CX - Staff colony provided by company is directly and intrinsically linked to its manufacturing activity - Cost necessarily forms part of business expenditure - Consequently, services which were crucial for maintaining staff colony are Input services: CESTAT
By TIOL News Service
NEW DELHI, FEB 26, 2016: THE appellant availed CENVAT credit of Rs.12,93,573/- in respect of services utilized for the maintenance or repairs of residential buildings/quarters.
Revenue was of the view that these services will not fall under the ambit of "input service" in terms of Rule 2(l) of CCR, 2004 and, therefore, the credit was inadmissible.
The demand notice was confirmed by the original authority and upheld by the Commissioner (A), against which order the appellant is in appeal.
The appellant submitted that their manufacturing unit is located in a remote village adjoining the mines of the company. They had made residential quarters and buildings for the purpose of housing employees of the manufacturing unit; they undertake maintenance and repair of such residential quarters;that the said expenditure is considered and added in the cost of final products manufactured. To this effect, the appellant submitted a certificate dated 17/11/2015 issued by the Chartered Accountant to state that the services of repair and maintenance of residential colony of the appellant units at Zawar mines forms part of assessable value of the final product. Reliance is placed on the Andhra Pradesh High Court decision in ITC Limited - 2012-TIOL-199-HC-AP-ST, Bajaj Hindustan Ltd. - 2015-TIOL-2162-CESTAT-DEL, Reliance Industries Ltd. vs. CCE& ST (LTU), Mumbai - 2015-TIOL-2343-CESTAT-MUM, Ultratech Cement Ltd. - 2010-TIOL-745-HC-MUM-ST and Coca Cola India Pvt. Ltd. vs. CCE, Pune - III - 2009-TIOL-449-HC-MUM-ST in support of their contention that service tax paid on any service which is in relation to business should be eligible for CENVAT credit.
The AR justified the demand and placed reliance on the decision of Bombay High Court in the case of Manikgarh Cement - 2010-TIOL-720-HC-MUM-ST.
The Bench inter alia observed -
"…The appellants contend that it is a part of a business activity and necessarily forms part of business expenditure captured in the assessable value of their final product. I find that similar issue was under consideration by the Hon'ble High Court of Andhra Pradesh in the case of CC & CE., Hyderabad - III vs. ITC Limited (supra). The Hon'ble High Court held that staff colony provided by the company, being directly and intrinsically linked to its manufacturing activity could not therefore be excluded from consideration of credit. Consequently, the services which were crucial for maintaining the staff colony, such as lawn mowing, garbage cleaning, maintenance of swimming pool, collection of household garbage, harvest cutting, weeding etc. necessarily had to be considered as "input services" falling within the ambit of Rule 2 (l) of the Cenvat Credit Rules, 2004. In Bajaj Hindustan Ltd. (supra), this Tribunal followed the above decision and distinguished the decision of Hon'ble Bombay High Court in the case of Manikgarh Cements vs. CCE, Nagpur (supra). Similarly, the Tribunal in the case of Reliance Industries Ltd. vs. CCE& ST (LTU), Mumbai (supra) examined in detail the scope of "input services" and expression "relating to business". After considering the various decisions of the Tribunal and High Courts, came to the conclusion that Cenvat credit of service tax paid on various services which were utilized for residential colony/township of the appellant's factories are eligible for credit. The Tribunal examined and relied on the decisions of Hon'ble Bombay High Court in Ultratech Cement Ltd. (supra) and Coca Cola India Pvt. Ltd. vs. CCE, Pune - III (supra) and distinguished the decision of the same High Court in the case of Manikgarh Cements vs. CCE, Nagpur (supra)."
Holding that the appellants are eligible for the input credit of service tax, the impugned order was set aside & the appeal was allowed.
(See 2016-TIOL-515-CESTAT-DEL)
