Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs Hotel Sun-N-Sand (P)Ltd on 23 December, 2010
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI APPEAL NO. E/74/10 (Arising out of Order-in-Appeal No.AGS(218)101/09 dtd. 5/10/2009 passed by the Commissioner of Central Excise & Customs(Appeals), Aurangabad ) For approval and signature: Honble Mr P.G.Chacko, 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?
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Commissioner of Central Excise, Aurangabad
:
Appellant
VS
Hotel Sun-N-Sand (P)Ltd.
Respondent
Appearance
Shri S.S.Katiyar, SDR for Appellant
Shri Bhavik Dave, C.A. for Respondent
CORAM:
Mr.P.G.Chacko, Member(Judicial)
Date of hearing :23/12/10
Date of decision : 23/12/10
ORDER NO.
Per : P.G.Chacko
In this appeal filed by the Revenue, the short question to be considered is whether the lower appellate authority was right in allowing CENVAT credit of the service tax paid on certain input services, to the respondent for utilization in payment of service tax on their output services. The respondent runs a Hotel at Shirdi, (Ahmednagar Dist) where they availed various input services such as DD Commission, Pest Control, Insurance, Repairs & Maintenance, Telephone, Security, Goods Transport, Travel Agent & Courier for the purpose of rendering output services namely Mandap Keeper service, Health & Fitness Services and Business Support Services during the material period. During the said period (November, 2007 to March, 2008), the Hotel was rendering both taxable and exempted output services without maintaining separate accounts for common input services and, therefore, they availed CENVAT credit of the service tax paid on input services and utilized the same only to the extent of 20% of the amount of service tax on output services in terms of Rule 6(3)(c) of the Cenvat Credit Rules, 2004. In a show-cause notice, the department proposed to recover the credit so utilized, on the ground that any of the input services were not shown to have been used in, or in relation to, the output services. This demand was contested. The original authority confirmed the demand of duty against the assessee and imposed on them penalties. In an appeal filed by the assessee against the order of adjudication , the ld. Commissioner (Appeals) allowed the above credit to the party after holding that the input services had been used in relation to the hotel business. The appellate authority observed that no nexus required to be established between an input service and an output service under Rule 2(l) of the Cenvat Credit Rules 2004 by the assessee to claim CENVAT credit on the input service. It was further observed that there was no mention of nexus in the definition of input service under Rule 2(l) ibid. Accordingly, the appellate authority set aside the order of adjudication. Hence the present appeal of the Revenue.
2. According to the appellant, the words used in the definition of input services under Rule 2(l) very much required an output service provider to establish nexus between the output service and input service on which credit was proposed to be taken. It is submitted that the word used appearing in the definition indicates the nexus. It is further submitted that mere inclusion of the cost of input services in the business expenses of the hotel would not per se entitle them to take CENVAT credit on the input services. The appellant has also relied upon a plethora of decisions including the apex courts judgment in the case of Maruti Suzuki Ltd. vs. Commissioner of Central Excise, Delhi [2009(240)E.L.T. 641 (S.C.)]. The ld.SDR has reiterated the grounds of appeal. In the course of his arguments, he has also produced a copy of the High Courts judgment in Commissioner of C.Ex. Nagpur vs. Ultratech Cement Ltd. [2010 (20) S.T.R. 577 (BOM).
3. The ld. Consultant for the respondent, on the other hand, relies on the Tribunals decision in Ultratech Cement Ltd. vs. Commissioner of C.Ex. Bhavnagar [2010 (258) E.L.T. 266 (Tri-Ahmd.)] wherein it was held that the expression business used in the definition of input service under Rule 2(l) ibid was of wide import and that activities used for business purposes were to be recognized as input services within the said definition. The Tribunal, in the cited case, relied on the Honble High Courts judgment in Coca Cola India Pvt. Ltd. vs. Commissioner [2009 (242) E.L.T. 168 (Bom).] .
4. After considering the submissions, I have found this case to be fit for remand to the original authority inasmuch as the expression activities relating to business figuring in the text of the definition of input service under Rule 2(l) has since been examined and it has been held by the Nagpur Bench of the Honble High Court in the case of Ultratech Cement Ltd. (supra) that any service/activity integrally connected with the business of manufacturing the final product would qualify as input service for the manufacturer. In the said case, the Bench clarified the judgment rendered in the case of Coca Cola India Pvt. Ltd. (supra) . When applied to the present case involving output service provider, the judgment of the Honble High Court in Ultratech Cement case (supra), would mean that the service provider should establish an integral connection between the output services and the activity/service on which CENVAT credit is proposed to be taken under Rule 3 (1) read with Rule 2(l) of the Cenvat Credit Rules 2004. The benefit of the judgment of the High Court in Ultratech Cement Ltd. case was not available to the lower authorities in the present case. In any case, the view taken by the lower appellate authority that no nexus requires to be established between the input service and output service cannot be sustained.
5. For the aforesaid reasons, I set aside the orders of the lower authorities and allow this appeal with a direction to the original authority to take fresh decision on the issue in accordance with law after considering the Honble High Courts judgment in Ultratech Cement Ltd. case (supra) and giving the assessee a reasonable opportunity of being heard.
(Pronounced in court) P.G.Chacko Member(Judicial) pv 4