Custom, Excise & Service Tax Tribunal
M/S Mangalam Cement Ltd vs Cce & St, Jaipur-I on 8 October, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. IV
Excise Appeal No. E/58875/2013-E[SM]
[Arising out of Order-In-Appeal No. 46-47(VC)CE/JPR-I/2013 dated 20.05.2013 passed by CCE (Appeals-I) Jaipur-I]
For approval and signature:
Hon'ble Mr. S.K. Mohanty, Member (Judicial)
1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
M/s Mangalam Cement Ltd. ...Appellant(s)
Vs.
CCE & ST, Jaipur-I Respondent(s)
Appearance:
Mr. Mayank Garg for the Appellant Mr. Vaibhav Bhatnagar DR for the Respondent CORAM:
Hon'ble Mr. S.K. Mohanty, Member (Judicial) Date of Hearing/ Decision. 08.10.2015 Final Order No. 54030 /2015_ Per S K Mohanty:
This appeal is directed against the impugned order dated 30.04.2013 passed by the Ld. Commissioner (Appeals) Central Excise, Jaipur, wherein cenvat credit of service tax taken by the appellant on maintenance and repair work of their residential colony has been denied on the ground that the said service has no nexus with the manufacture of final product.
2. Sh. Mayank Garg, the Ld. Advocate appearing for the appellant submits that the residential facilities have been developed near by the factory which is situated in a remote area approximately 60KM away from the district Headquarter, Kota. He further submits that if such facilities are not developed and not properly maintained, there would be no availability of proper staff and labour required for continuous manufacturing activities. Thus, he submits that residential colony constructed adjacent to the factory is in relation to the manufacture of the final product, and as such, the cenvat credit taken on the disputed service shall be eligible for cenvat credit. To justify his above stand that cenvat credit is available to the appellant, the Ld. Advocate has relied on the judgment of Honble Andhra Pradesh High Court in the case of CCE Hyderabad-III vs ITC Ltd. reported in 2012 (32) STR 288 (A.P.)
3. On the other hand, Sh. Vaibhav Bhatnagar, the Ld. DR appearing for the Revenue reiterates the findings recorded in the impugned order and also relies on the judgment of Honble Bombay High Court in the case of Commissioner of Central Excise Nagpur vs Manikgarh Cement reported in 2010 (20) STR 456 Bombay to justify the stand of Revenue that unless the input service has a nexus with the manufacture of the final product, cenvat credit cannot be available.
4. I have heard the Ld. Counsel for both the sides and perused the records.
5. I find from the grounds of appeal that the residential colony was constructed adjacent to the factory because of the reason that the factory manufacturing cement is located at a place which is away from the city. Unless the residential colony is constructed near the factory, the appellant will not be in a position to get the proper/ adequate manpower for running its plant activities.
6. Considering the aforementioned activities and the legistature intent behind the cenvat scheme, the Honble Andhra Pradesh High Court in the case of ITC Ltd (supra) has held that cenvat credit of service tax paid on the taxable services used in the residential complex shall be available to the manufacturer. The relevant paragraph of the said judgment is extracted herein below.
9.?The Commissioners Order-in-Appeal dated 27-5-2008 reflects that he accepted that the efficiency of the employees of an organization would be dependent on various factors, one such being the provision of a housing colony. He further conceded that these facilities would contribute to the enhancement of the productivity of the organization. Having stated so, the appellate authority surprisingly took the view that maintenance of the residential colony by the respondent-Company was only an obligatory activity owing to situational exigencies and was not connected either directly or indirectly to the manufacture of its final products This inherent contradiction in the Order-in-Appeal was noted by the CESTAT, which opined that if accommodation was not provided by the respondent-Company to its employees at this remote location, it would not be feasible for it to carry on its manufacturing activity. The finding of the Commissioner that providing a colony to the employees was not directly or indirectly connected with the manufacturing activity of the respondent-Company was therefore not borne out on facts. The staff colony, provided by the respondent-Company, being directly and intrinsically linked to its manufacturing activity could not therefore be excluded from consideration. Consequently, the services which were crucial for maintaining the staff colony, such as lawn mowing, garbage cleaning, maintenance of swimming pool, collection of household garbage, harvest cutting, weeding etc., necessarily had to be considered as input services falling within the ambit of Rule 2(l) of the Cenvat Rules, 2004.
7. The judgment cited by the Ld. DR is distinguishable from the facts of the present case inasmuch as the issue decided in the said cited judgment is with regard to the nexus between the input service and the finished product manufactured by the appellant. In the case of ITC Ltd. (Supra) since the Honble Andhra Pradesh High Court has categorically held that construction of residential colony adjacent to the factory has the nexus with the ultimate manufacture of the goods, the judgment cited by the Ld. AR is not applicable to the facts of this case.
8. In view of above, I do not find any merits in the impugned order passed by the Ld. Commissioner (Appeals) and thus, the same is set aside and the appeal is allowed in favour of the appellant.
(Dictated and pronounced in open court) (S. K. Mohanty) Member(Judicial) Neha