Custom, Excise & Service Tax Tribunal
M/S Gateway Terminals (I) Pvt. Ltd vs Cce, Raigad on 26 September, 2014
IN THE CUSTOMS, EXCISE AND SERVECE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. ST/608, 627, 745, 746/12 & ST/88139/13 (Arising out of Order-in-Appeal No. BC/84/RGD/2012-13 dated 31.05.2012 passed by the Commissioner of Central Excise (Appeals), Mumbai-III.) For approval and signature: Honble Shri Anil Choudhary, Member (Judicial) =====================================================
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 should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy : Seen
of the order?
4. Whether order is to be circulated to the Departmental : Yes
authorities?
=====================================================
M/s Gateway Terminals (I) Pvt. Ltd.
: Appellant
Versus
CCE, Raigad
: Respondent
Appearance
Shri Bharat Raichandani, Advocate
: For Appellant
Shri N.N. Prabhudesai, Supdt. (A.R.)
: For Respondent
CORAM:
HONBLE SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL)
Date of Hearing : 26.09.2014 Date of Decision: 2015
ORDER NO.......................................................
Per: Anil Choudhary:
The present appeals are filed against the order-in-appeals passed by the Commissioner of Central Excise (Appeals), Belapur. The details are as follow:
Appeal Nos.
OIA No. Period Amount (Rs.) ST/608 & 627/12 BC/84/RGD/12-13 dated 31.05.2012 October, 2004 to March, 2010 Garden Maintenance and Event Management Services Rs. 23,79,222 Outdoor catering Services Rs.13,01,735 ST/745-746/12 US/467 & 468/RGD/ 2012 dated 06.08.2012 April, 2007 to March, 2010 Telephone Charges Rs.1,55,915 Brokerage Services Rs.18,300 ST/88139/13 US/124/RGD/2013 dated 15.05.2013 April, 2011 to March, 2012 Outdoor Catering Services - Rs. 1,130,584 The issue in the present case is on availment of credit of Service Tax paid on input services viz. Garden Maintenance services, Event Management Services, Outdoor catering Services (canteen) services, Telephone Services & Brokerage Charges.
2. The brief facts of case are the appellant, inter alia, is engaged in the business of providing Port services. They are, accordingly, registered with the service tax department. The appellant uses various input services for providing the taxable output services and in turn are availing and utilizing credit of service tax paid on input services as per Rule 3(1) read with Rule 3(4) of the CENVAT Credit Rules, 2004.
3. Show-cause notices were issued to the appellant denying credit of Service tax paid on input services as mentioned above in the table, alleging that the aforesaid services do not qualify as Input Services in as much as there is no nexus between the input services and the output services provided by the appellants and the said expenses are in nature of a welfare activity. The said show cause notices were dropped in part by the adjudicating authority except for demand pertaining to credit availed on outdoor catering services for period post April, 2011, vide order-in-original dated 31.01.2013. Appellant being aggrieved, had filed appeals along with cross objection to Revenues appeal before the Commissioner (Appeals)- against dropping of the demands. The Commissioner (Appeals) had upheld the order passed by the Additional Commissioner. Being aggrieved by the same, the appellant is before this Tribunal praying for:-
(i) Allowance of CENVAT credit of Rs. 36,80,947/- for period October, 2004 to March, 2010.
(ii) Penalty of Rs. (2,379,222 & 50,000) in respect of show-cause notice dated 20th April, 2010 & 27th September, 2010 respectively to be set aside.
(iii) Interest to be recovered (as per provision of Rule 14 of CENVAT Credit Rules read with Section 75 of Act) be set aside.
4. The learned Counsel for the appellant have made following submissions before this Tribunal.
4.1 Learned Counsel states that the object of the legislature for introducing CENVAT Credit Rules was to allow credit of Service Tax paid on taxable services that form part of assessable value of final product, which is very clear from the speech of Finance Minister in his budget speech, 2004-2005 pursuant to which draft CENVAT Credit Rules were circulated by Ministry of Finance inviting comments from the trade and industry. Therefore, a Press Note dated August 12, 2004 was also issued along with the draft rules highlighting the salient features of CENVAT Credit Rules. Draft Rules were taken judicial notice in 2004 (170) ELT T-19, in para (iii) & (iv). The relevant extract thereof is as under:
(iii) In principle, credit of tax on those taxable services would be allowed that go to form a part of the assessable value on which excise duty is charged. This would include certain services which are received prior to commencement of manufacture but the value of which gets absorbed in the value of goods. As regards services received after the clearance of the goods from the factory, the credit would be extended on services received upto the stage of place of removal (as per section 4 of Central Excise Act.) In addition to this, services like advertising, market research etc. which are not directly related to manufacture but are related to the sale of manufactured goods would also be permitted for credit.
(iv) Full credit of Service tax on services (such as telephone, security, construction, advertising service, market research etc.) which are received in relation to the offices pertaining to a manufacturer or service provider would also be allowed. ?????????????????
4.2 Learned Counsel further states that the rules as introduced with effect from 10.09.2004 have wide connotation than the draft definition as under the Draft CENVAT Credit Rules. The term used in relation to setting up a factory, was contemplated, it was widened to read as used in relation to setting up, modernization, renovation or repairs of a factory or office relating to such factory. The CENVAT Credit Rules expanded the said term to read as activities relating to business, which was expanded and illustrated further with the addition of services such as coaching and training, share registry, credit rating, etc. which pertain to various aspects of the activities relating to business. Hence, the manifest intention of the Legislature is to allow credit on all services which are activities relating to business of the assessee.
4.3 Learned Counsel clarifies that as the issue involved in present case is one of interpretation, the issue is purely legal in nature. The definition of input service has been subject to constant litigation.
The definition of the term Input service as defined under Rule 2(l) of the CENVAT Credit Rules, 2004 has two parts means & inclusive which should be read harmoniously as definition is one of very wide connotation. It covers within its ambit all services received by the service provider or manufacture, as long as they are related to the service business of the assessee. A service would qualify as input service even if not covered by the means portion, if it satisfies the includes portion of the definition. In other words, in order to qualify as an input service, a service has to fall either within the means part or includes part of the said definition. Term includes infact enhances the scope of the definition as it is inclusive in nature. Therefore, the definition cannot be taken one of restrictive approach. As per Honble Apex Court judgment in the case of Regional Director Vs. High Land Coffee Works - (1991) 3 SCC 617, wherein held that:
The word include in the statutory definition is generally used to enlarge the meaning of the preceding words and it is by way of extension, and not with restriction. The word include is generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used, these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import but also those things which the interpretation clause declares that they shall include. [See (i) Strouds Judicial Dictionary, 5th edn. Vol. 3, p. 1263 and (ii) C.I.T. v. Taj Mahal Hotel, (iii) State of Bombay v. Hospital Mazdoor Sabha.
Further the term such as in a definition is purely illustrative but not exhaustive. It establishes that whatever activities are enumerated in the Rule are only illustrations of service that relate to the business and are not exhaustive in nature. The same was reiterated in the case of Royal Hatcheries (P) Ltd. Vs. State of A.P. - 1994 Supp (1) SCC 429. Hence any activity relating to business of assessee would be covered as an input service; business is an integrated/continuous activity and is not only confined/restricted to mere provision of input services or manufacture of the product. Therefore, activities in relation to business cover all the activities that are related to the functioning of a business.
4.4 Learned Counsel further submits that, various limits of definition of input service are independent/diverse/concession/ exemption. If an assessee can satisfy any one of the limbs of the definition of input service which is effectively divided into four categories as below, than credit would be available:
(a) Any service used by the service provider for providing output service;
(b) Services used in relation to setting up, modernization, renovation or repairs of a factory, or an office relating to such factory,
(c) Services used in relation to advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs,
(d) Services used in relation to activities relating to business and outward transportation upto the place of removal; As per Kerala State Co-operative Marketing Federation Ltd. and Ors. v. Commissioner of Income tax - 1998 (5) SCC 48, the Supreme Court, inter alia, held as under:
We may notice that the provision is introduced with a view to encouraging and promoting growth of co-operative sector in the economic life of the country and in pursuance of the declared policy of the Government. The correct way of reading the different heads of exemption enumerated in the section would be to treat each as a separate and distinct head of exemption. Whenever a question arises as to whether any particular category of an income of a co-operative society is exempt from tax what has to be seen is whether income fell within any of the several heads of exemption. If it fell within any one head of exemption, it would be free from tax notwithstanding that the conditions of another head of exemption are not satisfied and such income is not free from tax under that head of exemption. 4.5 It is further urged that the demand raised is time barred; and the extended period cannot be invoked. The allegation raised on appellant that they did not produce any evidence and they should have intimated department of the availment of credit on aforesaid services is not correct; as appellant is registered with department & filing periodical ST-3 returns which dully reflect the CENVAT credit availed by the appellant. Relying on Hon'ble Supreme Court judgment in the case of Pahwa Chemicals Pvt. Ltd. 2005 (189) ELT 257 (SC), wherein Hon'ble Supreme Court held that once the RT-12 returns have been filed regularly & there is no positive Act on part of assessee to establish useful mis-declaration, no suppression can be alleged.
4.6 Further the department has clearly misread & mis-construed the provision in demand raised for period post April, 2011, as the credit of Service Tax paid on outdoor catering services post April 2011, has been used for providing out put service. The appellant are regulated by dock workers (safely, health & welfare) Regulation, 1990 as the employees are more than 250 workers, appellant is under statutory obligation to provide and maintain adequate canteen facilities under the said Regulations. Hence as the catering services are provided by the appellant as a part of its business need & obligation to the employees who are the essential hands of the business. Without the said workers/employees, the appellant would not be in position to provide the output service. Hence, it is evident that it has a direct bearing on output services.
Further the exclusion (C) clause of the definition of Input service post April, 2011 i.e. (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 and such as leave or home travel concession, when such services are used primarily for personal use or consumption of any employee. Will not apply in the facts of present case, as the said clause would only apply in case when such services are used primarily for personal use or consumption of an employee. The learned Counsel has cited the Hon'ble Supreme Court judgment in the case of Union of India V/s Hansoli Devi (2002) 7 SCC 273, wherein it has observed that the legislature never waste its words or say anything in vain and a construction which attributes redundancy to legislation will not be accepted except for compelling reasons.
5. The learned Counsel as well as learned A.R. have cited various judgment as follows:-
5.1 The learned A.R. appearing on behalf of department has strongly relied on Hon'ble Supreme Court judgment in case of Maruti Suzuki Ltd. Vs. CCE, Delhi-III 2009 (240) ELT 641 (S.C.). Wherein, it was held that definition of input can be divided into three parts namely (i) specific part (ii) inclusive part (iii) place of use and the expression used in or in relation to the manufacture of final products not a standalone item but it is to be read in entirely as used in or in relation to manufacture of final product whether directly or indirectly and whether contained in final product or not and further held that inputs falling in inclusive part must have nexus with manufacture of final product. Therefore while deciding what is an eligible input service for a specific output service, the claimed input service should also be required to meet the test specified in all three parts of definition.
To this, the appellant Counsel rebuttes and states that firstly the facts of the present case are completely different as in present case dispute revolves around the question as to whether outdoor catering service, telephone service, garden maintenance service & brokerage service are input services or not. Whereas, in the cited case, the term defined is an Input under Rule 2(K) of CENVAT Credit Rules. There is no parallel between the inclusive part of the definition of input & input service and even the means part of definition of input service do not appear to be pari materia. As the aforesaid decision of Hon'ble Supreme Court was rendered in context of Input and did not consider the definition of input service under Rule 2(l), hence it does not apply to facts of instant case.
5.2 Further, in case cited by learned DR, in case of Manikgarh Cement [2010 (20) STR 456 (Bom.)], wherein it is held that the expression relating to business in Rule 2(I) of CENVAT Credit Rules, 2004, does not cover welfare activities of assessee and hence CENVAT credit not allowable. The appellant Counsel distinguishes and states, in this case the outdoor catering service, telephone services etc. were being used to benefit the service-business of the appellant and not for benefit of the employees. Further reliance is placed on the view taken in case of BASP Industries 2011 (24) STR 30, that credit of Service Tax paid on telephone lines installed at the residence of employees would be available.
5.3 Further the learned AR, submits that as to the contention of the appellant that the amendment vide Notification No. 03/2011 CE (NT) expressly excluding outdoor catering services vide clause (C) of the definition of Input Services, which was effective from 01/04/2011 is not applicable to employees (plural) . The DR submits that Hon'ble SC of India in Judgment in United Electrical Industries Ltd [1999 (108) ELT 609 (SC)], at para 7 of judgment had held, as provided in Sec 13 of General Clauses Act, 1897, the word singular shall include plural and vice-versa.
5.4 In relation to services rendered in case of Event Management services, Appellant submits that said Input Services of Event management is an essential input service in relation to the sales promotion activities of the appellant. Hence Cenvat credit of the Input Service should be allowed. The appellant relies on ruling of the Hon'ble Karnataka High Court (2011 (24) STR 246 (Kar.), wherein it is held that expenses incurred for welfare of employees cannot be separated from the business of manufacture of final product.
5.5 In relation to garden maintenance service, learned AR relies on GKN Sinter Metals Ltd. Vs. Commissioner of Central Excise, Aurangabad 2009 (16) STR 615 (Tri.-Mumbai) stating that the garden maintenance service has no nexus with manufacture/clearance of excisable goods and is not eligible for taking credit. Appellant in reply submits that garden & landscape at their premises is required to be maintained as per Built operate and transfer agreement executed with Jawaharlal Nehru Port Trust. This requirement is cast upon JNPT by Maharashtra State Pollution Central Board (MPCB), a state Department. As the MPCB has granted the Consent to operate to JNPT which provides for subject to maintaining of garden within the premises. Hence, it is an essential activity or input service for appellant to start and operate business of Port service.
6. The learned A.R. appearing for the Revenue, relies and reiterates the findings of the impugned order passed by adjudicating authority.
7. Heard both sides.
8. Having considered the rival contention, it is held that (i) canteen services (outdoor catering service) is essential to run the business of appellant, (ii) Garden maintenance service is essential in terms of consent to operate, as directed by the Maharashtra State Pollution Control Board (MPCB), (iii) Event management service is also essential being incurred at opening ceremony or ceremonial occasions, (iv) brokerage service being incurred admittedly for finding residential accommodation for appellants employees, the same is essential for ensuring availability of staff to carry on its business. Thus all the services in question are held as essential inputs for business of the appellant and are allowable as input services.
7. Thus, the appeal is allowed, with consequential benefits.
(Pronounced in court on .............2015) (Anil Choudhary) Member (Judicial) Sp 12