1. Revenue filed the appeal against Order-in-Appeal No.12/2009 dt. 20.4.2009 passed by Commissioner (Appeals).

2. The brief facts of the case are that respondents, a 100% EOU, are manufacturers of Rear Axles Housing (Motor Vehicle parts) falling under CH 8708 of CETA'85 and exported their finished goods to various countries and availed cenvat credit of duty paid on inputs as well as service tax paid on input services used by them in relation to manufacture of final products. In respect of goods exported to USA, prior to delivery, the goods are subjected to quality control and cleaning operations at the warehouse of buyer. For this purpose, the respondents engaged the services of M/s. Product Action International, USA for carrying out the quality control and cleaning operations such as deburring and removal of rust developed during transit. As a recipient of service they paid service tax under Business Auxiliary Service under reverse charge and availed credit of the service tax paid. A show cause notice dt. 3.3.2008 was issued to the respondents demanding reversal of service tax credit of Rs.10,28,524/- on the grounds that the said activities have no nexus to the manufacture of final products and the service activity was rendered outside India, outside the place of removal of excisable goods. The adjudicating authority in his order dt.13.8.2008 confirmed the demand and ordered for recovery of the credit along with interest and dropped penal proceedings. Aggrieved by the order, the respondents filed appeal and Commissioner (Appeals) vide impugned order has set aside the adjudication order and allowed their appeal. Revenue filed the present appeal.

3. The Ld. AR on behalf of the Revenue reiterated the grounds of appeal. He submits that though the respondents paid services tax under reverse charge mechanism, they are not eligible to avail credit. As per the definition of "input services" the activity carried out by the overseas company do not qualify as input services and has no nexus to the manufacture of final product. The service is rendered outside the place of removal. He submits that clause (ii) of definition of "input service' of Rule 2(l) of CCR has four categories (i) it should be related to setting up, modernization, renovation or repairs of a factory, premises of provider of output service (ii) the input service should have been directly used in or in relation to the manufacture of final product and clearance of final product upto the place of removal (iii) activities relating to business, such as advertisements or sales promotion, market research, such as accounting, auditing, financing, recruitment, and quality control etc. and (iv) inward transportation of inputs or capital goods and outward transportation upto the place of removal. All the above four categories should be directly relating to manufacture of goods. He further submits that the activity carried out at the buyer's premises at USA is only cleaning the rust and it is not to rectify any manufacturing defect. These activities are not covered as "input service" in relation to manufacture or clearance of goods. The said service is to be considered as post-manufacturing and post-clearance activity after the sale and do not fall under the inclusive definition of "input services" defined under CCR. He relied on the following case laws :-

(1) CCE v. Cadila Healthcare Ltd.

(2) CCE v. Manikgarh Cement [2010] 29 STT 230 (Bom.)

(3) CCE & C v. Gujarat Heavy Chemicals Ltd. [2012] 34 STT 587

(4) Telco Construction Equipment Co. Ltd. v. CCE & C [2011] 32 STT 311

(5) Maruti Suzuki Ltd. v. CCE [2009] 22 STT 54 (SC)

The Commissioner (Appeals) has not considered these facts and pleaded that the impugned order is to be set aside.

4. On the other hand, Ld. Advocate for the respondents reiterated the findings of the impugned order. He submits that the entire dispute relates to interpretation of inclusive definition of "input service". He submits that payment of service ta