Tribunal decision in ABB clears mist over definition of ‘input service’
Definition of ‘input service’ is very wide. Any service in relation to business is input service. Any relation to ‘manufacture’ or ‘provision of service’ is really of required. However, department was taking a restricted view and even n case of many decisions of Tribunal, restricted view was taken.
Recent decision dated 18-5-2009 of 3 member bench of Tribunal in case of ABB Ltd. has cleared the mist and has brought out true interpretation of the term ‘input service’.
1 Definition of input service
Rule 2(l) of Cenvat Credit Rules reads as follows –
“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final products and clearance of final products, upto the place of removal; (The words ‘from the place of removal’ have been replaced by ‘, upto the place of removal’ w.e.f. 1-4-2008).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.
1-1 Analysis of the definition
The definition of ‘input service’ is broadly in two parts – first i.e. main part and second i.e. inclusive part. First part of the definition is restrictive in scope as it covers 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 expands the scope much beyond the coverage of first part.
The inclusive part itself is of two sub-parts. The first sub-part gives some illustrations of input services while second part covers all services used in relation to ‘activities relating to business, such as - -‘. Some illustrations are given in second sub-part of the definition, but these are preceded by the term ‘such as’. It means these are 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 well settled and I am not burdening this article with that case law].
Any service in relation to business is input service - Thus, input services which have only remote or no nexus with output services or manufacture of goods will 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’.
2. Decision of large bench of Tribunal in case of ABB
In 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.
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 Tribunal’s decision).
(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.
Hon. Tribunal 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 [para 3 of the decision of Tribunal].
[Note - In case of service provider, clauses (a) and (b) above change but there is no change in clauses (c), (d) and (e) above].
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 or essential activities [para 13 of the decision of Tribunal]. All activity relating to business fall within the definition of ‘input service’.
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 of Tribunal]
‘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.
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.
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, just because 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 – Finally, Tribunal 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 goes 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.
3 Other Tribunal decisions taking liberal view of ‘input service’
Any service whose cost included in assessable value eligible for Cenvat credit - In CCE v. GTC Industries (2008) 17 STT 63 = 2008 TIOL 1634 (CESTAT 3 member 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].
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 (Appeal No. ST/336/2007 decided on 18-5-2009) (CESTAT Bang – 3 member large bench) [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]. No change in aforesaid provision w.e.f. 1-4-2008 – In my view, the aforesaid legal position does not change even after definition of ‘input service’ is amended w.e.f. 1-4-2008. The reason is that ‘outward’ freight actually gets covered under ‘inclusive part’ of the definition of input service as held by Tribunal in aforesaid decision.
Outward freight eligible if its cost included in assessable value - In Ambuja Cements v. UOI (2009) 20 STT 182 = 236 ELT 431 (P&H HC DB), it has been held that if freight charges form part of assessable value, price is FOR 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.
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.
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) 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.
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).
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.
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].
Security services and maintenance charges of residential colonies eligible - In CCE v. Ultra Tech Cement (2009) 19 STT 355 (CESTAT SMB), a prima facie view was held that security services in residential colonies of assessee is input service, relying on Manikgarh Cement v. CCE (Unreported CESTAT order dated 13-12-2007) where it was held that repairs and maintenance of residential colony can be considered as ‘input service’.
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).
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’.
Rent-a-cab service for bringing employees to factory - In CCE v. Cable Corporation of India (2009) 19 STT 158 (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 – followed in CCE v. J K Cement Works (2009) 20 STT 254 (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 – 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).
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.
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 (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 (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 (CESTAT SMB) – reiterated in para 8.3 of CBE&C Circular No. 97/8/2007-ST dated 23-8-2007.
The view has been confirmed in CCE v. Excel Crop Care (2009) 20 STT 164 (Guj HC DB).
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.
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).
Canteen services – 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 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.
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.
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).
4 Tribunal decisions taking restrictive view
In many Tribunal decisions as stated below, a restrictive view has been taken that ‘input service’ should have relation with manufacture or provision of service.
In view of the 3 member decision of Tribunal in ABB Ltd and GTC Industries , validity of these decisions is now doubtful, particularly because some of these decisions given below are only prima facie views expressed at the time of considering stay application.
Cenvat credit cannot extend beyond removal of goods - In Gujarat Ambuja Cement Ltd. v. CCE (2007) 8 STT 122 = 212 ELT 410 = 6 STR 249 (CESTAT). Hon. Tribunal in para 12 of the decision has observed, ‘Crucial point to be noted in regard to Cenvat Credit is that credit availability is in regard to 'inputs'. The credit covers duty paid on input materials as well as tax paid on services, used in or in relation to the manufacture of the 'final product'. Therefore, extending the credit beyond the point of duty paid removal of the final product, would be contrary to the scheme of Cenvat Credit Rules’.
Service should have relation to manufacture - In Colgate Palmolive P Ltd. v. CCE (2008) 12 STT 269 = 7 STR 294 (CESTAT), a prima facie view was expressed that credit of input services which are common to manufactured as well as exempted/traded goods is not available. A prima facie view was also expressed that even services in the inclusive part of definition should be ‘in relation to manufacture’.
In Coca Cola India v. CCE (2007) 7 STR 529 = 223 ELT 69 (CESTAT), assessee was manufacturing concentrate for cold drinks. He was incurring expenditure for advertisement of aerated water and not concentrate. It was held that advertisement expenses is not his ‘input service’ since it is not related to manufacture of ‘concentrate’ but related to sale of aerated waters. The reason given was that such advertisement expenses are not includible in assessable value of base essence.
Service of CHA is not input service - In Excel Crop Care v. CCE (2007) 9 STT 249 = 7 STR 451 (CESTAT SMB), it was held that services of CHA (Customs House Agent) in relation to export is not in relation to manufacture and clearance and hence Cenvat credit is not eligible. Same prima facie view was held in GHCL Ltd. v. CCE (2007) 10 STT 254 (CESTAT) – this view has been specifically not accepted in CCE v. Rolex Rings (2008) 16 STT 193 = 230 ELT 569 (CESTAT SMB) and CCE v. Adani Pharmachem (2009) 19 STT 239 (CESTAT SMB).
Construction services relating to sign boards - In Excel Crop Care v. CCE (2007) 9 STT 249 = 7 STR 451 (CESTAT SMB), it was held that construction services for setting up circles/gardens for putting sign boards is not in relation to advertisement of the product and is not eligible.
Club house fees for recreation of workers - In Mundra Port & SEZ Ltd. v. CCE (2009) 18 STT 314 (CESTAT), it was held that service tax paid on club house fees, meant for recreation of workers is not eligible for credit as it is not used for providing output service.
Residential quarters is not input service - In VMT Spinning Co. Ltd. In re (2008) 16 STT 514 = 232 ELT 169 = 17 VST 369 (AAR), it has been held that construction of residential quarters for workers inside the factory is not ‘input service’ as it has no relation with manufacturing activity.
In GHCL Ltd. v. CCE (2007) 10 STT 254 (CESTAT), prima facie view was held that services received at residential colonies of staff do not qualify as ‘input service’ – similar prima facie view in India Cements v. CCE (2008) 9 STR 65 (CESTAT SMB).
Windmills for generation of electricity which are away from factory - In Rajhans Metals v. CCE (2007) 8 STR 498 (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 electricity is not excisable and hence the services availed at windmill are not ‘input services’ – similar prima facie view in India Cements v. CCE (2008) 9 STR 65 (CESTAT SMB) – same view in Ellora Times Ltd. v. CCE (2009) 19 STT 381 = 235 ELT 661 (CESTAT SMB), but the reason given was that there is no direct nexus between services provided in power plant and items manufactured in factory.
Contrary decisions of Tribunal in respect of outward freight - The decision of Tribunal in Gujarat Ambuja Cement was followed in India Japan Lighting P Ltd. v. CCE (2007) 11 STT 498 = 8 STR 124 = 218 ELT 103 (CESTAT) * HEG Ltd. v. CCE (2008) 13 STT 96 (CESTAT SMB) * CCE v. Sound Castings (2009) 18 STT 185 (CESTAT SMB) * Bharat Starch Industries v. CCE (2008) 223 ELT 395 (CESTAT) – same prima facie view in stay petition in Ultratech Cement v. CCE (2007) 8 STT 152 = 6 STR 364 (CESTAT) – view reiterated in para 8.2 of CBE&C Circular No. 97/8/2007-ST dated 23-8-2007. The decision of Tribunal in Gujarat Ambuja Cement was also followed in Universal Cables Ltd. v. CCE (2007) 10 STT 271 = 7 STR 310 (CESTAT SMB), in respect of courier services utilised for despatch of finished goods.
In CCE v. NHK Springs Ltd. (2007) 9 STT 548 = 7 STR 63 = 215 ELT 354 (CESTAT SMB) also, it was held that credit of service tax on outward freight is not available - followed in Orissa Concrete v. CCE (2008) 10 STR 16 (CESTAT).
In CCE v. Adishiv Forge (2008) 12 STT 359 (CESTAT SMB), it was held that Cenvat credit can be availed of service tax paid on inward freight but not in respect of outgoing consignments.
Now these decisions stand impliedly overruled in view of decision of three member bench of Tribunal and judgment of Punjab & Haryana High Court.
5. Summary
Apart from the fact that definition of ‘input service’ is very wide and it includes 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’.
Conclusion - In my view, decision of large bench of Tribunal in ABB Ltd. correctly interprets the definition of ‘Input service’ [Unless the definition is changed in next budget]. Thus, any service in relation to business of assessee is ‘input service’ and eligible for Cenvat credit.
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