Custom, Excise & Service Tax Tribunal
Tanfac Industries Ltd vs Pondicherry on 24 October, 2024
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL, CHENNAI
Excise Appeal No.40399 of 2016
(Arising out of Order in Appeal No. 381/2015-CXA-II dated 26.11.2015 passed by
the Commissioner of Central Excise (Appeals - II), Chennai)
TANFAC Industries Ltd. Appellant
No. 14, SIPCOT Industrial Estate
Cuddalore - 607 005.
Vs.
Commissioner of GST & Central Excise Respondent
Puducherry Commissionerate No. 1, Goubert Avenue, Beach Road Puducherry - 605 001.
APPEARANCE:
Ms. P. Varshini, Advocate for the Appellant Shri Harendra Singh Pal, Authorized Representative for the Respondent CORAM Hon'ble Shri M. Ajit Kumar, Member (Technical) FINAL ORDER NO. 41347/2024 Date of Hearing : 08.10.2024 Date of Decision: 24.10.2024 The present appeal is filed against Order in Appeal No. 318/2015 (CXA - II) dated 26.11.2015 passed by the Commissioner of Central Excise (Appeals - II), Chennai (impugned order).
2. Brief facts of the case are that the appellant is a manufacturer of chemicals falling under Chapter 28 of the CETA. It was noticed that during the period from April 2011 to March 2013, the appellant had availed service tax credit of Rs.87,054/- on various services like housekeeping, medical centre service and membership subscription of club. Since it appeared that the services were not eligible capital services, a Show Cause Notice dated 24.10.2013 was issued to the appellant proposing to deny the above-mentioned input service credit. After due process of law, the learned Original Authority confirmed an 2 E/40399/2016 amount of Rs.33,267/- alone under Rule 14 of the CENVAT Credit Rules, 2004 (CCR 2004) involved on medical centre service and membership subscription of club and allowed the balance credit on other services. He also imposed a penalty of Rs.16,634/- under Rule 15(2) of the CCR 2004 read with sec. 11AC(1)(b) of the Central Excise Act, 1944. Against such order, the appellant preferred appeal before learned Commissioner (Appeals) who vide the impugned order rejected the appeal. Hence the present appeal before this Tribunal.
3. Ms. P. Varshini, Ld. Advocate appeared for the appellant and Shri Harendra Singh Pal, Ld. Authorized Representative appeared for the respondent.
3.1 The Ld. Advocate for the appellant submitted that as per the definition of 'input service' given in Section 2(l) of the Cenvat Credit Rules, its scope includes, "services used directly or indirectly in relation to manufacture of final products and clearance of final products upto the place of removal." She submitted that the services on which credit was availed falls within the scope of this definition. The Ld. Advocate refuted the finding in the impugned order that Service of Maintaining medical centre (Ambulance room) is a welfare service not covered under the definition of input service, and is to be based on application of exclusion clause under Rule 2(l) which denies credit on services used primarily for personal use or consumption of any employees. She stated that the appellant is engaged in the manufacture of chemicals which may cause serious injury to the employees when mishandled. To safeguard against accidents, Section 45 of the Factories Act, 1948 mandated the maintenance of a first-aid centre having nurses and para-medical staff, with an ambulance for 24 Hrs. Further, Section 38 of the Employees' State Insurance Act, 1948, states that all employees in factories and or establishments to which this Act applies shall be safeguarded in the manner provided. Therefore, the medical-aid centre provided by the appellant to their employees is an activity in relation to manufacture of finished goods and hence covered under the definition of input service because, the appellant cannot engage in manufacture without complying with these laws. She placed reliance in 3 E/40399/2016 this regard on the judgments in Jaypee Sidhi Cement Plant Vs. CCE Bhopal [2015 (37) S.T.R. 397 (Tri. Del.)]; Kakinada Seaports Ltd., Vs. CCE [2015 (40) S.T.R. 509 (Tri. Ban.] and M/S Gujarat State Fertilizers & Chemicals [2015 (10) TMI 1693 - CESTAT AHMEDABAD], hence the findings in the impugned order is incorrect and untenable. With regard to Membership subscription service she stated that the impugned order misconstrued the subscription paid to Tamil Nadu Electricity Consumer Association as subscription paid for membership of a club and holds that the service is not even remotely related to manufacture of final products and therefore cannot be treated as input service. She stated that the appellant buys electricity from TANGEDCO for manufacturing activities. In case of any grievance in relation to supply of electricity, the appellant can only raise it through the Tamil Nadu Electricity Consumer Association, for which a membership subscription fee is required to be paid. The appellant has availed credit on the service tax paid for the same. Electricity being an input of primary significance for production of finished goods, without which there would be no finished goods, she submitted that the said subscription is not for membership of a club or any recreational activity, it is an input service on which the credit availed by them is allowed and valid. Therefore, the denial of credit based on the misconception mentioned in para 8 is not sustainable and liable to be set aside. Further the demand has been confirmed in terms of Section 11A(5) of the CEA, invoking extended period. She has contested the impugned order on the ground that such irregular availment was accounted in the books of accounts of the appellant and was not suppressed. Further they had disclosed the credit availed to the department and the same was also reflected in the ER-1 returns filed by them. Since there is no provision in the said return to show the description of input services with respect to which the credit was availed, mere failure to disclose that which is not required by the returns cannot be construed as suppression of facts. The Ld. Advocate submitted that this itself proves there is no suppression or intent to avail ineligible credit as alleged. She placed reliance on the following cases:
4E/40399/2016 • Moderin Petrofils Vs. CCE, Vadodara., 2010 (20) STR 627 (Tri. Ahmd);
• CCE, Jaipur I Vs. Pushpa Enterprises., 2011 (22) STR 299 (Tri. Del.);
• CCE, Indore Vs. Medicaps Ltd., 2011 (24) STR 572 (Tri. - Del.);
• Parekh Plast (India) Pvt. Ltd Vs. CCE, Vapi., 2012 (25) STR 46 (Tri. - Ahmd);
• CCE, Kolkatta VI VS. ITC Ltd., 2013 (291) ELT 377 (Tri. - Kolkatta); & • National Steel & Agro Industries Ltd Vs. CCE, Indore 2014 (36) STR 805 (Tri. Del.).
She prayed that the entire demand along with the interest and penalty be set aside.
3.2 The Ld. AR reiterated the points given in the impugned order.
4. Heard the Ld. Counsel for the appellant and the Ld. AR for revenue representing the contesting parties. I have also carefully perused the Appeal Papers, and the judgments cited. The issue basically pertains to the availment of CENVAT credit on the tax paid towards services availed by the appellant on which Service Tax is payable. The question in the said context is as to what constitutes "services used directly or indirectly in relation to manufacture of final products". The services involved are (1) maintaining medical centre (Ambulance room) and (2) membership of Tamil Nadu Electricity Consumer Association. The period of demand relates to the period April 2011 to March 2013.
5. I find that the words 'directly or indirectly in or in relation to manufacture' used in the definition of input service, should be given a very wide meaning, subject only to the restrictions placed by the CCR 2004. Credit of service tax of duty paid towards mandatory services availed by the appellant under various Acts or which are mandatory for manufacture of goods, would hence continue to be eligible for being taken as credit, as without availing the said services, the goods cannot 5 E/40399/2016 be manufactured, without facing penal action or other disruptions. So they are integrally connected with the ultimate production of goods/ chemicals manufactured in their factory. Moreover, services availed are not used primarily for private use or consumption of any employee and the duty paid forms a part of the final price of the product on which tax is paid.
6. I find that similar issues came to be examined by this Tribunal;
(a) In the Kakinada Seaports Ltd., Vs. CCE [2015 (40) S.T.R. 509 (Tri. Ban.], the Division Bench examined the eligibility of taking cenvat credit on health care with ambulance facility, during the period 01/07/2012 to 31/03/2013. It was held as under;
6.1 It was submitted that healthcare with ambulance facility would be available within the port area and this being a mandatory requirement, the appellant tied up with Apollo Hospital, Kakinada. We find that provision of healthcare within the port area where accident can take place cannot be said to be having no nexus to the port service, therefore, the credit of Rs. 83,430/- is admissible.
(b) In Welspun Corpn Ltd Vs C.C.E & S.T. - Vadodra - II [2018 (8) TMI 536 - CESTAT AHMEDABAD], a Single Member Bench examined the eligibility of taking cenvat credit on Associations such as the Chamber of Commerce and Indian Business Council. It was held as under;
"4. ....... As regards the subscription to membership charges, I find that the subscription is in respect of associations such as the Chambers of Commerce and Indian Business Council. Subscription of these associations and Chambers are only for the purpose of business of the assessee. This issue of credit in respect of Business subscription has been considered by this Tribunal in many cases and in respect of all the business associations subscription was held as admissible input service and the credit was allowed. Therefore, following the judgments of Reliance Industries Ltd. (supra) shri Kamrej vibhag Shakari Khand Udyog Mandali Ltd. (supra) I hold that the credit in respect of subscription is admissible to the appellant and the same is allowed. "
7. Although it is not a universal rule to be followed in all situations, judicial comity or judicial propriety requires that the interpretation of law made by another Bench should be followed. Moreover, the issues involve a very low tax effect and relate to an Act / Rules that has 6 E/40399/2016 already been eclipsed with the introduction of GST. Not much would be gained by protracting litigation.
8. Accordingly, I set aside the impugned order and allow the appeal. The appellant is eligible for consequential relief, if any, as per law.
(Order pronounced in open court on 24.10.2024) (M. AJIT KUMAR) Member (Technical) Rex