Custom, Excise & Service Tax Tribunal
Pam Pharmaceuticals & Allied Machinery ... vs Commissioner Of Central Excise, Mumbai ... on 4 February, 2016
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
Appeal No.
E/1262/11
- Mum
(Arising out Order-in-Appeal No. SB/55/M-V/2011 dated 25.04.2011 passed by the Commissioner of Central Excise (Appeals), Mumbai V)
For approval and signature:
Honble Mr. S.S. Garg, Member (Judicial)
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 No CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy Yes
of the Order?
4. Whether Order is to be circulated to the Departmental Yes
authorities?
Pam Pharmaceuticals & Allied Machinery Co. P. Ltd.
Appellant
Vs.
Commissioner of Central Excise, Mumbai V
Respondent
Appearance:
Shri H.G. Dharmadhikari, Advocate for the appellant Shri Ashutosh Nath, AC (AR) for the respondent CORAM:
Honble Mr. S.S. Garg, Member (Judicial) Date of hearing : 27.01.2016 Date of decision : 04.02.2016 O R D E R No:..
This present appeal is directed against Order-in-Appeal No. SB/55/M-V/2011 dated 25.04.2011 passed by the Commissioner of Central Excise (Appeals), Mumbai V wherein he has upheld the Order-in-Original.
2. Briefly the facts of the case are that appellant are engaged in the manufacture of pharmaceutical machinery and its spares falling under sub-heading 84.22, 84.74, 84.79 of Central Excise Tariff Act, 1985. During the scrutiny of records of the appellant, the department raised objection to the availment of Cenvat Credit of service tax paid on the club membership and issued a show-cause notice dated 12.04.2010 for recovery of service tax so availed by the appellant on two grounds i.e. (i) credit has been availed on the documents which does not disclose the service tax registration number of service provider and type of service as required under Rule 4A of service tax documents; and (ii) the service of the club is not an input service in or in relation to manufacture of final product as per the definition of input service under Rule 2(l)(ii) of CENVAT Credit Rules, 2004. The appellant filed the reply to the show-cause notice. After hearing the appellant, the Adjudicating Authority denied the Cenvat Credit on the ground that the membership of the club does not fall within the definition of input service, and the same is not related to manufacturing activities. Aggrieved by the Order-in-Original the appellant filed appeal before the Commissioner (Appeals) who confirmed the Order-in-Original and now the appellant is before this Tribunal.
3. Ld. Counsel for the appellant submitted that the order passed by the Commissioner (Appeals) is bad in law and is liable to be set aside on the ground that the membership of the business club is directly related to the business of the company and therefore fall in the definition of input service. He further submitted that any business activity prior to or during the course of post manufacture of final product has nexus with the business and such services is in relation to those activities are input services within the terms of Rule 2(l) of CENVAT Credit Rules, 2004. He further submitted that the subscription charges towards the club membership charges of the appellant company was approved by the Board resolution and the director was authorised to join the club for entrepreneurs. The entrepreneur organisation is an international organisation where the entrepreneurs hold the meetings so as to exchange vital informations about the change in business technologies, sourcing of inputs, change in needs of the customers, new technical know-how etc. The said club is a facilitator for canvassing the business and therefore the membership of such club is directly connected with the business of appellant. He further submitted that club membership expenses are forming part of the assessable value since they are being debited to profit and loss account i.e. the said activity is construed to be a input service in view of the settled law by the decision of the Hon'ble High Court of Bombay in the case of Coca Cola P. Ltd. 2009 (15) STR 657.
4. On the other hand, ld. AR reiterates the findings of the lower authorities.
5. I have heard the ld. Counsel for the parties and perused the records. The ld. Counsel for the appellant submitted that the Commissioner (Appeals) has narrowly interpreted the definition of input services. He takes me through the definition of input service which is reproduced below:-
As per Rule 2(1) of the said Rules input service means any services :-
(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 final products up to the place of removal.
6. He further submitted that the club and association service is used in or in relation to business activity. In support of his submission, he relied upon the following judgment:-
1) CCE vs. Ultratech Cement Ltd. 2010 (20) STR 577 (Bom)
2) Willis Processing Services (I) P. Ltd. vs. CST 2015 (38) STR 169
3) Mangalam Cement Ltd. 2015 (38) STR 635
4) Coca Cola P. Ltd. 2009 (15) STR 657
7. On the other hand, ld. AR has cited the decision in CCE vs. Manikgarh Cement 2010-TIOL-720-Hon'ble High Court-MUM-ST.
8. I have gone through the various judgments cited by both the sides. The only issue involved in the present appeal is of denial of Cenvat Credit of service tax paid on club membership of Association known as Entrepreneur Organisation. The contention of the department is that the said services are not in relation to the manufacturing of final product; whereas the contention of the appellant is that the membership of such an organisation is essential for the purpose of promoting their final product and to get the knowledge with respect to the availability of inputs from right source across the globe and also to facilitate the meetings of entrepreneurs for exchange of their knowledge and information. The present organisation is not an entertainment club and purely a business club. The ld. Counsel for the appellant also cited the following judgments of this Tribunal on the same point wherein this Tribunal has allowed the Cenvat Credit of membership fee of the business club. The following are the judgments:
a) Finolex Cables Ltd. vide Order no. A/2056/15/SMB dated 30.06.2015
b) Racold Tharmo Ltd. vide Order no. A/3698/15/SMB dated 30.10.2015
c) Zensar Technologies Ltd. vide order no. A/85126-85130/15/SMB dated 27.11.2015
9. On the other hand, ld. AR submitted that the appellant has failed to establish the nexus between the club and the business of the appellant.
10. After hearing the ld. Counsel for the parties, and perusal of the records, I find that the membership of the business club like the Entrepreneur organisations is indirectly related to the promotion of the business of the appellant. I also find that the expenses incurred on membership of the club are forming part of the assessable value and as per the judgment in the case of Coca Cola P. Ltd. (supra) wherein the Hon'ble High Court in para 43 has observed that Once the cost incurred by the service has to be added to the cost, and is so assessed, it is a recognition by Revenue of the advertisement services having a connection with the manufacture of the final product. This test will also apply in the case of sales promotion. Therefore keeping in view the judgments cited (supra), I am of the considered opinion that the expenses incurred on the membership of the business club is an input service and appellant can legally take Cenvat Credit of the expenses incurred on the membership of the club.
11. In view of the foregoing, I set aside the impugned order by allowing the appeal with consequential relief, if any.
(Pronounced in Court on .) (S.S. Garg) Member (Judicial) //SR 7 e-1262-11