Custom, Excise & Service Tax Tribunal
The Commissioner Of Customs & Central ... vs M/S. The India Cements Ltd on 27 February, 2012
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, BANGALORE SOUTH ZONAL BENCH COURT - I Misc. No. 149/2012 & Appeal No: E/1245 & 1246/2010 (Arising out of Order-in-Appeal N.:33 & 34/2010 (T) CE dated 15.3.2010 passed by the Commissioner of Customs, Central Excise and Service Tax (Appeals), Guntur.) 1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3. Whether their Lordship wish to see the fair copy of the Order? Seen 4. Whether Order is to be circulated to the Departmental authorities? Yes The Commissioner of Customs & Central Excise Tirupati. Appellant Versus M/s. The India Cements Ltd. Respondent
Appearance Ms. Sabrina Cano, Superintendent (AR) for the Revenue.
Shri K. Krishnamurthy, Consultant for the respondent.
CORAM SHRI P. G. CHACKO, HONBLE MEMBER (JUDICIAL) Date of Hearing: 27.2.2012 Date of decision: 27.2.2012 FINAL ORDER No._______________________2012 These appeals filed by the department are directed against the appellate Commissioners order granting CENVAT credit on outdoor catering service to the assessee (respondent). The period of dispute is from March 2007 to May 2008. The original authority had passed two separate orders covering the periods March 2007 to November 2007 and December 2007 to May 2008, for recovery of total amount of Rs.3,57,864/- from the assessee towards CENVAT credit which was found to have been irregularly availed on outdoor catering service. It also imposed penalties under Rule 15(3) of the CENVAT Credit Rules, 2004 and Rule 25 of the Central Excise Rules, 2002. Aggrieved, the assessee preferred appeals to the Commissioner (Appeals) and the latter by a common order allowed both the appeals relying on the Tribunals Larger Bench decision in the case of Commissioner vs. GTC Industries Ltd.: 2008 (12) S.T.R 468 (Tri.-LB) and few other decisions of the Tribunal including Stanzen Toyotetsu Pvt. Ltd. vs. Commissioner: 2009 (14) STR 316 (Tri.-Bang.).
2. In the present appeals, the department on its own interpretation of the definition of input service contends that services like outdoor catering service are not covered by the said definition and that the learned Commissioner (Appeals) has failed to appreciate the legislative intent underlying the definition of input service. In support of this contention, the learned Superintendent (AR) has reiterated the ground of the appeals. However, she fairly points out that the Tribunals decision in Stanzen Toyotetsu case (supra) has been upheld by the Honble Karnataka High Court viz., Commissioner vs. Stanzen Toyotetsu India (P) Ltd. : 2011 (23) S.T.R 444 (Kar.) and that Tribunals Larger Bench decision in GTC Industries case was upheld by the Honble Bombay High Court (Nagpur Bench). Nevertheless, it is also submitted that the respondent cannot claim CENVAT credit on outdoor catering service unless they prove that the service was availed for supply of food to not less than 250 workers and that no part of the cost of food was recovered from the workers. In this connection, the learned Superintendent (AR) refers to para 12 of the Karnataka High Courts judgment and para 39 of the Bombay High Courts judgment.
3. The learned consultant for the respondent points out that they have filed a miscellaneous application as directed by the Bench to bring on record an affidavit in relation to partial reversal of credit and a certificate of the Range Officer certifying the correctness of the facts deposed in the affidavit. The affidavit states inter alia that the respondent reversed proportionate credit to the extent of Rs.16,380/- and that the service tax borne by the workers (ultimate consumers of the service) was not availed as credit by the manufacturer. The Superintendent of Central Excise has certified that the respondent has reversed an amount of Rs.16,380/- in their service tax credit account in the month of March 2011 and that the reversal is on account of cost of canteen coupons collected from their employees. The learned consultant for the respondent prays for taking the affidavit and certificate on record and granting CENVAT credit on outdoor catering service to the respondent in view of the High Court judgments.
4. On 16.9.2011, when the consultant for the respondent claimed to have reversed proportionate credit, this Bench directed him to bring the fact on record through an affidavit accompanied by the Range Officers certificate. The respondent was also directed to take steps under Rule 23 of the CESTAT Procedure Rules for the said purpose. The miscellaneous application was filed accordingly by the respondent but without paying the requisite fee. At this stage, the consultant undertakes to pay the fee today itself. I accept this undertaking and direct the registry to register the miscellaneous application upon production of proof of payment of fee. This registration also shall be done today itself and the miscellaneous application number allotted by the registry shall be incorporated in the cause title of this order.
5. After considering the submissions made by both sides on the substantive issue, I am of the view that the matter needs to be remanded to the original authority to verify the correctness of the facts pleaded before this Tribunal. The affidavit claims that proportionate credit of Rs.16,380/- was reversed and, as on date, there is no recovery of any part of the cost of outdoor catering service from the workers. It has been submitted by the learned consultant that more than 250 workers were beneficiaries of the above service. He adds that the strength of workers has never been in dispute. As rightly pointed out by the learned Superintendent (AR), the availability of CENVAT credit on outdoor catering service to the respondent is not without conditions. These conditions are discernible from para 12 of the jurisdictional High Courts judgment in Stanzen Toyotetsu case, which reads as follows:
12. It is in this context that when the assessee provides outdoor canteen facilities because of a statutory obligation imposed on him under Section 46 of the Factories Act, it becomes a condition of service as far as the employees are concerned. He has paid the service tax on outdoor canteen services. The said expenses incurred by the assessee will also be taken into consideration before fixing the price of the final product. It may be a welfare measure but certainly it is not a charity provided by the employer to the employees. It is an onerous legal obligation imposed on him. The cost incurred in rendering such service will be included in the cost of production. More or less the same conditions are seen embodied in para 39 of the Honble Bombay High Courts judgment, which reads as under:
39. The Larger Bench of CESTAT in the case of GTC Industries Ltd. (supra) has also observed that the credit of service tax would be allowable to a manufacturer even in cases where the cost of the food is borne by the worker (see last para). That part of the observation made by the Larger Bench cannot be upheld, because, once the service tax is borne by the ultimate consumer of the service, namely the worker, the manufacturer cannot take credit of that part of the service tax which is borne by the consumer. Shri Shridharan, learned counsel for the assessee fairly conceded to the above position in law and in fact filed an affidavit affirmed by a responsible officer of the assessee wherein it is stated that the proportionate credit to the extent embedded in the cost of food recovered from the employee/worker has been reversed.
6. It is for the original authority in de novo proceedings to ascertain whether (a) the respondent employed more than 250 workers during the material period and (b) the amount of Rs.16,380/- reversed by them in their CENVAT account in the month of March 2011 represents the service tax element in the cost of canteen coupons collected from their workers/employees during the relevant period. This kind of verification is called for in the light of the High Court judgments. If, upon such verification of facts, it is found that the relevant conditions have been satisfied by the respondent, they would be entitled to the CENVAT credit in question. Needless to say that a reasonable opportunity of adducing evidence and of being personally heard should be extended to the respondent.
7. The orders of the lower authorities are set aside and these appeals are allowed by way of remand to the original authority. The miscellaneous application also stands allowed.
8. In the event of fee on miscellaneous application not being paid as undertaken by the consultant today, both the appeals of the department shall stand allowed in absolute terms.
(Pronounced and dictated in open Court) (P. G. CHACKO) Member (J) rv ??
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