Custom, Excise & Service Tax Tribunal
M/S. Valspar (India) Coatings ... vs Commissioner Of Central Excise, ... on 29 December, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: E/20302/2015-SM [Arising out of Order-in-Appeal No. 679/2014 dated 31/10/2014 passed by Commissioner of Central Excise , BANGALORE-I (Appeal) ] M/s. Valspar (India) Coatings Corporation Private Ltd No.66B-67, Bommasandra Industrial Area, Hosur Road, Anekal Taluk BANGALORE - 560099 Karnataka Appellant(s) Versus Commissioner of Central Excise, Customs and Service Tax Bangalore-I POST BOX NO 5400, CR BUILDINGS, BANGALORE 560 001. KARNATAKA Respondent(s)
Appearance:
Mr. Aditya, CA For the Appellant Mr. Parashiva Murthy, AR For the Respondent Date of Hearing: 29/12/2016 Date of Decision: 29/12/2016 CORAM:
HON'BLE SHRI S.S GARG, JUDICIAL MEMBER Final Order No. 21516 / 2016 Per : S.S GARG The present appeal is directed against the impugned order dated 31.10.2014 passed by the Commissioner (A) whereby the Commissioner (A) rejected the appeal of the appellant and upheld the Order-in-Original.
2. Briefly the facts of the case are that the appellant is a manufacturer of paint and varnishes falling under Chapter heading 32 and 38 of Central Excise Tariff Act (CETA), 1985 and they are availing the CENVAT credit of tax paid on input and input services. A show-cause notice dated 12.12.2011 was issued to the appellant alleging inter alia that the input service credit availed on certain insurance services like public liability insurance, money insurance, group personal accident insurance, workman compensation insurance, standard fire and special perils insurance, consequential loss policy insurance, etc., is irregular and should be paid along with interest and penalty. The show-cause notice invoked extended period of limitation. The Assistant Commissioner vide Order-in-Original dated 5.6.2013 confirmed the demand of irregular CENVAT credit along with interest and penalty. Aggrieved of the same, the appellant filed appeal before the Commissioner (A). Learned Commissioner (A) confirmed the demand mainly on the ground that the activities carried out by the appellant fall within the category of welfare activities and insurance services broadly cover the companies property against exigencies such as fire and the said services are not input services used in or in relation to the manufacture or for furtherance of business. Aggrieved by the said order, the appellant has filed the present appeal.
3. Heard both the parties and perused the records.
4. Learned CA for the appellant submitted that the impugned order is not sustainable as the same has been passed without considering the definition of input services as defined in Rule 2(l) of CENVAT Credit Rules (CCR) 2004 and also the decisions rendered by various higher judicial fora on the same issue. He further submitted that the Commissioner (A) has not appreciated that all the disputed input services are activities relating to the business and have a direct nexus with the manufacturing activity. All the services are necessary/essential for the smooth running of the business. He further submitted that the definition of input services as contained in Rule 2(l) of CCR, 2004 is very wide and it includes within its ambit of services which are used in or in relation to the business. He further submitted that the narrow approach of restricting the scope of input service to such services which are required for production alone is contrary to the provisions of CCR, 2004. He also submitted that appellants manufacture chemicals of hazardous and volatile nature and it is mandatory for them to insure their employee/staff/machinery and equipment to mitigate any risk that may occur. Therefore the insurance service being mandatory for them, falls within the scope of input service. In support of his submission, he relied upon the following decisions:
i. CCE, Bangalore-III vs. Stanzen Toyotetsu India (P) Ltd.: 2011 (23) STR 444 (Kar.) ii. Coca Cola India (P) Ltd. vs. CCE, Pune-II: 2009 (242) ELT 168 (Bom.) iii. CCE, Hyderabad-IV vs. Deloitte Tax Services India (P) Ltd.: 2008 (11) STR 266 (Tri.-Bang.)
5. On the other hand, the learned AR reiterated the findings in the impugned order.
6. After considering the submissions of both the parties and perusal of the material on record, I am of the view that this issue is no more res integra and has been held in favour of the appellant by various decisions cited supra. In the case of Stanzen Toyotetsu India (P) Ltd. cited supra, the Honble High Court of Karnataka has held as under:
14. Insofar as Insurance coverage to the employees is concerned in the course of employment if the employees suffer injury or dies, there is a vicarious liability imposed on the employer to compensate the employee. If the employer employs its own transportation facility in order to cover the risk which also includes the risk of workers who are covered in that statutory establishment. He has to take the insurance policy without which the vehicle cannot go on the road. Under the Workmens Compensation Act, he has to obtain the insurance policy covering the risk of the employees. The Employees State Insurance Act takes care of the health of the employees also and casts an obligation on the employer to provide insurance services. Under these circumstances, this Group Insurance Health Policy though is also a welfare measure is an obligation which is cast under the Statute that the employer has to obey. Section 38 of the Employees State Insurance At, 1948, mandates that subject to the provisions of the Act, all employees in factories or establishments to which this Act applies shall be insured in the manner provided by this Act. May be the employees also have to contribute but the employer is under an obligation to take an insurance policy and contribute his share. Therefore, the said Group Insurance Health Policy taken by the assessee is a service which would constitute an activity relating to business which is specifically included in the input service definition.
15. Therefore, merely because these services are not expressly mentioned in the definition of input service, it cannot be said that they do not constitute input service and the assessee is not entitled to the benefit of CENVAT credit. In fact, Rule 3 of the Cenvat Credit Rules, 2004, specifically provides that the manufacturer of final products shall be allowed to take credit, the service tax leviable under Section 66 of the Finance Act and paid on any input service received by the manufacturer of the final product. Therefore under the scheme of the Cenvat Credit Rules, 2004, the service tax paid on all those services which the assessee has utilized directly or indirectly in or in relation to the final product is entitled to claim the credit. Therefore, the judgment of the Tribunal is legal and valid and is in accordance with law and does not suffer from any legal infirmity which calls for any interference. Hence, the substantial questions of law framed in these appeals are answered against the revenue and in favour of the assessee
7. Keeping in view the ratio of the decision cited supra of the jurisdictional High Court, I am of the opinion that the impugned order is not sustainable in law and I set aside the same with consequential relief, if any.
(Operative portion of the Order was pronounced in Open Court on 29/12/2016.) S.S GARG JUDICIAL MEMBER rv 5