view, integrally connected with the business of manufacturing of the final product and, therefore, the services received for construction of railway siding have to be treated as services used in or in relation to procurement of inputs and also the activities relating to Business of manufacture of the final product.

Holding that the service in question is to be considered as an 'input service' and the credit is admissible, the order of the lower authority was set aside and the appeal was allowed.

(See 2014-TIOL-1567-CESTAT-DEL)