By TIOL News Service

MUMBAI, APRIL 17, 2017: APPEALS have been filed by the assessee against denial of CENVAT Credit on Outdoor Catering Services, Manpower Supply for Garden Maintenance Services and Maintenance and Repair service of Sewage Treatment Plant.

It is submitted that appellants are providing Outdoor Catering Services as the Dock Workers (Safety, Health and Welfare) Regulations, 2006 requires them to provide and maintain canteen facility. However, insofar as it relates to the amount recovered from the employees, they are ready to reverse the CENVAT Credit for the period prior to 1.4.2011. Reliance is placed in this regard on the decision in Ultratech Cement Ltd. - 2010-TIOL-745-HC-MUM-ST . The appellant further submits that even after amendments to the definition of input services w.e.f. 1.4.2011, the appellants are entitled to the CENVAT Credit on Outdoor Catering Services as the services are not primarily for the personal consumption of the employees but are required under the relevant statutory provisions. Case laws cited in support are - Gateway Terminal - 2015-TIOL-1471-CESTAT-MUM , Hindustan Coca Cola Beverages - 2014-TIOL-2460-CESTAT-MUM , 2015-TIOL-3003-CESTAT-DEL . So also, in respect of services that were received prior to 1.4.2011 but the payment was made after 1.4.2011, the provisions prior to 1.4.2011 should be applied in view of Board Circular No. 943/04/2011-EX dated 29.4.2011, the appellant added.

As regards CENVAT Credit availed on Garden Maintenance and Maintenance of Sewage Treatment Plant, the appellant justifies the same on the ground that - they had entered into an agreement with JNPT, which required them to fulfill and comply all the statutory requirements pertaining to pollution control and discharge of effluents and like materials; that the Maharashtra Pollution Control Board granted consent to operate the Port at JNPT on the condition that they will operate sewage treatment plant as prescribed under Water (Prevention and Control of Pollution) Act, 1974;that MPCB mandates that a portion of water discharged from sewage treatment plant should be used for plantation in the port premises and as a consequence they are required to maintain the garden. Case laws cited - Gateway Terminal - 2015-TIOL-1471-CESTAT-MUM , ITC Ltd. - 2012-TIOL-199-HC-AP, Larsen & Toubro Ltd. - 2010-TIOL-497-CESTAT-MUM. Plea of limitation, interest relief and bonafide belief are also taken by the appellant.

The AR reiterated the stand taken by the lower authorities.

The Bench observed -

Input Services:

+ The appellants had agreed to reverse the CENVAT Credit insofar as it pertains to the amount collected from the employees in respect of the Outdoor Catering Services. For the rest, the appellants have relied on the decision of the Tribunal in the case of Ultratech Cement Ltd. (supra). Relying on the said decision, the credit for the period prior to 1.4.2011 is allowed to the extent, the incidence of such services is borne by the appellant and not recovered from anybody else.

+ Insofar as credit pertaining to period after 1.4.2011 is concerned, it has been argued that the catering services provided by them is not primarily for the personal consumption, but it is a statutory requirement…Thus, the appellants are entitled to take credit insofar as it relates to the burden of service borne by the appellant themselves and not recovered from any other party.

+ Garden Maintenance Service and Maintenance of Sewage Treatment Plant is concerned, the appellants have highlighted that these are statutory requirements. In support of this, they produced an approval letter of Maharashtra Pollution and Control Board…In view of the above, it is apparent that credit for the maintenance of sewage treatment plant and for the garden maintenance cannot be denied as the same are statutory requirement for operating the Port.

Conclusion: Demands are set aside except for the demand in respect of Outdoor Catering Services pertaining to the amounts recovered from others.

Interest:

Rule 14 of the Rules was amended w.e.f. 17.3.2012 and the interest was required to be paid only in respect of credit taken and utilized. Prior to that date, interest was required to be paid on credit taken or utilized wrongly. Interest liability will accordingly be modified by original adjudicating authority.

Penalty:

Issue involved is regarding interpretation of statutory provisions. I find that it is a fit case for invocation of Section 80 of the Finance Act, 1994 and, therefore, penalty under Rule 15 of the Cenvat Credit Rules, which in turn is penalty in terms of Section 76 or 78 of the Finance Act, 1994, is set aside.

The appeals were partly allowed.

(See 2017-TIOL-1263-CESTAT-MUM)