Custom, Excise & Service Tax Tribunal
Hindustan Coca Cola Beverages Pvt.Ltd vs Cce, Meerut-Ii on 7 September, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
SINGLE MEMBER BENCH
Court No.III
Appeal No. E/52963 to 52966/2014-Ex-SM
(Arising out of OIA No.MRT-EXCUS-002-APP-223-226 dt.17.2.2014 passed by CCE(A), Meerut-II)
Date of Hearing: 15.07.2015
Date of Order:07.09.2015
For approval & Signature:
Honble Smt.Sulekha Beevi C.S., Member (Judicial)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether their Lordships wish to see the fair copy of the order?
seen
4.
Whether order is to be circulated to the Department Authorities?
Yes
Hindustan Coca Cola Beverages Pvt.Ltd. Appellant
Vs.
CCE, Meerut-II Respondent
Appearance:
Present for the Appellant: Shri B.L.Narasimhan, Advocate Present for the Respondent: Shri R.K.Gupta, DR Coram: Honble Smt.Sulekha Beevi C.S., Member (Judicial) Final Order No.52793-52796/2015 Per: Sulekha Beevi C.S. These appeals have been filed challenging the impugned order which denied credit on outdoor catering services.
Appeal No.E/52963 to 52965/2014 pertain to the outdoor catering service for the period September, 2011 to August, 2012. The appeal No.E/52966/2014 pertain to the guest house maintenance service and outdoor catering used for the period January, 2008 to December, 2011.
2. The appellants are engaged in the manufacture of aerated water and mineral water and are also availing credit of the service tax paid on various services. The credit on outdoor catering and guest house maintenance service for the above periods was denied on the ground that these services are neither directly or indirectly used in or in relation to the manufacture or clearance of their final products.
3. The arguments advanced on behalf of the appellants can be summarized as under:
The appellants have canteen inside their factory where the workers and employees are serviced food by an outside caterer. This facility is provided because there are no proper facility outside in or around the factory. Thus in the absence of this arrangement, the workers will be required to go out of the factory in search of cooked food which will result in waste of productive time. That these services are essential and directly used in or in relation to the manufacture of final products. It is submitted that though in the definition of input service with effect from 1.4.2011, services provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of club, health and fitness centre, life insurance, health insurance, travel benefits are excluded from the scope of input service, that only when such services are used primarily for personal use or consumption of an employee, they are excluded. Thus, it is evident from bare perusal of exclusion clause that scope of exclusion is restricted to services which are primarily meant for personal use or consumption of employee. These services when availed on the occasion of family day celebration, farewell of employees, etc. would become services for personal use or consumption of employee. When outdoor catering services are provided under obligation of the Factories Act, the activity has a direct bearing on manufacturing activity. As such, these services become integrally connected to the activity of manufacture and also forms part of value of final products. That credit of service tax paid on outdoor catering services provided within the factory premises of appellant when such services are provided under a statutory obligation would qualify as input service. That therefore the denial of credit is unjustified. Adopting almost the same line of arguments the learned counsel urged that the service of guest house keeping is availed for upkeep and maintenance of the guest house property. The guest house is utilized for stay of employees during their visit to the factory. Similarly outdoor catering services are availed for providing food to the employees staying in the guest house. The learned counsel relied on the jugements rendered in CCE, Nagpur vs. Ultratech Cement Ltd.-2010 (20) STR 577 (Bom), CCE, Ahmedabad vs. Ferromatric Millacron India Ltd.-2011 (21) STR 8 (Guj.), CCE, Meerut-II vs. Hindustan Coca Cola Beverages Pvt.Ltd.-2011 (274) ELT 196 (Tri.-Del.), NTF India Pvt.Ltd. vs.CCE, Delhi-III-2013 (30) STR 575 (Tri.-Del.), CCE, Bangalore vs. Stanzen Toyotetsu India (P) Ltd.-2011 (23) STR 444 (Kar) and the assessees own case Hindustan Coca Cola Beverages Pvt.Ltd. vs. CCE, Nashik-2014-TIOL-2460-CESTAT-MUM.
4. Against this, learned DR defended the impugned order and submitted that amended definition of inputs services which came into force with effect from 1.4.2011 expressly excluded outdoor catering service from the definition of input service and that the appellants are not entitled to credit of service tax paid on these services. Further that the services of guest house maintenance has no direct nexus with the activity of manufacture.
5. Heard both sides.
6. After amendment of the definition of input service with effect from 1.4.2011 the exclusion part of the definition takes in outdoor catering service also. But it is provided therein that the exclusion applies when such services are used primarily for personal use or consumption of any employees. The outdoor catering service/canteen services provided by the appellant is in compliance of mandatory requirement under section 46 of the Factories Act, 1948. The ground stated in the impugned order for disallowing the credit is that even though canteen facility is provided under the Factories Act, to the workers under statutory obligation, it does not have nexus either directly or indirectly to manufacture of final product.
7. It is worthwhile to note the various judgements relied by the appellant. In CCE, Bangalore vs. Stanzen Toyotetsu India (P) Ltd. (supra) observed as under:-
Therefore when a particular service not mentioned in the definition clause is utilised by the assessee/manufacturer and service tax paid on such service is claimed as Cenvat credit, the question is what are the ingredients that are to be satisfied for availing such credit. If the credit is availed by the manufacturer, then the said service should have been utilized by the manufacturer directly or indirectly in or in relation to the manufacture of final products or used in relation to activities relating to business. If any one of these two tests is satisfied, then such a service falls within the definition of input service and the manufacturer is eligible to avail Cenvat credit of the service tax paid on such service. The view taken by the Honble High Court of Bombay in CCE, Nagpur vs. Ultratech Cement Ltd. (supra ) is as follows:-
As rightly contended by Shri Shridharan, learned Counsel for the respondent-assessee, in the present case, the assessee carrying on the business of manufacturing cement by employing more than 250 workers is mandatorily required under the provisions of the Factories Act, 1948 to provide canteen facilities to the workers. Failure to do so entails penal consequences under the Factories Act, 1948. To comply with the above statutory provision, the assessee had engaged the services of a outdoor caterer. Thus, in the facts of the present case, use of the services of an outdoor caterer has nexus or integral connection with the business of manufacturing the final product namely, cement. Hence, in our opinion, the Tribunal was justified in following the Larger Bench decision of the Tribunal in the case of GTC Industries Ltd. (supra) and holding that the assessee is entitled to the credit of service tax paid on outdoor catering service.
8. The Tribunal in NTF India Pvt.Ltd. vs.CCE, Delhi-III was dealing with the issue whether housekeeping services would qualify as input service. The Tribunal observed as under:-
As regards the housekeeping service, the same undisputedly has been used for keeping the factory premises neat and clean which is a statutory requirement of Section 11 of the Factories Act, 1948. In view of this, the service have to be treated as services used by the manufacturer in or in relation to the manufacture of final product as without compliance with the provisions of the Factories Act, manufacturing operations are not possible. In view of this, we hold that housekeeping service is also eligible for Cenvat credit during the period of dispute. In the appellants own case, Hindustan Coca Cola Beverages Pvt.Ld. vs. CCE, Nashik,2014-TIOL-2460-CESTAT-MUM, the CESTAT has rendered judgement in favour of the assessee wherein the period involved was also post 1.4.2011. The Tribunal observed as below:
I find considerable force in the submissions made by the Ld.Counsel for the Appellant, that what is excluded is only the services primarily for personal use or consumption of any employee under clause (C) of Rule 2(1) of the definition of input service. When the Government has specifically used the words such as used primarily for personal use or consumption of any employee, the same has to be given due effect to. In the present case the outdoor catering service is used in relation to business activities of the appellant and the service is used by all employees in general. Also, the Revenue has not rebutted the contention of the Appellant, that the costs of these input services form part of the cost of final product. I also find that the services covered in clause (B) of the definition are excluded from the ambit of cenvat credit without any such qualification of use of service for personal or official purpose.
I further find that even the Government while issuing the budget clarification or subsequent circular has clarified that what is not eligible is that service which is meant for personal use or consumption of any employee or the cost of which is included as part of salary of the employee as cost to company basis. In the present case, the cost of such services, are admittedly borne by the company and not by the employee. Therefore, I hold that the appellant has correctly claimed the cenvat credit on outdoor catering services. Accordingly, the impugned orders are set aside and the appeals are allowed with consequential relief, if any.
9. In the light of the facts, foregoing discussion and judicial pronouncement on the issue, I fully agree with the view taken by CESTAT, Mumbai Bench in the appellants own case reported in 2014-TIOL-2460-CESTAT-MUM.
10. The Revenue has no case, that the cost of these services do not form part of the cost of final products so also it is not in dispute that the appellant cannot conduct manufacturing operation without complying the requirement under the Factories Act, 1948.
11. In Appeal NO.E/52966/2014, the appellant have challenged disallowance of credit for guest house maintenance service and outdoor catering in guest house. The period of dispute is from January, 2008 to December, 2011. Prior to the amendment of input service with effect from 1.4.2011 the definition of input service was very wide so as to include all activities that would come under the activities of business of manufacture. Annexure B shows that all invoices except 2 pertain to the period prior to 1.4.2011. These two invoices are dated 18.4.2011 and 18.5.2011. In a number of judgements, the CESTAT has held that guest house maintenance service and outdoor catering service in the guest house are eligible for credit. In Loreal India Pvt.Ltd. vs. CCE, Pune-I-2011 (22) STR 89 (Tri.-89 (Tri.-Mum.) these services were held to be qualified as input service on which credit can be availed by the assessee. Applying the ratio of the said decision, I hold that the appellant is eligible for credit on guest house maintenance services for the period from January, 2008 to December, 2011 except for the two invoices.
12. From the foregoing I hold that appellants are entitled to credit on outdoor catering services and guest house maintenance services. Appeal Nos.E/52963,E/52964 and E/52965/2014 are allowed. The appeal No.E/52966/2014 is allowed in part (except for the two invoices dated 18.4.2011 and 18.5.2011). The appeals are allowed in the above terms with consequential relief, if any.
(pronounced in the open court on 07/09/2015) (Sulekha Beevi C.S.) Member (Judicial) mk 8