Custom, Excise & Service Tax Tribunal
M/S Hindustan Petroleum Corporation ... vs Cce, Visakhapatnam-I on 18 August, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Bench - SMB
Court I
Appeal No. E/21663/2015
(Arising out of Order-in-Original No. VSP-EXCUS-001-COM-003-15-16 dt. 18.05.2015 passed by CCE & C, Visakhapatnam-I)
For approval and signature:
Honble Sh. Madhu Mohan Damodhar, Member(Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3.
Whether their Lordship wish to see the fair copy of the Order?
4.
Whether Order is to be circulated to the Departmental authorities?
M/s Hindustan Petroleum Corporation Ltd.,
..Appellant(s)
Vs.
CCE, Visakhapatnam-I
..Respondent(s)
Appearance
Sh. G. Prahlad, Advocate for the Appellant.
Sh. Nagraj Naik, Deputy Commissioner (AR) & Sh. Guna Ranjan, Superintendent (AR) for the Respondent.
Coram:
Honble Sh. Madhu Mohan Damodhar, Member(Technical)
Date of Hearing: 18.07.2016
Date of Decision:
FINAL ORDER No._______________________
[Order per: Madhu Mohan Damodhar]
The appellants herein, M/s Hindustan Petroleum Corporation Limited, Visakhapatnam are a Central Public Sector undertaking under the Ministry of Petroleum and Natural Gas, Govt of India. They are engaged in refining and clearing diverse petroleum products on payment of appropriate duty of excise. During the period April 2013 to December 2013, Appellants had paid Service Tax on various services and had availed CENVAT Credit of Service Tax paid on the same and utilized the same while discharging the excise duty liability on the finished petroleum products cleared from their refinery. Department took the view that the above services were not eligible for CENVAT Credit and the Service Tax paid on these items were in no way involved in or in relation to the manufacture the said services were not eligible for CENVAT Credit. Hence SCN dated 29.04.2014 was issued interalia proposing recovery of allegedly irregular input credit availed during the period April to December 2013 amounting to Rs. 2,02,82,343/- with interest thereof, and penalty in terms of Rules 15 and 15A of the CENVAT Credit Rules, 2004. On adjudication, the adjudicating authority dropped SCN proposals for recovery of credit to the extent of Rs. 2,00,65,097/-, however confirmed a demand of Rs. 2,17,246/- on the following input services:
Rs.
(i) Catering services 23,889
(ii) Commissioning services 1,23,660
(iii) House keeping 41,463
(iv) Documentation Service 22,732
(v) Conducting written test for Non-Mgt. 5,562
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2,17,246/-
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2. Hence this appeal.
3. On behalf of the appellant, Ld. Advocate Sh. G. Prahlad, reiterated the grounds of appeal, and in particular, made the following submissions:
(i) Each of the CENVAT Credit amounts disallowed in the impugned order covers service tax paid on valid input service which is incurred directly in relation to the manufacturing operation of the refinery/project related activities of the refinery.
(ii) The impugned order has wrongly examined that the said services are specifically excluded from the definition of input services.
(iii) The eligibility of the said input services has been upheld in a number of judgements, interalia Hindustan Coca Cola Beverages Vs CCE, Nashik [2015(38) STR 129 (Tri Mum)], Commissioner of S.T. Mumbai Vs Reliance Capital Asset Management [2016(41) STR 508 (Tri-Mum)], Hindustan Coca Cola Beverages Pvt Ltd Vs CCE & ST Hyderabad [Final order A/30578/2016 dated 30.06.2016], HCL Technologies Ltd Vs CCE, Noida [2015(40) STR 369 (Tri Del)]
4. On behalf of the department, Learned AR Sh. Nagaraj Naik opposed the appeal and submitted that the adjudicating authority denial of credit on the said services was correct in law. He placed reliance on the ratio of Tribunal decision in Jubilant Life Sciences V/s CCE, Noida [Final Order ST/A/631-632/2012-Cus (PB) dated 05.10.2012]
5. For better understanding of the nature of services where credit availed is disputed, the reasons for their denial by the adjudicating authority and the appellants own contentions thereof, it would be useful to extract the following table submitted in the grounds of appeal:
Page of O-I-O Para of O-I-O Grounds given in the impugned order for disallowing the CENVAT Credit Appellants Contentions 20 48 It is held that from the invoice submitted by the Appellants clearly evidences that the expenditure incurred was towards providing food in a hotel / restaurant. Further no relation is attributable to the expenditure incurred towards utilization of the said service in or in relation to the manufacture of excisable goods in the refinery.
Catering Service Amount involved is Rs. 23,889/-.
The Appellants confirm that they are not availing CENVAT Credit on the service tax paid for canteen services which are used for consumption of employees in line with the changes that were brought in CENVAT Credit Rules with effect from 01.04.2011.
In the instances referred in the impugned order, CENVAT Credit availed was on service tax paid to hotels where the activities were basically training activities like seminars, workshops etc., connected with the manufacturing activity of the Assessee were involved like seminars, workshops etc., House keeping services 20 7 48 18 Assessee has not provided any conclusive evidence towards utilization of services and availing CENVAT Credit in respect of them.
Services have been availed with reference to the Assessees old project Office, warehouse etc., which have no nexus with the manufacturing activity of petroleum products.
Amount involved: Rs. 41,463/- consisting of 13 invoices.
There is no allegation either in the SCN or in the impugned order that the said service has not been received by the Refinery.
The Appellants rely on the decision of Balkrishna Industries Ltd., Vs CCE, Aurangabad reported in 2010 (254) ELT 301 (Tri.Mum) where CENVAT Credit availed on House keeping services was ordered to be eligible for CENVAT Credit.20 48
Commissioning service Commissioning Service: Amount involved Rs. 1,23,600/-. Covered by only one invoice issued by M/s Projects Development India Ltd.
The services provided relates to project monitoring consultancy services for the 2 units Flue Gas De-sulpharisation Unit (FGD) & Purge Treatment Unit (PTU). FGD is set up to reduce the sulphur emission. FGD & PTU Process units are set up in the refinery connected with refining activities. Accordingly, the service tax paid to Service Provider against the valid tax invoice is eligible for CENVAT Credit.20 48
Documentation service Rs. 22,732/-
No conclusive evidence produced that the said services are utilized in or relation to manufacture of excisable goods.
CENVAT Credit availed under this service involved 3 invoices, covers certification services rendered by M/s International Certification Services in connection with the Disaster Management Plan which is an essential activity for a refinery which is required by various Statutory Authorities like Explosives Act, Factories Act etc., other 2 invoices relate to documentation services for Mechanical Engineering Services (MES) Section covering the process drawings in the refinery.20 48
Conducting written test for non-management Rs. 5,562/-
No conclusive evidence produced that the said services are utilized in or relation to manufacture of excisable goods.
CENVAT Credit availed under this service cover one invoice issued by the Indian Institute of Psychometry whose services were availed at the time of conducting Written test for selection of non-management employees to fill up existing vacancies.
6. The period covered in the above appeal for the disputed input Credits in April 2013 to December 2013, when the following definition of input service in Rule 2(I) of the CENVAT Credit Rules 2004, with effect from 01.04.2011, was in force:
RULE 2(l) : Input Service means any service,-
(i) used by a provider of output service for providing an output service; or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products, up to the place of removal, and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation up to the place of removal; but excludes services,-
(A) specified in sub-clauses (p), (zn), (zzl(zzm), (zzq), (zzzh) and (zzzza) of clause (105) of Section 105 of the Finance Act (hereinafter referred as specified services), in so far as they are used for
(a) construction of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or (B) specified in sub-clauses (d), (o), (zo) and (zzzzj) of clause (105) of Section 105 of the Finance Act, in so far as they relate to a motor vehicle except when used for the provision of taxable services for which the credit on motor vehicle is available as capital goods; or (C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee;
7. I find that the disputed input services are not barred or excluded by Rule 2(I) ibid. The catering service availed by the appellant is not in the nature of outdoor catering service used primarily for personal use or consumption of any employee, but related to food served in training activities like seminars, workshops etc., hence their input services will not fall in the audit of the Exclusion clause (C) of Rule 2(I).
8. With reference to credit on commissioning service appellant has clarified that this relates to project monitoring consultancy charges for FGD and PTU units; hence I hold that this service has indeed been utilised in relation to refining activities and hence not excluded by Rule 2 (I).
9. With reference to credit on House Keeping Services, it is not the case that there are used for the personal use or consumption of any employee. The appellant is a manufacturer, a refinery, and if they utilise the services of a service provider to perform housekeeping functions like cleaning etc., such services are very much required for the proper upkeep of premises which in term necessary for the manufacturing activities, hence they should be accepted as an input service for the purposes of Rule 2 (L) of the Rules. There is also no explicit bar in Rule 2(I) against house keeping services.
10. With reference to credit on Documentation Service, it is clear that there relate to certification services rendered in connection with Disaster Management Plan and for Mechanical Engineering services section covering process drawings. There are very much services in relation to the refinery activities and hence do not fall foul of Rule 2(I).
11. With reference to credit on conducting written test for non-management, this relates to services of Indian Institute of Psychometry for selection of employees for the refinery; the said input services are for the purpose of recruitment which is specifically included in the sample list of services in Rule 2(I).
12. Post amendment with effect from 01.04.2011, the definition of input service in Rule 2(I) is much wider and broadbanded and takes in its ambit, interalia, all input services used by the manufacturer, whether directly or indirectly, is or in relation to the manufacture of final products and clearance of final products, except services specifically excluded in clauses A, B and C of the Rule. As trend, hereinatore, the impugned services are very much input services for the purposes of Rule 2(I). This being so, the denial of input credit by the adjudicating authority to the extent of Rs. 2,17,246/- on these impugned services is not supported by law and hence is set aside.
13. Appeal allowed, with consequential benefits, if any as per law.
(Pronounced on _________ in open court) (MADHU MOHAN DAMODHAR) MEMBER(TECHNICAL) Jaya.
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