Custom, Excise & Service Tax Tribunal
Sundaram Fasteners Limited Fasteners ... vs Commissioner Of Gst&Amp;Central ... on 12 July, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
Appeal No. Arising out of Order-in-Appeal passed by
Commissioner of GST & Central Excise
(Appeals - I)
E/40341/2018 No. 302/2017 (CTA-I) dated 9.11.2017
E/40342/2018 No. 282/2017 (CTA-I) dated 8.11.2017
E/40344/2018 No. 283/2017 (CTA-I) dated 8.11.2017
E/40344/2018 No. 284/2017 (CTA-I) dated 8.11.2017
E/40345/2018 No. 285/2017 (CTA-I) dated 8.11.2017
E/40346/2018 No. 286 & 287/2017 (CTA-I) dated 8.11.2017
M/s.Sundram Fasteners Limited Appellant
Vs.
Commissioner of GST & Central Excise
Puducherry Respondent
Appearance Shri M. Kannan, Advocate for the Appellant Shri S.Govindarajan, AC (AR) for the Respondent CORAM Hon'ble Ms. Sulekha Beevi C.S., Member (Judicial) Date of Hearing / Decision: 12.07.2018 Final Order Nos. 41995-42000 / 2018 The issue involved in all these appeals being the same, they were heard together and are disposed by this common order.
2. Brief facts are that the appellants were issued show cause notice proposing to disallow credit on various input services and for recovery of the same along with interest and for imposing 2 penalties. After due process of law, the original authority disallowed credit on certain input services which was partly upheld by the Commissioner (Appeals). Aggrieved by the disallowance of credit on various input services, the appellant is now before this Tribunal.
3. On behalf of the appellant, ld. counsel Shri M. Kannan has furnished the details of the input service credit involved in various appeals which are tabulated as under:-
Appeal No. Period of Input Service
Dispute
E/40341/2018 6/2010 to 4/2011 Group Health Insurance (1,38,823)
Convention Service (2,600)
Commercial construction (5,354)
Penalty (1,46,237)
E/40342/2018 10/2011 to 3/2012 Commercial Construction (8,10,854)
Rent a cab service (4,392)
E/40344/2018 10/2011 to 3/2012 Commercial Construction (1,68,839)
Coating Service (job work) (23,756)
E/40344/2018 7/2011 to 9/2011 Commercial Construction (8,37,412)
Coating Service (job work) (14,341)
E/40345/2018 5/2011 to 4/2012 Air Conditioner Maintenance (9,756)
Commercial Construction (11,67,230)
E/40346/2018 4/2008 to 4/2011 Air Conditioner maintenance (35,276)
Group Health Insurance (4,26,159)
Commercial Construction (8,83,324)
Penalty (13,44,759)
3.1 He submitted that the period involved in Appeal
No.E/40341/018 and E/40346/2018 are both prior to 1.4.2011. In respect of group health insurance services, ld. counsel argued that in respect of demand in Appeal No.E/40341/2018, all the invoices except one is prior to 1.4.2011. That in any case, the said issue whether group health insurance service is 3 eligible for credit has been held in favour of the appellant in their own case reported in 2016 (43) STR 454 (Tri. Chennai). The ld. counsel argued that the exclusion clause in definition of input service excludes insurance coverage given to employees during the journey availing leave travel allowance. The group health insurance in the present case was availed for covering the risk of employees and not for any leave travel allowance. That therefore the credit is eligible. It is also submitted that it is mandatory for the appellant to take insurance benefit for the employees as there are more than 600 employees under the assessee.
3.2 With regard to convention service, he submitted that the services were availed prior to 1.4.2011 and as per the definition of 'input service' as it stood prior to 1.4.2011, the said service which were used for training of employees is eligible for credit. He adverted to page 11 of the Order-in-Original and submitted that the credit stands disallowed by the authority stating that the appellant has not produced any supporting documents. The appellant had made relevant entries giving the details of the service provider in their accounts. As per proviso to Rule 9, the AC/DC is required to verify and satisfy as to whether credit availed is correctly accounted and then allow the credit if it is properly accounted by the assessee. He therefore requested that the matter maybe remanded to the adjudicating authority 4 to verify whether credit has been properly availed by the appellant.
3.3 With regard to commercial construction service, he submitted that the services were availed prior to 1.4.2011. He submitted that in two appeals which are stated above, the said services were availed prior to 1.4.2011. With regard to other four appeals, the construction services were availed only for repair and maintenance, modernization and renovation of the premises. The authorities below have rejected stating that those have no nexus with the manufacturing activity and that they are not eligible for credit. He submitted that the appellants would be able to produce documents showing that construction services were availed by the appellant after 1.4.2011 for repair and modernization and therefore requested to remand this issue to the adjudicating authority.
3.4 With respect to rent-a-cab service, the ld. counsel was fair enough to submit that the services were not utilized for manufacture and therefore the appellant is not pressing with regard to the demand raised on this service.
3.5 Coating service (job work) was availed by the appellant for the purpose of processing of the intermediate products which were returned to the appellant. The authorities below have erred in relying upon Notification No.25/2012 dated 20.6.2012 to deny the credit. He argued that the said notification has come 5 into existence only with effect from 1.7.2012, the appellant is eligible for credit.
3.6 Service tax paid on air-conditioner maintenance service has been rejected for the reason that these services have no nexus with the manufacturing activity. He submitted that it is necessary to maintain the air-conditioner which have been installed in the appellant's factory. He relied upon the decision in the case of Sarita Handa Exports (P) Ltd. Vs. Commissioner of Central Excise, Gurgaon - 2016 (44) STR 654 (Tri. Chan.). 3.7 He prayed that the issues relating to convention service, commercial construction service may be remanded and the credit in respect of other services may be allowed.
4. The ld. AR Shri S. Govindarajan supported the findings in the impugned order. He submitted that the group insurance services are not eligible for credit since they are not related to the manufacturing activity of the appellant. He relied upon the decision of the Tribunal in the case of Hindustan Petroleum Corporation Vs. Commissioner of Central Excise, Mumbai- 2018 (12) GSTL 305 (Tri. Mum.) and argued that in the said case, the medical insurance premium paid for employees of security agency (CISF) was disallowed by the Tribunal. He also relied upon the decision in the case of Maruti Suzuki India Ltd. Vs. Commissioner of Central Excise - 2017 (5) GSTL 18 (P&H) to argue that only when the input services have nexus with the 6 manufacturing activity, credit is eligible. The decision in the case of Commissioner of Central Excise Vs. Gujarat Heavy Chemicals Ltd. - 2011 922) STR 610 (Guj.) was relied by the ld. AR to argue that the credit in respect of security service provided in residential quarters was disallowed. He submitted that the authorities below have rightly disallowed the credit on various input services.
5. Heard both sides.
6. The period involved in Appeal No.E/40341/2018 and E/40346/2018 are for the period prior to 1.4.2011. Needless to say that the definition of input services prior to 1.4.2011 had a wide ambit as it included the words 'activities relating to business'. The Tribunal as well as High Courts have held in a number of decisions that services like Group Health Insurance, Convention Service, Construction Service, Air-conditioner maintenance service and rent-a-cab service are eligible for credit prior to 1.4.2011. In respect of Group Health Insurance in Appeal No. E/40341/2018, ld. counsel has submitted that except one invoice all the invoices relate to the period prior to 1.4.2011. I hold that the credit availed on this input service for the period prior to 1.4.2011 are eligible for credit as per the definition of input service as it stood prior to 1.4.2011. 6.1 With regard to group health insurance, the ld. counsel has submitted that the said services were availed for taking 7 insurance coverage for the employees. Since the appellant has more than 600 employees, it is mandatory for them to take insurance coverage for their employees. The exclusion clause in the definition of input service excludes such kind of insurance which is taken for an employee during the leave travel allowance and it does not blanketly exclude all insurance service. Though the Tribunal in the case of Hindustan Petroleum Corporation (supra) has taken a view that medical insurance service is not eligible for credit, the said decision is not applicable to the facts of the present case for the reason that in the said case the insurance was taken for security agency i.e. CISF, who is not a direct employee of the assessee. In the appellant's own case, for the period after 1.4.2011, as reported in 2016 (43) STR 454, the Bench has allowed the credit. The relevant portion is reproduced as under:-
"4. So far as the Cenvat credit on insurance service is claimed, the exclusion of such service in certain events has been incorporated into the law with effect from 1-4-2011. That is only in respect of the insurance coverage given to employees during journey availing leave travel concession. But that had not taken away welfare of workers under the Factories Act, from its fold if insurance service is availed to overcome difficulties under Workmen's Compensation Act, in case of hazard. Accordingly, appellant's claim of Cenvat credit on the service tax paid to avail insurance service for employees employed in factory is permissible."
Following the same, I hold that the group health insurance service prior to 1.4.2011 as well as after 1.4.2011 is eligible for credit.
86.2 With regard to rent-a-cab service, the ld. counsel has submitted that the said services are not used for activities relating to manufacture. The demand in respect of rent-a-cab service in Appeal No. E/40342/2018 is upheld along with interest and the penalties thereof.
6.3 The ld. counsel has submitted that commercial construction service were availed n Appeal Nos. E/40342/2018, E/40343/2018, E/40344/2018 and E/40345/2018 for the purposes of modernization and renovation of the factory and office premises. He submitted that the appellant would be able to furnish documents to establish the same. I therefore deem it fit to remand the matter on this issue to the adjudicating authority, which I hereby do.
6.4 With regard to commercial construction services which have been availed prior to 1.4.2011 as reflected in Appeal No.E/40341/2018 and E/40346/2014, I am of the view that the credit is eligible.
6.5 The authorities below have disallowed credit on coating service (job work). The appellant has submitted that the goods were sent for processing of the job work and during the disputed period, the job worker was not liable to pay service tax for the reason that the processing work did not amount to manufacture. Later Notification No.25/2012 dated 20.6.2012 came into force with effect from1.7.2012 which exempted 9 service tax on such processing work done by the job worker. The authorities below have relied upon this notification to disallow the input service tax credit. These services have been availed prior to 1.7.2012 and therefore the disallowance of credit by the authorities below relying upon the notification is incorrect and unjustified. I hold that the credit availed on coating service (job work) is eligible.
6.6 The appellant is aggrieved by the disallowance of credit on air-conditioner maintenance service. It is submitted by him that it is absolutely necessary to avail the said services for the purpose of upkeep and maintenance of air-conditioner. The Tribunal in the case of Sarita Handa Exports (P) Ltd. (supra) has held that credit is eligible for services availed for maintenance of air-conditioner. Further, the inclusive part of the definition of input service mentions that the services availed for repair and maintenance is eligible for credit. For these reasons, I hold that disallowance of credit on air-conditioner maintenance service is unjustified and requires to be set aside, which I hereby do.
7. From the above discussions, I hold that:-
(a) Group health insurance service, coating service (job work), commercial construction service prior to 1.4.2011 are eligible for credit.
(b) The issue with regard to commercial construction service after 1.4.2011 and convention service prior to 1.4.2011 are 10 remanded to the adjudicating authority for reconsideration of the issue, who shall grant an opportunity of hearing.
(c) The air-conditioner maintenance service is allowed.
(d) Rent-a-cab service is disallowed and the demand along with interest and penalty in respect of the same are upheld.
8. The impugned orders are modified to the above extent. The appeals are partly allowed and partly remanded in the above terms, with consequential relief, if any.
(Dictated and pronounced in open court) (Sulekha Beevi C.S.) Member (Judicial) Rex