Custom, Excise & Service Tax Tribunal
M/S. Hindustan Zinc Ltd vs Cce, Jaipur-Ii on 26 August, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST BLOCK NO. 2, R.K. PURAM, NEW DELHI COURT III CENTRAL EXCISE APPEAL NO. 2399 OF 2007-SM [Arising out of Order-in-Appeal No. 318(HKS)CE/JPR-II/2007 dated 30.5.2007 passed by the Commissioner (Appeals-II), Central Excise, Jaipur] For approval and signature: Honble Mr. P.K. Das, Member (Judicial) 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 would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy of the order? 4. Whether order is to be circulated to the Departmental authorities? M/s. Hindustan Zinc Ltd., Appellants Vs. CCE, Jaipur-II Respondent
Appearance:
Shri B.L. Narasimhan, Advocate for the assessee;
Shri S.N. Srivastava, SDR for the Revenue Coram: Honble Mr. P.K. Das, Member (Judicial) Date of hearing: 26th August, 2009 Date of pronouncement: 6th October, 2009 FINAL ORDER NO._________________ dated __________ Per P.K. Das:
The relevant facts of the case as per records, in brief, are that the appellants are engaged in the manufacture of Zinc Lead, Sulphuric Acid and Copper. The appellants availed input service credit of Rs. 5,58,961/- on the basis of invoice issued by M/s. Innuenodo Communication in respect of service tax paid on Event Management service provided to the appellants in connection with celebration of expansion of their Chanderia plant. Original authority disallowed the credit and confirmed the demand of Cenvat credit of Rs. 5,58,961/- and imposed penalty of Rs. 10,000/- under Rule 15 (3) of the Cenvat Credit Rules, 2004 along with interest. Commissioner (Appeals) upheld adjudication order.
2. The learned Advocate on behalf of the appellants submits that Event Management service was utilized by the appellant company relating to the business activity insofar as the celebration of expansion of their Chanderia plant which is covered within the definition of input service under Cenvat Credit Rules, 2004. He submits that the cost of Event Management service has been included in the assessable value. He relied upon the decision of the Larger Bench of the Tribunal in the case of CCE, Mumbai-V vs. GTC Industries Ltd., reported in 2008 (12) STR 468 (Tri.-LB). He also submits that the Larger Bench of the Tribunal in the case of ABB Ltd. vs. CCE & ST, reported in 2009 (15) STR 23 (Tri. LB) held that the definition of input service has to be interpreted in the light of the requirement. He submits that celebration of expansion of Chanderia plant is for advertisement or sales promotion. He submits that under Section 37(1) of Income Tax Act, 1961 expenditure incurred by the assessee in connection with inauguration ceremony on commissioning new project, is allowed as business expenditure. In this connection, he relied upon the decisions of the Honble High Court as under:-
(a) Commissioner of Income-tax vs. Aluminium Industries Ltd. [1995] 214 ITR 0541 [Kerala High Court];
(b) Commissioner of Income-tax vs. Merck Sharp and Dohme of India Ltd. [1983] 140 ITR 0332 [Bombay High Court];
(c) Amarjothi Pictures vs. Commissioner of Income-tax [1968] 069 ITR 0755 (Madras High Court.)
3. Learned SDR on behalf of the Revenue reiterates the findings of the Commissioner (Appeals). He submits that the Commissioner (Appeals) rightly observed that celeberation of expansion of Chanderia plant by the employees is mere entertainment and cannot be treated as activities relating to business. He also submits that the appellants failed to establish that celebration was done in connection with business. He further submits that any expenses incurred by the assessee cannot be activities relating to business unless it is established by the evidences that such activity is relating to business. It is his contention that the appellant in the present case failed to establish that celebration was held in connection with the business activity. He also submits that Section 37 of the Income-tax Act, 1961 is different from the definition of input service under Rule 2(l) of Cenvat Credit Rules, 2004 and, therefore, case laws relied upon by the learned Advocate are not applicable herein.
4. After hearing both sides and on perusal of the records, I find that the appellant company availed input service credit on Event Management service in connection with celebration by the employees on expansion of Chanderia plant. The dispute relates to as to whether the Event Management service would be treated as activities relating to business under Rule 2(l) of the Rules. Learned advocate drew the attention of the Bench to the expression business as referred in decision of the Larger Bench of the Tribunal in the case of A.B.B. Ltd. (supra). It has been held that the expression business is a term of wide import as held by the Apex Court in Mazgaon Dock Ltd. v. Commissioner of Income-tax and Excess Profits Tax [AIR 1958 SC 861]. Further the definition of Input Services uses the expression activities relating to business. The word relating further widens the scope of the expression activities relating to business.
There is no qualification to the word activities. There is no restriction that the activities relating to business should be relating to only the main activities or essential activities and, therefore, all other activity relating to business falls within the definition of input service. It has further been held that the expression such as is purely illustrative. It has been defined in the Chambers Dictionary as for example. The usage of the words such as after the expression activities relating to business in the inclusive part of the definition, therefore, further supports view that the definition of the term input service would not be restricted to services specified therein.
5. Larger Bench of the Tribunal in the case of GTC Industries Ltd. held that credit of tax on those taxable service would be allowed that go to form the part of the assessable value of which excise duty is charged. It is, precisely, contended by the learned Advocate that any expenses relating to the business activity form part of the assessable value would be eligible for Cenvat Credit. It is contended by the appellant that the Commissioner (Appeals) erroneously observed that celebration for expansion of Chanderia plant is mere entertainment. On the other hand, learned SDR submits that the assessee has to establish that the service was rendered in connection with the business. In this connection, it is worthwhile to discuss the case laws cited by the learned Advocate under Income Tax Act, as under:-
(a) In the case of Amarjothi Pictures (supra), the Honble Madras High Court held that the expenditure was clearly within the scope of Section 10(2) (xv) of Income Tax. In this case, nobody has suggested that it had been incurred otherwise thereon in the course of carrying on the business of exhibition of films. On the occasion of the celebration there was presentation of shields to the theatres, artists and others. Evidently, the object of the celebration was publicity, and that publicity would only have been with a view to step up the collections, at the time when the collections might otherwise be dwindling. It has been pointed out by courts repeatedly that the expediency of the expenditure is not for the revenue to consider. That is the matter entirely lift to the judgment of the assessee concerned.
(b) In the case of Merck Sharp and Dohme of India Ltd. (supra), the Honble Bombay High Court affirmed the decision of the Tribunal that the expenditure incurred in connection with the foundation-stone laying ceremony was allowable as business expenditure. The assessee-company incurred expenditure on account of printing invitation cards, construction of shamianna, hiring of furniture and transport. The Honble Court followed earlier decisions CIT vs. Tata Iron & Steel Co. Ltd. (1977) 106 ITR 363 (Bom.) wherein amount spent by the company on publication of the brochure at the time of its golden jubilee was also allowed as revenue expenditure.
(c) In the case of Aluminium Industries Ltd. (supra), the Honble Kerala High Court held that the expenditure incurred by the assessee was revenue expenditure. In this case, expenditure was incurred in connection with inauguration ceremony on commission of new project, the Chief Minister of Karala was invited. Press conferences were held and it bought out a newspaper supplement.
6. In the above High Court decisions, it is evident that the assessee produced evidences to establish that the expenditures were incurred for the purpose of business would include of advertisement for claiming benefit under Income Tax Act. Similarly, service tax is a tax on value addition by rendering service. The assessee has to establish that the service was rendered relating to business activity. The contention of the learned Advocate that any expenses incurred relating to business activity would be treated as input service cannot be accepted, unless it is established by evidence that the service was rendered for the purpose of business include advertisement or sales promotion as claimed by the appellant. IT is noted that Event Management Service is provided in relation to planning, promotion, organizing or presentation of any art, entertainment, business, sports or any other event. It appears that in the present case, Event Management Service was provided for entertainment of employees for expansion of Chanderia Plant. The Commissioner (Appeals) has rightly observed that the appellants failed to produce any profile of the said event to substantiate that the event was organized in order to sales promotion/ advertisement and upheld adjudication order.
7. In view of the above discussion, I do not find any reason to interfere with the order of the Commissioner (Appeals). Accordingly, the appeal filed by the appellant is rejected.
(Pronounced in the Open Court on 6th October, 2009) (P.K. DAS) MEMBER (JUDICIAL) RK 7