Custom, Excise & Service Tax Tribunal
Cce, Delhi-Iii, Gurgaon vs M/S. Q. H. Talbros Ltd on 28 October, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI Date of hearing/decision:28.10.2014 Excise Appeal No. 57188 of 2013-EX(SM) [Arising out of Order-in-Appeal No.24/SVS/GGN/2013 dated 17.01.2013 passed by the Commissioner of Central Excise (Appeals), Delhi-III]. CCE, Delhi-III, Gurgaon Appellants Vs. M/s. Q. H. Talbros Ltd. Respondent
For approval and signature:
Honble Shri Rakesh Kumar, Member (Technical) 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 Lordships wish to see the fair copy of the Order?4
Whether Order is to be circulated to the Departmental authorities?
Appearance: Rep. by Shri M.S. Negi, DR for the appellant.
Rep. by Shri Hemant Bajaj, Advocate for the respondent.
CORAM: Honble Shri Rakesh Kumar, Member (Technical) Final Order No.54478/2014 /Dated:28.10.2014 Per Rakesh Kumar:
The respondent are manufacturers of motor vehicle parts chargeable to central excise duty. They availed cenvat credit of central excise duty paid on inputs and of service tax paid on input services. There is no dispute that number of workers in their factory is more than 250 and they are covered by the provisions of the Factories Act, 1948. The dispute in this case is about eligibility for cenvat credit in respect of two services availed by the Respondent outdoor catering service for providing the canteen facility for the workers and banking and financial services. The jurisdictional Asstt. Commissioner vide order-in-original dated 28.12.2011 disallowed the cenvat credit in respect of these services and confirmed cenvat credit demand of Rs.11,99,219/- for the period from Jan. 2006 to October, 2010 along with interest and imposed penalty of equal amount on them. The Asstt. Commissioner held that these services have no nexus with the manufacture of final products. On appeal being filed by the respondent to the Commissioner (Appeals) against this order, the Commissioner (Appeals) vide order-in-appeal dated 17.01.2013 allowed the appeal. Against this order of the Commissioner (Appeals), this appeal has been filed by the Revenue. The Revenues appeal is based on the judgement of the Apex Court in the case of MSIL Vs. CCE, Delhi-III - 2009 (240) ELT 641 (SC), wherein the Apex Court held that the inputs falling in inclusive part of the definition of input must have nexus with manufacture of final product and also the judgement of the Honble Bombay High Court in the case of CCE Vs. Manikgarh Cement - 2010 (20) STR 456 (Bombay), wherein it was held that for availment of cenvat credit, the services must be integrally connected to manufacture as distinct from a welfare measure for the staff.
3. Heard both the sides.
4. Shri M.S. Negi, learned Departmental Representative, assailed the impugned order by reiterating the grounds of appeal and pleaded that services, in question, being welfare measure have no nexus with the manufacture of final products and, therefore, are not eligible for cenvat credit.
5. Shri Hemant Bajaj, Advocate, the ld. Counsel for the respondent pleaded that the question of eligibility of outdoor catering services for providing canteen facility to the workers is covered in favour of the Respondent by the judgement of the Honble Bombay High Court in the case of CCE, Nagpur Vs. Ultratech Cement Ltd. reported in 2010 (20) STR 577 (Bombay), judgement of Honble Gujarat High Court in the case of CCE, Ahmedabadd-I Vs. Ferromatik Milacron India Ltd. - 2011 (21) STR 8 (Gujarat) and the judgement of Honble Karnataka High Court in the case of CCE, Bangalore Vs. Stanzen Toyotetsu India (P) Ltd. reported in 2011 (23) STR 444 (Karnataka), that even otherwise, the number of workers in the respondents factory is more than 250, and as per the provisions of Section 46 of the Factories Act, 1948 every factory having 250 workers or more, is required to provide canteen facility to the workers, that in view of this, providing of canteen facilities to the workers has to be treated as an activity in or in relation to the manufacture of final products as without compliance of the statutory provisions of Section 46 of the Factories Act, the respondent would not be allowed to conduct the manufacturing activities, that as regards the banking and financial services, the issue stands decided in favour of the respondent by the judgement of Tribunal in the case of JSW Steel Ltd. 2012 (277) ELT 189 (T-Chennai) and also by the judgement of the Tribunal in the case of Jenson & Nicholson (India) Ltd. 2014 (34) STR 596 (T-D) and MPI Machines Ltd. 2013 (31) STR 103 (T-D), wherein it was held that the banking and financial services have nexus with the manufacturing business of manufacturer and, therefore, would be eligible for cenvat credit. He, therefore, pleaded that in view of the above submissions, there is no infirmity in the impugned order.
6. I have considered the submissions from both the sides and perused the records.
7. As regards the eligibility of banking and financial services for cenvat credit, it is seen that this issue stands decided in favour of the respondent by the judgement of the Tribunal in the cases of JSW Steel Ltd. (Supra) and Jenson & Nicholson (India) Ltd. & MPI Machines Ltd. In view of this, the impugned order allowing the cenvat crdit in respect of these services is correct and as such, there is no infirmity for the same.
8. As regards the outdoor catering services availed for providing canteen facilities to the workers firstly, this issue stands decided in favour of the respondent by the judgements of three High Courts - judgement of Honble Gujarat High Court in case of Ferromatik Milacron India Ltd.(supra), judgement of Honble Karnataka High Court in the case of Stanzen Toyotetsu India (P) Ltd. (supra) and of Honble Bombay High Court in the case of Ultra Tech Cement (supra). In para 28 of its judgement in case of Ultra Tech Cement, Honble High Court has observed that the definition of input service is very wide and covers not only the services which are directly or indirectly used in or in relation to the manufacture of final products, but also includes various services used in relation to the business of manufacture of final product, be it prior to the manufacture of final products or after the manufacture of final products and that the definition of input service is not restricted to the services used in or in relation to the manufacture of final products but extends to all services used in relation to the business of manufacturing the final product. In para-29 of the judgement, the Honble High Court has observed that the expression activities in relation to business in the definition of input service covers activities which are integrally connected with the business of the assessee, and if the activity is not integrally connected with the business of the manufacture of final product, the service would not qualify to be a input service under Rule 2 (l) of the Cenvat Credit Rules, 2004 and in para-30 and 31 of the Honble High Court after discussing the Apex Courts judgement in the case of MSIL vs. CCE reported in 2009 (240) ELT 641 (SC), referred to by the department in the grounds of appeal, has observed that the ratio laid down by the Apex Court in the case of Maruti Suzuki Ltd. (supra) in the context of the definition of input in Rule 2(k) of 2004 Rules would equally apply while interpreting the expression activities relating to business in Rule 2(l) of 2004 Rules. No doubt that the inclusive part of the definition of input is restricted to the inputs used in or in relation to the manufacture of final products, whereas the inclusive part of the definition of input service extends to services used prior to/during the course of/after the manufacture of the final products. The fact that the definition of input service is wider than the definition of input would make no difference in applying the ratio laid down in the case of Maruti Suzuki Ltd. (supra) while interpreting the scope of input service. Accordingly, in the light of the judgment of the Apex Court in the case of Maruti Suzuki Ltd. (supra), we hold that the services having nexus or integral connection with the manufacture of final products as well as the business of manufacture of final product would qualify to be input service under Rule 2(l) of 2004 Rules. Since during the period of dispute, definition of input service included the activities relating to business, in view of the judgement of the Honble Bobmay High Court, it has to be held that definition of input service would cover not only the services which are used in or in relation to the manufacture of final products but also all the services which are used in or in relation to the business of manufacture of final products, irrespective of whether those services are used before the manufacture, during the manufacture or after the manufacture.
8.1 Moreover, as per the provisions of Rule 46 of the Factory Act, 1948 Factory Act, every factory having 250 workers or more, is required to provide canteen facility to the workers. In view of this, providing of canteen facility to the workers has to be treated as an activity in or in relation to the manufacture of final products as without compliance with the provisions of Factories Act, an assessee would not be allowed to conduct the manufacturing activities. Therefore, outdoor catering services availed for providing canteen facility to the workers has to be treated as an activity in or in relation to the manufacture of final products and from this point of view also, the outdoor catering services has to be treated as having nexus with the manufacture of final products.
9. In view of the above discussion, I do not find any infirmity in the impugned order. Revenues appeal is dismissed.
(Rakesh Kumar) Member (Technical) ckp 1