Custom, Excise & Service Tax Tribunal
M/S Hindustan Zinc Limited vs Cce & St, Udaipur on 16 September, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. III DATE OF HEARING : 12/09/2016. DATE OF DECISION : 16/09/2016. Excise Appeal No. 52460 of 2016 (SM) [Arising out of the Order-in-Appeal No. 134 (AK)/CE/JPR/2016 dated 27/05/2016 passed by The Commissioner (Appeals), Customs, Central Excise (Appeals), Jaipur.] For Approval and signature : Honble Shri V. Padmanabhan, Member (Technical) 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 would 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 :Seen copy of the order? 4. Whether order is to be circulated to the :Yes Department Authorities? M/s Hindustan Zinc Limited Appellant Versus CCE & ST, Udaipur Respondent
Appearance Shri Shashwant, Advocate for the appellant.
Shri H.C. Saini, Authorized Representative (DR) for the Respondent.
CORAM: Honble Shri V. Padmanabhan, Member (Technical) Final Order No. 53595/2016 Dated : 16/09/2016 Per. V. Padmanabhan :-
The present appeal has been filed against the order dated 27/5/16 passed by the Commissioner (Appeals), Jaipur. The controversy in the present proceedings is with reference to availment of Cenvat credit on various input services. The Original Authority vide his order dated 15/10/13 disallowed and demanded reversal of Cenvat credit to the tune of Rs. 18,15,244/-, availed by them. The disallowance was ordered under Rule 14 of the Cenvat Credit Rules, 2004 readwith proviso to Section 11A of the Central Excise Act, 1944, alongwith payment of interest and levy of penalty of equivalent amount. When the order-in-original was challenged before the First Appellate Authority, he allowed the Cenvat credit of various services total to the extent of Rs. 14,35,168/-. He, however, upheld the order for reversal of Cenvat credit to the extent of Rs. 3,76,076/-. The reversal of Cenvat credit was upheld by the Commissioner (Appeals) on the following services :-
Sl.
Service Amount (Rs.) Purpose
1.
Structural Fabrication and Water proofing 1,26,216 + 11,247 Maintaining, repairing and replacing the structures of plant building on regular basis
2. Construction service 1,74,808 Construction of residential facility
3. Construction of road 16,471 Construction of road within factory premises for transportation of inputs, semi-finished and finished goods within the factory
4. Outdoor Catering 38,256 Maintaining Canteen for employees statutory obligation under Factories Act, 1948, since more than 250 workers employed in the factory.
5. Rain Water Harvesting 6,421 For making available water in the factory, which is an important input Statutory obligation to conserve rain water in the state of Rajasthan.
6. Other Services 13,904 Services generally used in or in relation to manufacture
2. The appellant has challenged the impugned order in the present appeal, citing various case laws and claiming that the issues are settled in their favour.
3. I have heard Shri Shashwant, Advocate, the learned Counsel for the appellant as well as Shri H.C. Saini, learned DR for the Revenue.
4. The claims of the appellant are discussed one by one below:-
(1) Structural Fabrication and water proofing :- These services have been used for repair, replacing and maintaining of plant and building on a regular basis. The Cenvat credit in these services have been disallowed as they do not fall under the definition of input service. Further it has been held in the impugned order that structural and construction services are not admissible in view of the exclusion clauses inserted in the definition of input service w.e.f. 01/4/2011. The appellant claim is that these services would be covered under the inclusive clause of the definition of input services under Rule 2 (l) of the Cenvat Credit Rules; these would come under modernization, remuneration or repairs of the factory. The appellants have placed reliance on the following case laws in support of their argument :
(a) Cargill India Pvt. Ltd. vs. CCE & ST, Bangalore - I reported in 2015 (38) S.T.R. 587 (Tri. Bang.) ;
(b) Triveni Engg. & Industries Ltd. vs. CCE, Meerut I reported in 2016 (42) S.T.R. 186 (Tri. Del.).
In the Cargill India Pvt. Ltd. case the Tribunal held as follows :-
4.?As regards maintenance service, the case of the appellant is that the services were used in relation to maintenance and repair of factory and office related to factory. She produced one of the invoices and on going through the invoice, I find that the claim of the learned counsel is correct. In view of the above, the appellant is able to make out a case on merits for eligibility of Cenvat credit and accordingly the appeal is allowed with consequential relief, if any.
In the light of the above, I am of the view that the appellant is entitled to the Cenvat credit on services used in maintenance, repair and replacing of structures of the building ;
(2) Construction Service :- Services used in the construction of residential accommodation for employees near factory. The claim of the appellant is that Cenvat credit is allowable on such services as they are used indirectly in or in relation to the manufacture. They have supported their views by the findings in the following case laws :-
(a) Reliance Industries Ltd. vs. CCE, (LTU) Mumbai reported in 2016 (42) S.T.R. 457 (Tri. Mumbai) ; and
(b) Ultratech Cement Ltd. vs. CCE, Jaipur II vide Final Order No. A/51417/2015 SM (BR) dated 08/04/2015.
(c) CCE, Hyderabad III vs. ITC Limited reported in 2013 (32) S.T.R. 288 (A.P.) I have gone through the above case laws. In the case of Reliance Industries Ltd. (supra) such services have been allowed as input services since the residential colonies near the factories to accommodate employees are required for smooth functioning of the factories in remote areas. Moreover such expenses incurred for construction of township for the employees is in relation to the business activities of manufacturing final products. Similar views have been taken by the Honble High Court of Andhra Pradesh in the case of CCE, Hyderabad III vs. ITC Limited reported in 2013 (32) S.T.R. 288 (A.P.) and also by the Tribunal in the case of Ultratech Cement Ltd. vs. CCE, Jaipur II vide Final order No. A/50344/2015 SM (BR) dated 06/02/2015. Accordingly, I find that the issue is no more res-integra and stands settled in favour of the appellant. Accordingly, the credit of service tax paid for construction of residential facility is allowed.
(3) Construciton of road within the factory premsies :- The credit stand disallowed for the reason that such services are not covered by the definition of input services. However, the appellant has argued that the roads constructed within the factory premises are used for transportation of inputs, semi-finished and finished goods within the factory and, hence, are to be considered within the term services used in or in relation to the manufacture. They have placed reliance in the case of CCE, Salem vs. ITC Ltd. reported in 2011 (268) E.L.T. 89 (Tri. Chennai). The definition of input service covers services used by the manufacturer whether directly or indirectly in relation to the manufacture of final products. In as much as the roads are constructed within the factory premises, they are used for the movement of inputs semi-finished and finished goods within the factory and, hence, are covered within the definition of input service, as has been held by the Tribunal in the ITC Ltd. case.
(4) Outdoor Catering :- The credit has been taken for the maintenance of canteen for their employees and its claim as a service used in or in relation to the manufacture. It stands disallowed in the impugned order for the reason that catering service has been specifically excluded from the definition of input services w.e.f. 01/4/2011. The appellant has argued that the issue is settled in their favour in their own case vide final order No. 724/2011 SM (BR) dated 10/10/2011. I have gone through the above decision, where the issue stand decided in favour of the appellant. I also find that the credit of service tax on outdoor catering used for canteen meant for the employees, which is a statutory obligation under Factories Act, cannot be denied ;
(5) Rain Water Harvesting :- Service tax paid on services used for rain water harvesting stands denied. I find that in the State of Rajasthan, it is a statutory obligation to make arrangements for conservation of rain water make water available within the factory. Accordingly, it will be a service used in relation to manufacture and, hence, allowed as an input service ;
(6) Other services :- Cenvat credit to the tune of Rs. 13,904/- stands denied by the authorities below. The argument of the appellant is that demand of service tax of this amount has been pressed by Revenue without specifying the service for which it has been availed. It is their further submissions that this demand has come about by mistake. In as much as the demand is not attributable to any specific service and no specific grounds have been discussed by the authorities below for denying such credit, I find no reasons to sustain the demand and, hence, it is set aside.
5. In line with the above discussions, the appeal is allowed and the impugned order is set aside.
(Order pronounced in open court on 16/09/2016.) (V. Padmanabhan) Member (Technical) PK ??
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