‘Garden maintenance in factory can’t be subjected to tax liability’

Allowing appeals moved by Rane TRW Steering System Ltd, Guduvancherry, challenging the Customs Excise and Service Tax Appellate Tribunal (CESTAT), which confirmed tax liability and recovery, a division bench comprising Justice S Manikumar and Justice Subramonium Prasad, said, “Having gone through the statutory provisions which stood prior and after the amendment, and the decisions, we hold that the garden maintenance service would fall within the definition of input service, in terms of Rule 2 (1) of the Cenvat Credit Rules, 2004 and consequently, declare that the Tribunal was not right in denying input service credit availed on garden maintenance service.”

“All the input services used in relation to modernisation, renovation or repairs of a factory, advertisement or sales promotion, security, legal services, etc., are included in the inclusive definition of input services. Requirement of 25% of the green belt is mandatory, for the very purpose of existence and consequently, manufacture of the final product,” the bench said.

Further, the bench also noted, “It is not only the process of manufacture which results in the production of excisable goods, attracting duty, but the input services which are integrally connected with the manufacture of such final products, should also be considered, to give effect to the inclusive definition of input services. Such input services may not in all cases, be in or in relation to manufacture of the final product, but they may be integrally connected and that there should be nexus with manufacture.”

As per the case, the Commissioner of Central Excise and Central Tax, Chennai, issued two show cause notices to Rane TRW Steering System, alleging they have availed CENVAT credit, for Garden Maintenance Service, which cannot be considered as a valid input service. Show cause notices also proposed to impose penalty, under Rule 15 (1) of the CENVAT Credit Rules, 2004.

CESTAT had confirmed the decision holding that garden maintenance service, will not fall within the purview of Input Service, and thus, confirmed the tax liability.

P Srija, counsel for the appellant submitted that garden maintenance service has been availed, to prevent air pollution and it is an essential input service, for availing license, for the manufacturing activity.

“The finding of CESTAT, holding that though gardening service is compulsorily required by the Pollution control laws, the same cannot be considered aas an activity, in relation to manufacture and thus, not entitled to avail the benefit of CENVAT credit, is erroneous,” she added.