Custom, Excise & Service Tax Tribunal
Rane Trw Steering Systems Ltd vs Commissioner Of Central Excise on 12 April, 2017
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal Nos.E/40511/2017 & E/40512/2017
[Arising out of Order-in-Appeal No.119/2016 dt. 29.11.2016 & OIA No.120/2016 dt. 29.11.2016 passed by the Commissioner (Appeals),Central Excise & Service Tax, LTU, Chennai]
Rane TRW Steering Systems Ltd.
Appellant
Versus
Commissioner of Central Excise,
LTU, Chennai Respondent
Appearance:
Shri M. Karthikeyan, Advocate For the Appellant Shri S. Govindarajan, AC (AR) For the Respondent CORAM:
Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of hearing/decision : 12.04.2017 FINAL ORDER No.40617-40618/2017 Both the appeals relate to the same issue emanating from common impugned order, hence they are taken up together for hearing and disposal.
2. Issue in the appeals concerns denial of input service credit in respect of garden maintenance service as per the following details :
S.No. Appeal No. SCN No. & Date Period Service Tax amount sought to be recovered.
1. E/40511/2017 05.03.2015 February 2014 to January 2015 50,857
2. E/40512/2017 08.03.2016
-do-
65,809 These demands were confirmed by the Original Authority and, in appeal, upheld by the Commissioner (Appeals), vide the impugned order.
3. Aggrieved, appellants are before this forum.
4. Today when the matter came up for hearing Ld. Advocate Shri M. Karthikeyan placed reliance on the following case laws :-
(1) Honble Madras High Court decision reported in 2015-TIOL-1057-HC-MAD-CX (2) CCE Delhi Vs Maruti Suzuki India Ltd.
2015 (38) STR 503 (Tri.-Del.) (3) HCL Technologies Ltd. Vs CCE Noida 2015 (40) STR 369 (Tri.-Del) (4) Mukund Ltd. Vs CCE Belapur 2016 (42) STR 88 (Tri-Mumbai) (5) Lifelong Meditech Ltd. Vs CCE & ST 2016 (44) STR 626 (Tri.-Chennai) 4.1. Ld. Advocate submits that garden maintenance services are very much essential service and an eligible input service for the purpose of Rule 2 (l) of Cenvat Credit Rules, 2004. However, he submits that even if the said service is held to be ineligible service, there is no case for imposition of penalty as the eligibility of the service was in itself dispute and there were contrary decisions on the subject.
5. On the other hand, Ld. A.R. Shri S. Nagalingam for Revenue supports the impugned order and contends that garden maintenance service do not have any nexus with the manufacturer or business activities of the manufacturer. He also placed reliance on ratio of case law of Tribunals decision in CCE Trichy Vs Sri Rama Vilas Service Ltd. 2011 (271) ELT 317 (Tri.-Chennai.).
6. Heard both sides and gone through the facts of the case.
7. I find that in respect of Honble Madras High Court judgement in the appellants own case reported in 2015-TIOL-1057-HC-MAD-CX, the period involved therein is prior to amendment of Rule 2 (l) ibid w.e.f. 1.4.2011. On this point, I am afraid that ratio of this judgement cannot be made applicable to the present appeals.
7.1 In respect of other decisions cited by ld. Advocate, those decisions are rendered by single member bench of the Tribunal which either relate to the period prior to 1.4.2011 or contain interpretations which I respectfully do not agree with. No doubt, the first part of the definition of Rule 2 (l) of CCR w.e.f 1.4.2011 is an inclusive one and the types of services listed out therein are only examples of input services which would fall within the ambit of the said rule. However, even going by the fact that there could be many more services other those listed therein which could be eligible input service, such services have to necessarily pass the usage criteria test which is also found in the definition. Relent part of this is reproduced for ready reference :
RULE 2. In these rules, unless the context otherwise requires, -
.. .. .
(l) input service means any service, -
(i) used by a provider of output service for providing an output service; or
(ii) used by a 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, and includes services used in relation to modernisation, 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, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal; but excludes, - (A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for -
(a) construction or execution of works contract of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or services provided by way of renting of a motor vehicle, in?(B) so far as they relate to a motor vehicle which is not a capital goods; or service of general insurance?(BA) business, servicing, repair and maintenance, in so far as they relate to a motor vehicle which is not a capital goods, except when used by -
(a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such person; or
(b) an insurance company in respect of a motor vehicle insured or reinsured by such person; or (C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee;
Explanation. - For the purpose of this clause, sales promotion includes services by way of sale of dutiable goods on commission basis.
7.2 What comes to the fore is that service for attaining the colour of eligible input service should have been, inter alia, used by the manufacturer directly or indirectly in relation to the manufacture of the final products and clearance of final products. I am unable to find a connection between the garden maintenance and with the aforesaid requirement. There are services which though cannot be directly related to manufacture various activities which are compulsorily required by Pollution Control Laws, Factories Act and so on which can definitely be considered an activity in relation to manufacture and hence conduct of such activities can surely be considered as eligible input service for the purpose of Rule 2(l) ibid. However, it does not appear to be the case here. Undoubtedly, gardening would definitely contribute to aesthetic looking of the factory of the manufacture and would also be an eco-friendly activity. However, so long as such activity does not pass the test of usage criteria, or is not enjoined on them by various statutory requirements as discussed, and further such activity is also not barred or excluded by the exclusion provision (A), (B), (BA) and (C) in the second part of the definition of Rule 2 (l) ibid, the same cannot be treated as an eligible input service.
7.3 The case law submitted by Revenue is also for a period prior to amendment of the Rule 2 (l) and hence same is not discussed further. Nonetheless, in view of the discussions herein above, I have no hesitation in holding that the impugned service availed for the purpose of garden maintenance by the appellants will, by no stretch of imagination, fall within the purview of eligible input service for the purpose of Rule 2 (l) ibid. For the reason aforestated, no merit is found in the appellants plea and hence I do not find any infirmity in confirmation of tax liabilities as aforesaid, which are upheld.
7.4 However, coming to the issue of penalty, it is a fact that there are contrary decisions in respect of the eligibility of the said service. Element of confusion cannot be ruled out. This being so, there is definitely merit in the plea of the ld. Advocate with regard to penalty imposed under Rule 15 (1) of the Rules. Accordingly, penalties imposed in these appeals are set aside.
Appeals are partly allowed on the above terms.
(Dictated and pronounced in open court) (MADHU MOHAN DAMODHAR) MEMBER (TECHNICAL) gs 7 Appeal Nos.E/40511/2017 & E/40512/2017