Custom, Excise & Service Tax Tribunal
M/S.Victor Gaskets Limited vs Commissioner Of Central Excise, Pune-I on 29 February, 2008
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No.I Appeal No.E/1240/2007-Mum Appeal No.E/1235/2007-Mum Appeal No.E/1267/2007-Mum (Arising out of Order-in-Appeal No.P-I/BBP/72/07, dated 18.7.2007, No.P-I/BBP/73/07 dated 18.7.2007 and No.P-I/BBP/55/07 dated 28.06.2007 passed by the Commissioner of Central Excise (Appeals), Pune-I) For approval and signature: Honble Mr.A.K.Srivastava, Member (Technical) ====================================================
1. Whether Press Reporters may be allowed to see No 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 Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy Seen of the Order?
4. Whether Order is to be circulated to the Departmental Yes authorities?
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1. M/s.Victor Gaskets Limited Appellants
2. M/s.Bosch Chassis Systems India Limited
3. M/s.Bajaj Electricals Ltd.
Vs.
Commissioner of Central Excise, Pune-I Respondent
Appearance:
Ms.Padmavati Patil, Advocate for the appellants
Shri Y.D.Banga, SDR for the respondent
Shri U.H.Jadhav, JDR for the respondent
CORAM:
Honble Mr.A.K.Srivastava, Member (Technical)
Date of hearing : 13.02.2008/15.02.2008
Date of decision: 29.02.2008
O R D E R No:..
Per: Mr.A.K.Srivastava, Member(Technical)
These appeals have been filed by M/s.Victor Gaskets India Limited, M/s.Bosch Chassis Systems India Limited and M/s.Bajaj Electricals Limited against Order-in-Appeal No.P-I/BBP/72/07 dated 18.7.2007, No.P-I/BBP/73/07 dated 18.7.2007 and No.PI/BBP/55/2007 dated 28.06.2007 passed by the Commissioner of Central Excise (Appeals), Pune-I.
2. Heard both sides and perused the records.
3. Since the issue involved in all the three appeals is common, these are being taken up together for disposal by a common order.
4. In Appeal No.E/1240/2007-Mum relating to M/s.Victor Gaskets India Limited, the inadmissible Cenvat credit involved is Rs.96,912/- for the period from January, 2005 to August, 2006. The appellants are engaged in the manufacture of Gasket falling under chapter sub heading 84.68 of Central Excise Tariff Act, 1985.
5. In Appeal No.E/1235/2007-Mum relating to M/s.Bosch Chassis Systems India Limited, the inadmissible Cenvat credit involved is Rs.3,83,283/- for the period from September, 2004 to May, 2006. The appellants herein are engaged in the manufacture of M.V.Parts falling under chapter 87 of Central Excise Tariff Act, 1985.
6. In appeal No.E/1267/2007-Mum relating to M/s.Bajaj Electricals Limited, the inadmissible Cenvat Credit involved is Rs.33,956/- for the period from September, 2005 to February, 2006. The appellants herein are engaged in the manufacture of excisable goods falling under chapter 84 of Central Excise Tariff Act, 1985.
7. The issue involved in the instant appeals is whether the appellants are entitled to the Inputs service Credit of the service tax paid on the Outdoor Catering Services. The appellants have provided a canteen facility in their factory for their employees. This is claimed to be a statutory requirement under Section 46 of the Factory Act. The service provider issued the invoices to the appellants for the said Outdoor Catering Services and the appellants had availed the Cenvat Credit on the strength of such invoices. The question is whether Outdoor Catering Services can be regarded as an input service.
8. The issue involved in the instant appeals, is regarding the admissibility of Cenvat Credit of the service tax paid on out door catering services i.e. canteen service treating the same as input service under Rule 2(l) of the Cenvat Credit Rules, 2004.
9. As per Rule 2(l) of the Cenvat Credit Rules, 2004, 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 the final products from the place of removal, 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 up to 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; The meaning assigned to input service is divided in two parts, first part giving the specific meaning and the second part gives the inclusive meaning of the same. In the second part an inclusive meaning is given to input service, which otherwise would not have been covered in the main first part.
From this, it is evident that manufacturer/output service provider can take credit of the service tax paid on business related activities, which are specified in the expanded inclusive definition of input service.
10. The expression used in the said Rule 2(l) is such as which means that the stipulated activities that follow the said expression in the definition are only illustrations and not limitations. This gets support from the Honble Apex Court judgement in Good Year India Ltd.-1997 (95) ELT 450 (SC), wherein it has been held that the expression such as is only illustrative and not exhaustive.
In other words, the expanded part of the definition is inclusive one and not an exhaustive list of the activities on which the input service credit can be taken by the appellants.
11. The expression in relation to used in Rule 2(l) has to be given a wide connotation as has been held by the Apex Court in:
(i) Solaris Chemtech Ltd.-2007 (214) ELT 481 (SC)
(ii) Doypack Systems Pvt.Ltd.-1988 (36) ELT 201 (SC)
12. The illustrative list of activities relating to business in the inclusive definition of input service as reproduced above, consists of accounting, auditing, financing, recruitment and quality control, coaching and training, computer, networking, credit rating, share registry, security.
The credit of service tax paid on activities like coaching and training, credit rating, although not directly or indirectly related to manufacture of goods, is admissible as input service credit to a manufacturer of final products as well as to output service provider treating the same as activities in relation to business. In the light of the above, I am of the view that the canteen service provided within the factory premises of the appellants exclusively for the factory workers is an activity in relation to the business of the appellants, and hence can be regarded as input service within the ambit of Rule 2(l) (ii) of the Cenvat Credit Rules, 2004.
In the present cases, the canteen facility, although not specifically stated in the list of activities in the definition of the input service under Rule 2(l) ibid yet it is an activity relating to the business of the appellants as this facility is being provided exclusively only to the employees of the factory of the appellants within the premises of the factory. The canteen facility is beneficial for the workers as they are served with food stuff, etc. at concessional rates and it is they who are engaged in the business of the appellants, which is nothing but the manufacture of goods. In any case, the canteen facility provided can also be said to be used by the manufacturer indirectly as the canteen facility is only for the benefit of the appellants employees, who play a significant role in the activity of manufacture.
13. In accordance with Section 46 of Factories Act, 1948, every employer having more than 250 workers has to provide canteen facility for workers. Rule 79 of Maharashtra Factories Rules, 1963 also mandates such a requirement of provision of canteen. The appellants factory has more than 250 workers. Since the provision for canteen facility is a mandatory requirement, as stated above, the appellants would be subject to penal action by the State Government if they violate the mandatory requirements.
14. It may be noted that levy of fringe benefit taxes is on business expenses. The appellants have contended that they pay fringe benefit taxes on canteen related expenses under Income Tax Act and as the said tax is a levy on business related expenses, the Appellants payment of the same on the canteen related expenses would be considered as a business related expenses and hence, the same would get covered under the activities relating to business stipulated in the inclusive definition of input service u/r 2(l) of CCR, 2004. I am inclined to agree with this plea of the appellants.
15. I find that the CESTAT, vide Final Order No.A/27/C-IV/SMB/2007 dated 13.12.2007 in the case of Manikgarh Cement vs. CCE, Nagpur, has allowed the cenvat credit of the service tax paid on the repairs and maintenance of civil construction in the residential colony provided for the employees of the appellants therein based on the findings that the construction of the residential colony for their employees was necessary to maintain the continuity of activity of manufacture of cement and that repairs and reconstruction expenses were allowed as revenue expenditure as the same enabled the assessee to carry on the business.
16. I, further, find that the Tribunal has taken a consistent view that the service tax paid on mobile phones is eligible for credit, as held in the following cases:
(a) Indian Rayon & Ind.Ltd.-2006 (4) STR 79 (T)
(b) Excel Crop Care Ltd.-2007 (STR 451 (T)
17. Further, para 8.3 of CBEC Circular No.97/8/2007-ST, dated 23.8.2007 (2007 (215) ELT T-24], clarifies that service tax paid on mobile phone is an eligible input service.
18. The Honble Allahabad High Court, in ITAT vs. B.Hill and Co.(P) Ltd.-1983 (142) ITR 185, has held that expenditure incurred on restoration of buildings and residential quarters or factory was available as Revenue expenditure for the reason that repair and reconstruction enable the assessee company to carry on its business.
19. The Honble Bombay High Court, in Greaves Cotton & Co.Ltd. vs. CIT- 2005 (279) ITR 42 (Bom), has held that the expenditure incurred on maintenance of transit quarters used for accommodating employees visiting Bombay from outstation for business purpose was to be allowed in computing the income chargeable under the head profit and gains of business or profession under Section 37(1) of Income Tax Act.
20. In the light of the foregoing discussion, I hold that the credit of the service tax paid on the outdoor catering (canteen) service is admissible as input service under Rule 2(l) of the Cenvat Credit Rules, 2004.
21. Since the Cenvat Credit has been held to be admissible to the appellants on merits, the question of imposition of penalty and demand of interest does not arise. The same are set aside.
22. The impugned orders passed by the Commissioner (Appeals) are set aside and the appeals are allowed with consequential relief to the appellants.
(pronounced on 29. 02.2008 in the court)
(A.K.Srivastava) Member (Technical)
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