Custom, Excise & Service Tax Tribunal
M/S.Mrf Ltd., Medak vs Commissioner Of Central Excise And on 31 January, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
E/456, 457 & 458/2012
[Arising out of Order-in-Appeal Nos.42, 43 &44/2012, dated 24.08.2012 passed by the Commissioner of Central Excise & Service tax, LTU, Chennai]
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 the Member wishes to see the fair copy of
the Order? :
4. Whether Order is to be circulated to the Departmental
Authorities? :
M/s.MRF Ltd., Medak
M/s. MRF Ltd., Pondicherry
M/s. MRF Ltd., Kottayam
Appellant
Versus
Commissioner of Central Excise and
Service Tax (LTU), Chennai
Respondent
Appearance:
Shri V. Deivasigamani, Cons.
Shri M. Rammohan Rao, JDR For the Appellant For the Respondent CORAM:
HONBLE SHRI MATHEW JOHN, TECHNICAL MEMBER Date of hearing : 31.01.2013 Date of decision : 31.01.2013 Final Order No.____________ These are three appeals filed by the same appellant, which relate to similar issues but are in respect of three factories of the appellant, namely, that at Medak, Pondicherry and Kottayam, being considered together for disposal.
2. The issue in dispute is whether CENVAT credit could be taken on security services availed by the appellant for guarding the inputs which they had sent to the premises of the job-worker, where the goods were converted into an intermediate product and sent back to the factory of the appellant. The second issue involved in these appeals is whether CENVAT credit can be taken on security services availed at the guest houses maintained by the appellant near their factory for use of their employees during their visit to the factory for doing work relating to manufacture or other business activities.
3. In the matter of security services, the learned consultant for the appellant specifically relies on Rule 3 of the CENVAT Credit Rules, which authorizes a manufacturer to take credit of service tax paid on inputs services utilized at the premises of the job workers. The said rule is reproduced below:-
Rule 3 of the CENVAT Credit Rules, 2004, reads as follows:-
Rule 3 CENVAT Credit (1) a manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit of
(i) The duty of excise specified in the Second Schedule .
(ix) the service tax leviable under Section 66 of the Finance Act;
paid on
(i) Any input or capital goods
(ii) Any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004, including the said duties, or tax, or cess paid on any input or input service, as the case may be, used in the manufacture of intermediate products, by a job worker availing the benefit of exemption specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue., No.214/86-CE, dated the 25th March, 2986, published in the Gazette of India vide number GSR 547(E), dated 25h March, 1986, and received by the manufacture for use
4. The learned consultant for the appellant draws attention to para 8 of the Order-in-Original, where a categorical finding has been given that the security services has been availed by the appellant and such services was used in relation to manufacture of intermediate products at job-workers premises. The adjudicating authority denied credit arguing that the words used in Rule 3 is service used in the manufacture of intermediate products and not used in relation to the manufacture of intermediate products. The Adjudicating authority has argued that since a more stringent expression has been used in Rule 3, the appellant could not take CENVAT credit on security services utilized by them at job-workers premises. The adjudicating authority relied on the following decisions of the Tribunal in the case of Commissioner of Central Excise, Trichy Vs Godrej Sara Lee Ltd. reported in 2011 (266) E.L.T.85 (Tri.-Chennai). The Commissioner (Appeals), who confirmed the order relied on the decision of Zenith Machine Tools Pvt. Ltd. Vs Commissioner of Central Excise, Belgaum reported in 2010 (255) E.L.T.83 (Tri.-Bang.) which held that CENVAT credit of security services at job-workers premises cannot be taken.
5. The learned consultant submits the clarification issued by CBEC vide Circular No.120/1/2010-ST, dated 19.01.2010 in the context of refund of CENVAT credit taken on services used in relation to export of goods. He relies particularly on the contents of para 2(a) and para 3.1, which are reproduced below:-
2.? It has been represented (a) The major reason causing delay in granting refunds as well as rejecting the claims is that as per the wordings of the notification, refund is permitted of duties/taxes paid only on such inputs/input services which are either used in the manufacture of export goods or used in providing the output services exported. As against this, the phrases used in the Cenvat Credit Rules permit credit of services used whether directly or indirectly, in or in relation to the manufacture of final product or for providing output service. The field formations tend to take the view that for eligibility of refund, the nexus between inputs or input services and the final goods/services has to be closer and more direct than that is required for taking credit. Many refund claims are being rejected on this ground. 3.1? Use of different phrases in rules and notification para 2(a)] :
3.1.1? The primary objection indicated by the field formations is that the language of Notification No. 5/2006-C.E. (N.T.) permits refund only for such services that are used in providing output services. In other words, the view being taken is that to be eligible for refund, input services should be directly used in the output service exported. As regards the extent of nexus between the inputs/input services and the export goods/services, it must be borne in mind that the purpose is to refund the credit that has already been taken. There cannot be different yardsticks for establishing the nexus for taking of credit and for refund of credit. Even if different phrases are used under different rules of Cenvat Credit Rules, they have to be construed in a harmonious manner. To elaborate, the definition of input services for manufacturer of goods, as given in Rule 2(l)(ii) of Cenvat Credit Rules, 2004, includes within its ambit all services used in or in relation to the manufacture of final products and includes services used directly or indirectly. Similarly Rule 2(l)(i) of Cenvat Credit Rules also gives wide scope to the input services for provider of output services by including in its ambit services used.... for providing an output service. Similar is the case for inputs.
6. The learned consultant submits that it is very obvious from the statutory provision under Rule 3 of the CENVAT Credit Rules as well as the circular issued by CBEC that it is only proper that CENVAT credit of tax paid on any input service, used in the manufacture of intermediate products, by a job worker availing the benefit of exemption specified in notification No.214/86-CE. He points out that in the case of the decisions relied upon by the adjudicating authority and the appellate authority, the services were availed by the job worker, which is not the position in the present case. Further, he also points out that specific provision of Rule 3 authorizing taking of such credit and the clarification issued by CBEC has not be considered in the said decisions. He also relies on the decision of Collector of Central Excise Vs Solaris Chemtech Ltd. reported in 2007 (214) 481 (S.C.).
7. In the matter of security service at guest houses, the consultant for the appellant submits that these guest houses are very near the factory and are used only for the stay of the technical or managerial persons or auditors, who visit the factory for doing their work, which are integrally connected with the manufacturing activity and the business of the appellant and, therefore, there is no reason to deny CENVAT credit on such security services either. He relies on the decision of Maharashtra Seamless Ltd. Vs Commissioner of Central Excise, Raigad reported in 2012 (276) E.L.T.209 (Tri.-Mumbai) pointed out that there is no restriction anywhere in the definition of input services under Rule 2 (l) of the CENVAT Credit Rules to the effect that input services has to be utilized within the factory.
8. Opposing the prayer, the learned AR for Revenue submits that the security services used at the premises of job worker cannot have any nexus with the manufacturing activity of the appellant. He also points out that the Tribunal has already decided in the case of Godrej Sara Lee Ltd.(supra) and Zenith Machine Tools Pvt. Ltd. (supra) that CENVAT credit cannot be allowed for security services availed at the premises of the job worker. The learned AR also relies on the decision of the Tribunal in the case of Commissioner of Central Excise, Tirunelveli Vs M/s. Tuticorin Alkali Chemicals and Fertilizers Ltd. Final Order No.311-312/11, dated 08.02.2011 in Appeal No.ST/525,526/2010, where CENVAT credit was denied for security services arranged at the saltpan of the appellant in that case. He points out that it was held in the said decision that the services should be linked with the factory, where the goods are manufactured and since saltpan is outside the factory, credit cannot be allowed.
9. In the matter of CENVAT credit for security services at the guest houses, the learned AR for the Revenue relies on the decision of the Tribunal in the case of Kilburn Chemicals Ltd. Vs Commissioner of Central Excise, Tirunelveli reported in 2011 (268) E.L.T.537 (Tri.-Chennai) and Hindustan Zinc Ltd. Vs Commissioner of Central Excise, Jaipur-IIreported in 2011 (270) E.L.T.111 (Tri.-Del.), wherein it was held that CENVAT credit cannot be allowed for different services utilized at the Guest Houses.
10. I have considered the arguments from both sides. The definition of input services, nowhere specifies that the services have to be received and utilized within the factory. This position has been clearly held by the Tribunal in the case of Maharashtra Seamless Ltd.(supra). Rules 3 of the CENVAT Credit Rules specifically provides that credit of tax paid on any input service, used in the manufacture of intermediate products, by a job worker availing the benefit of exemption specified in notification No.214/86-CE. Be allowed. I find that the orders relied upon by the departmental representative has not examined the express provision under Rule 3 of Cenvat Credit Rules or the recent clarification dated 19-01-2010 (supra) issued by CBEC in the matter. Therefore, I adopt the principle laid down by the Mumbai Bench of the Tribunal in the case of Maharashtra Seamless Ltd. Vs Commissioner of Central Excise, Raigad and I hold that there is no reason to deny CENVAT credit of security services utilized by the appellant at the premises of the job workers and paid for by the appellant.
10. In the case of security services at the guest houses, there can be some dispute because of the very nature of the facility of a guest house. This facility, which can be utilized both for the personnel engaged in the manufacturing process and business process as well for satisfaction of their personal needs. Since the precedent decisions are to the effect that CENVAT credit cannot be allowed for tax paid for services utilized at guest houses I follow the principles laid down in those cited decisions and deny CENVAT credit of service tax paid on such services. Accordingly, the appeal is allowed partially by allowing credit for services utilized at the premises of job worker and denying credit for services utilized in the guest houses. All the three appeals are disposed of accordingly.
(Dictated and pronounced in open court) (MATHEW JOHN) TECHNICAL MEMBER ksr 05-02-2013 2