By TIOL News Service

MUMBAI, OCT 28, 2015: THE appellant had availed Cenvat Credit of CE duty paid on the furnace oil, which was used for manufacture of steam. Some part of the steam produced was utilised in canteen and in laundry.

It is the case of the revenue that the steam utilised for non-productive purpose cannot be considered as being used in or in relation to manufacture of any final products.

Coming to such a conclusion both the lower authorities have held against the appellant and confirmed the demands with interest and also imposed equivalent penalties.

Before the CESTAT, the appellant submitted that steam was used for the purpose of cleaning of vessels in the canteen and in the laundry for cleaning of the uniform which was used by the employees in the factory premises. Since canteen services are requirement of the law and the uniform is used by the appellant's employees in the manufacturing activity of the final products, they fall within the ambit of the term 'for any other purpose' and hence the credit is to be allowed.

The AR submitted that Bombay High Court in the case of Indo Rama Synthetics - 2007-TIOL-394-HC-MUM-CX has interpreted the phrase "for any other purpose" as being having nexus with the goods manufactured in the factory and, therefore, the credit taken, in the present case has been rightly disallowed.

The Bench observed -

6.2 In our considered view the requirement of a canteen in the factory is statutorily mandated in the Factories Act, the cleaning of the utensils in the canteen for providing hygienic food cannot be disputed by any one. Again, using of clean uniform in the course of manufacturing of final products cannot also be disputed as unwanted expenses. On this factual matrix, we find that the steam which is used in the factory premises is in a way related to manufacturing of final products. We find strong force in the contentions raised by the learned Counsel that the entire dispute needs to be considered from the angle whether the use of steam by the appellant in the factory premises is for the purposes related to manufacture and will be falling under the ambit of the phrase "used for any other purposes". In our considered view, Honourable High Court of Bombay, in the case of Indo Rama Synthetics (supra) has held what would be covered in the phrase "used for any other purposes" in paragraph 20 and 21 of the judgment, which we reproduce.

x x x

6.3 In the said case of Indo Rama(supra) their Lordships were considering the use of electricity generated in the factory and the above observations were made while denying the proportionate Cenvat Credit on the fuel used in that portion of electricity which is used for lighting the residential quarters. We find that the said observations will apply in the case in hand as it is undisputed that the canteen services and the laundry service is used within the factory and in a way related to manufacturing activity."

Holding that in the peculiar facts and circumstances of the case, the impugned orders are unsustainable, the same were set aside and the appeals were allowed with consequential relief.

(See 2015-TIOL-2309-CESTAT-MUM)