Custom, Excise & Service Tax Tribunal
Cce, Trichy vs M/S. Grasim Industries on 4 November, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH, CHENNAI ST/307/2010 & ST/CO/29/2010 (Arising out of Order in Appeal No. 17/2010 dated 16.02.2010 passed by the Commissioner of Central Excise (Appeals), Trichy). For approval and signature Honble Dr. CHITTARANJAN SATAPATHY, Technical Member CCE, Trichy : Appellant Vs. M/s. Grasim Industries : Respondent
Appearance Shri R. Srinivasan, Consultant, for the appellants Shri A.B. Niranjan Babu, SDR, for the respondents CORAM Dr. CHITTARANJAN SATAPATHY, Technical Member Date of hearing : 04.11.2010 Date of decision : 04.11.2010 ORDER No._____________ Heard both sides.
2. In this case, the original authority has denied the credit of service tax paid in respect of repair and maintenance services received for the staff colony, gardening service, security service provided in the wind farms, swimming pool maintenance and civil works undertaken at auditorium, shopping complex etc., on the ground that the same have no nexus with the manufacture of cement by the respondents. On appeal by the respondents, the lower appellate authority has allowed such credit citing interalia the decision of the Tribunal in the case of CCE, Nagpur Vs. Manikgarh Cement 2009 (16) STR 171 (Tri.- Mum.). The department is in appeal against the order of the lower appellate authority on the ground that the services in question have no nexus with the manufacture of finished goods viz., cement.
2. Shri A.H. Niranjan Babu, Ld. SDR appearing for the department states that the services in question are totally unconnected with the manufacturing activity and in any case the decision of the Tribunal in the case of CCE, Nagpur Vs. Manikgarh Cement (supra), relied upon by the lower appellate authority has been reversed by the Honble Bombay high Court vide CCE, Nagpur Vs. Manikgarh Cement 2010-TIOL-720-HC-MUM-ST. He prays for setting aside the order passed by the lower appellate authority.
3. Heard Shri R. Srinivasan, Ld. Consultant appearing for the respondents who states that the respondents factory is in a remote area and unless the workers are provided with a residential colony and other amenities, the factory cannot run. Hence, the services provided in relation to the residential colony should be considered as essential for the activity of manufacture and the credit should be allowed.
4. After hearing both sides, I find that the Tribunals order in the case of CCE, Nagpur Vs. Manikgarh Cement (supra), relied on by the lower appellate authority to grant relief to the respondents has been set aside by the Honble Bombay High Court and hence, the basis of allowing relief to the respondents no longer exists. Besides, the Honble Bombay High Courts decision in CCE, Nagpur Vs. Manikgarh Cement (supra), applies the ratio of the Honble Supreme Courts decision in the case of Maruti Suzuki Ltd. Vs. CCE 2009 (240) ELT 641 (S.C.) and holds as follows:-
9. Applying the ratio laid down by the Honble Apex Court in the case of Maruti Suzuki Limited Vs. Commissioner of Central Excise, Delhi (supra), we hold that unless the nexus is established between the services rendered and the business carried on by the assessee, the benefit of CENVAT credit is not allowable. In the present case, in our opinion, rendering taxable services at the residential colony established by the assessee for the benefit of the employees, is not an activity integrally connected with the business of the assessee and therefore, the Tribunal was not justified in holding that the services such as repairs, maintenance and civil construction rendered at the residential colony constitutes input service so as to claim credit of service tax paid on such services under Rule 2 (1) of the CENVAT Credit Rules, 2004.
5. Moreover, by a detailed order in the case of CCE, Chennai Vs. Sundaram Brake Linings 2010 (19) STR 172 (Tri.- Chen.), this Bench has examined in great detail the tests required for entitlement to credit of tax paid on input service for paying excise duty on manufactured goods in the light of the Honble Supreme Courts decision in the case of Maruti Suzuki Ltd. Vs. CCE 2009 (240) ELT 641 (S.C.). In the light of the afore-cited decisions of the Bombay high Court in the case of CCE, Nagpur Vs. Manikgarh Cement (supra) and the decision of this Bench in the case of CCE, Chennai Vs. Sundaram Brake Linings (supra), when the laid down tests are applied to the impugned services, it is clear that they have no nexus with the manufacturing of the finished goods viz., cement and hence, I am of the view that the respondents are not entitled to credit of service tax paid on such services. Accordingly, the impugned Order in Appeal is set aside and the impugned Order in Original is restored in so far as the duty demand and the demand of interest are concerned. However, as regards the penalty imposed by the original authority, the same is set aside considering the disputed nature of the issue involved.
(Operative part of the Order pronounced in the open Court on 4.11.10) (Dr. CHITTARANJAN SATAPATHY) TECHNICAL MEMBER BB 4