Custom, Excise & Service Tax Tribunal
M/S Ultratech Cement Ltd vs The Commissioner on 7 October, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Bench Single Member Bench
Court I
Appeal No.E/20946/2014
(Arising out of Order-in-Appeal No.117/2013(H-IV)CE
Dated 21-11-2013 passed by Commissioner of C.CE&ST
(Appeal-II) Hyderabad)
For approval and signature:
Honble Ms. Sulekha Beevi, C.S., 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 Lordship wish to see the fair copy of the Order?
4.
Whether Order is to be circulated to the Departmental authorities?
M/s Ultratech Cement Ltd..
..Appellant(s)
Vs.
The Commissioner.
C.C.E&ST, Hyderabad-IV
..Respondent(s)
Appearance Shri Karan Talwar, Advocate for the Appellant Shri P.S.Reddy, AR for the Respondent Coram:
Honble Ms. Sulekha Beevi, C.S., Member(Judicial) Date of Hearing : 21/09/2016 Date of decision: 07/10/2016 FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.,]
1. The appellants are engaged in the manufacture of cement and are registered with the Central Excise Department. They are availing the Cenvat credit facility of service tax paid on various services. The appellants were issued show cause notice for the period from April, 2012 to March, 2013 proposing to deny Cenvat credit availed by them on manpower supply services received for maintenance of railway track,and Cenvat credit availed on service tax paid on reimbursement of statutory contribution to PF and ESI for manpwoer supply service.
2. On behalf of the appellants, the Ld. Counsel Shri Karan Talwar advanced arguments referring to the definition of input services. He submitted that the definition of input services is of wide amplitude and has been interpreted by courts to include those services which are integrally connected with the business of manufacturing and the cost of which forms a part of the cost of final product. The definition of input service specifically provides that any service used whether directly or indirectly, in or in relation to the manufacture of final products is eligible for Cenvat credit. He explained that transportation of inputs into the factory is an essential activity in the process of manufacture, because without the inputs being made available within the factory, the activity of manufacture cannot be carried out. Inputs ie. Bulk Cement is received in the factory through rail wagons using railway tracks. That without railway track, the rail wagons cannot run. The manpower recruitment services were availed by the appellant for upkeep/maintenance of the railway tracks laid within the factory premises; such maintenance services can be carried out only by labourers who are experienced with such job. He relied on the decision laid in the case of M/s India Cement Ltd Vs CCE& ST Guntur in the Final Order No .A/30610-30611/2016 dated 20-07-2016 and argued that in the said case, credit was allowed on manpower recruitment services used for maintenance and cleaning, electrical maintenance works under taken at mines.
3. With regard to the denial of service tax paid on PF,ESI reimbursement, the Ld. Counsel submitted that as per the terms of contract, the consideration paid for supply of manpower is segregated as fixed and reimbursable component. The reimbursable component is payable only on furnishing of evidence of the payment towards statutory contribution such as PF, ESI etc., on the part of the contractor. The department allowed credit on the fixed component payable to the contractor and denied credit on reimbursable component holding that such payment is for welfare of employee only and do not have nexus with manufacturing activity. The man power services were used for loading of cement, which is completely in or in relation to the activity of manufacture of appellant. That therefore when the department has allowed credit on part of the consideration paid for manpower services, the denial of credit on balance portion of the consideration paid for the said services is contradictory and incorrect. The Ld. Counsel adverted to Circular No.B-1/6/2005, dated 27-07-2005 and submitted that in the said circular it was clarified by Board that service tax is payable on the gross amount including the contribution made towards PF and ESI and that therefore the appellant has rightly paid the service tax on the reimbursable part also to the contractor. It was also argued by the Ld. Counsel that the amount paid under PF and ESI are paid under statutory obligation and cannot be considered for personal use or consumption of an employee as the loading employees are engaged by the contractor and they are not employees of the appellant.
4. On behalf o the department, the ld AR Shri P.S.Reddy reiterated the findings in the impugned order. He submitted that the PF and ESI contributions are only welfare measures and therefore, these do not have any nexus with the manufacturing activity of the appellant.
5. I have heard both sides, and perused records. The firs issue to be considered is whether the appellant is eligible for credit availed on man power recruitment service engaged for carrying out maintenance of railways tracks. The authorities below have denied the credit holding that such services do not have any direct nexus with the activity of manufacture of final products. It is not disputed that the appellant used railway track for transportation of finished goods/bulk cement and also for inward transportation of inputs. Therefore it is evident that railway tracks are integrally connected for carrying out the activity of manufacture. The denial of credit stating that the manpower service used for maintenance of railways tracks does not have nexus with the manufacturing activity is against all cannons of reasoning. Further, the first part of definition of input service states,- input service means any service 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 . Therefore, any services used directly or indirectly in or in relation to the manufacture of final products would fall within the definition of input services. Since transportation of inputs into the factory as well as transportation of finished goods is an indispensable activity in the process of manufacture it can be concluded without doubt that manpower services used for maintenance of railway tracks qualify as an input service and is eligible for credit.
6. The service tax paid on reimbursable part of the consideration paid towards manpower supply services is denied for the reason that such contributions are for the personal use of the employee. It has to be stated that such contributions are mandatory and the appellant can avail the services only by making payment of such mandatory obligations. Further, such payments cannot be considered as primarily for personal use or for consumption of employees because the employees in this regard are supplied by the contractor and they do not fall under the category of employees of the appellant. In CST, Mumbai Vs Reliance Capital Asset Management Ltd.(2016(41)STR 508(Tri.Mumbai), the Tribunal has held the above service to be eligible for credit. The interpretation of definition of input service was discussed in the case of CCE & Customs Vs Parth Poly Wooven P.Ltd. 2012(25) STR-4(Guj), where the Honble Court held as below:
Bearing in mind the above judicial pronouncements, if we revert back to the definition of the term input service, as already noticed, it is coined in the phraseology of means and includes. Portion of the definition which goes with the expression means, is any service used by the manufacturer whether directly or indirectly in or in relation to the manufacture of final products and clearance of final products from the place of removal. This definition itself is wide in its expression and includes large number of services used by the manufacturer. Such service may have been used either directly or even indirectly. To qualify for input service, such service should have been used for the manufacture of final products or in relation to manufacture of final product or even in clearance of the of the final product form the place of removal. The expression in relation to manufacture is wider than for the purpose of manufacture. The words and clearance of the final products from the place of removal are also significant. Means part of the definition has not limited the services only upto the place of removal, but covers services used by the manufacturer for the clearance of the final products even from the place of removal. It can thus be seen that main body of the definition of term input service is wide and expansive and covers variety of service utilised by the manufacturer. By no stretch of imagination can it be stated that outward transportation service would not be a service used by the manufacturer for clearance of final products from the place of removal
7. In the cases of Coca India Pvt. Vs CCE, Pune-III, 2009(242)ELT 168(Bom) and CCE Nagpur Vs Ultratech Cements 2010(20) STR 577(Bom), the Honble Courts had occasion to consider in detail the definition of input service and the eligibility of credit in regard to various services. In CCE & ST Tiruchirapally Vs Grasim Industries Ltd. 2016(41) STR 73(Tri. Chen) the Tribunal, Chennai had allowed credit in regard to services availed for maintenance of wind mill and plantations. The Tribunal in M/s Yazaki Wiring Technologies India Pvt.Ltd.-2016-TIOL-858-CESTAT-MAD, while considering the eligibility of credit of outdoor catering services, after relying upon various decisions, has allowed the credit observing that, the services are rendered under statutory obligation in terms of Factories Act, 1948. The Tribunal observed that an obligation meant to be discharged under Central Statute should not be defeated by another statute when services are provided in accordance with the provisions of labour welfare legislation.
8. From the foregoing discussions, I hold that the denial of credit is unjustified. The impugned order is set aside. The appeal is allowed with consequential reliefs if any.
( Pronounced on 07/10/2016 in open court) ( SULEKHA BEEVI, C.S.) MEMBER(JUDICIAL) ..dks 7