TMI Blog2020 (2) TMI 1004X X X X Extracts X X X X X X X X Extracts X X X X ..... f the business activities of the Appellant and, in fact, would be included in the coaching and training‟ mentioned in the inclusive part of the definition of input service‟ - the appellant is clearly entitled to avail Cenvat Credit on the expenditure incurred in providing this service. Security in the headquarters building residential colony and other activities like tree trimming/cutting, fabrication, repair maintenance of residential quarters, cleaning services in the project office, dismantling of old structure and others - HELD THAT:- From a bare perusal of the order of the Commissioner (Appeals), it does appear that providing security in the office area is connected with the business activity of the Appellant, but providing security to the residential colony is not in relation to the business activity of the Appellant. Credit has, however, been denied since bifurcation of the amount spent for security for office and residential colony has not been provided. At this stage, it needs to be noted that there are 338 personnel provided by the security agency, out of which only 4 security guards are deployed at the four residential colonies and 334 security staff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y company of Coal India Limited, has filed this appeal to assail the order dated 31 January, 2019 passed by the Commissioner (Appeals). The appeal was filed before the Commissioner (Appeals) by the Revenue to assail the order dated 31 March, 2017 passed by the Joint Commissioner, Central GST and Customs Central Excise, Jabalpur the Joint Commissioner . The Joint Commissioner disallowed Cenvat Credit to the extent of only ₹ 1,08,018/- that was said to have been wrongly availed on ineligible capital goods by the Appellant, with interest and penalty. The cause for filing the appeal by the Revenue arose because the first show cause notice dated 21 December, 2015 for the period 01 July, 2012 to 31 March, 2014 proposed denial of Cenvat Credit of ₹ 1,86,40,085/- on capital goods and ₹ 1,85,32,067/- on input service, while the second show cause notice dated 09 November, 2016 issued for the period 01 May, 2014 to 31 December, 2015 proposed denial of Cenvat Credit of ₹ 35,79,241/- wrongly availed and utilized. The Commissioner (Appeals) modified the order passed by the Joint Commissioner by disallowing Cenvat Credit to the extent of ₹ 69,25,146/-. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llegations. 7. The Joint Commissioner adjudicated both the show cause notices by a common order dated 31 March, 2017. The credit availed to the tune of ₹ 1,51,11,493/- on various services used prior to 23 June, 2012 was found to be eligible to the Appellant. It was also found that the Appellant was entitled to take the credit on the following services: (a) Audit/CSR work shop/Seminar service/Chartered Accountant Service; (b) Security Services; (c) Tree trimming/grass and bush cutting; (d) Fabrication, fixing and display of sign board; (e) Repair and maintenance of residential quarters; (f) Cleaning services used in project offices; (g) Hiring of bus for transportation of its employees (h) Dismantling of old structure 8. The Joint Commissioner, however, found that the Appellant had wrongly availed Cenvat Credit of ₹ 1,08,018/- on ineligible capital goods and the same was ordered to be recovered. The Joint Commissioner also directed for payment of interest at the appropriate rate and imposed penalty of ₹ 1,08,018/-. 9. Feeling aggrieved by that part of the order of the Joint Commissioner by which Cenvat Credit availed by the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice Tax credit taken (Rs.) Details of Services Second Show Cause Notice May 2014 to December 2015 60,032/- Reimbursement of travelling expenses to CA 34,76,503/- Security in its Hqrs building and residential colony 29,127/- Tree trimming/cutting 13,579/- Cleaning services 12. As noted above, Cenvat Credit for the travelling expenses of the Chartered Accountants was held to be admissible to the Appellant and, therefore, the appeal, that had been filed by the Appellant, is for an amount of ₹ 69,25,146/-. 13. Shri Hemant Sindhwani, learned Chartered Accountant for the Appellant, has made the following submissions : (i) The Appellant was clearly entitled to avail Cenvat Credit on the participation of the officers of the Appellant in the work shop conducted for Corporate Social Responsibility, as the said services were availed for business operations and were covered by the inclusive definition of input services‟ under Rule 2(l) of the 2004 Rules under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve placed reliance upon a judgment of the Gujarat High Court in Commissioner of Central Excise Customs vs Gujarat Heavy Chemicals Ltd. 2011 (22) STR 610 (Guj.), which was subsequently followed by the Ahmedabad Bench of the Tribunal in Gujarat Guardian Limited vs Commissioner of Central Excise, Surat-II 2016 (46) STR 737 (Tri.-Ahd.) as also the decision of the Principal Bench of the Tribunal at Delhi in Hindustan Zinc Ltd. vs Commissioner of Central Excise ST, Udaipur 2017 (49) STR 315 (Tri.-Del); (ii) Cenvat credit availed on welfare activities undertaken by the Appellant cannot be allowed as they would not be covered in the definition of input services‟ under Rule 2(l) of 2004 Rules in view of the decision of the Bangalore Bench of the Tribunal in IFB Industries Limited vs Commissioner of C.Ex., Cus. S.T., Bangalore-I 2017 (4) GSTL 366 (Tri.-Bang.) and the Principal Bench at Delhi in Hindustan Zinc Ltd. vs Commissioner of Central Excise, Jaipur-I 2013 (29) STR 492 (Tri.-Del) and the Chennai Bench of the Tribunal in DCW Ltd. vs Commissioner of Central Excise, Tirunelveli 2018 (332) ELT 142 (Tri.-Chennai); and (iii) The extended period of limitation wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excludes certain services enumerated in the aforesaid definition. 19. It is in the light of aforesaid definition of input service‟ provided for in the 2004 Rules, that it has to be examined whether the Appellant was justified in availing Cenvat credit on certain services, which credit has been denied to the Appellant by the Commissioner (Appeals). 20. As noted above, the Appellant is a Government of India Public Sector Undertaking and is a subsidiary company of Coal India Limited. It is engaged in the business of mining and selling of coal at the mines located at Singrauli in the State of Madhya Pradesh and Sonbhadra in the State of Uttar Pradesh. The mines are located at remote locations from the main cities. The mines at Singrauli is at a distance of 350 kms. from the nearest city Jabalpur, while the mines at Sonbhadra is at a distance of 250 kms. from the nearest city Varanasi. According to the Appellant, it is for this reason that it had to provide a secured residential colony for the officers and staff working in the offices at Singrauli and Sonbhadra. The case of the Appellant is that in the agreement entered into between the Appellant and the security agency, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viding this service. (B) SECURITY IN THE HEADQUARTERS BUILDING RESIDENTIAL COLONY AND OTHER ACTIVITIES LIKE TREE TRIMMING/CUTTING, FABRICATION, REPAIR MAINTENANCE OF RESIDENTIAL QUARTERS, CLEANING SERVICES IN THE PROJECT OFFICE, DISMANTLING OF OLD STRUCTURE AND OTHERS : 24. This aspect has been elaborately dealt with by the Joint Commissioner and the relevant portion is reproduced below: Since the collieries are located at remote locations, NCL has to provide residential accommodation and other basic amenities to its workers and employees without which the business of coal mining cannot be undertaken. The said residential buildings are located in the near vicinity of the mines and Area Offices within the premises owned by NCL and have a significant role in contributing to the mining business. For the purpose of said facilities, NCL awards contract for availing security services both at its offices and residential buildings. No separate price break is provided by the service providers for security services rendered at the Office and residential buildings in as much as the said residential buildings are considered integral to the overall business of the Company. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned, the respondent have not submitted bifurcation of security services used in Hqrs building and residential colony separately, therefore, I have no option to reduce the demand to the extent the impugned service was used for the office building and disallow the Cenvat credit on the entire credit of security services. 26. It is seen that there is no discussion at all as to why the security provided at the residential colony, which is situated very close to the mines and area offices but within the premises of the Appellant, has been denied. The Joint Commissioner, as seen above, had observed that the Appellant has to provide residential accommodation and basic amenities to its workers and employees without which it would not be possible to conduct the business of coal mining and so the contention of the Department that providing security services to residential quarters of the employees is neither directly nor indirectly connected with the manufacturing activity, is not correct. From a bare perusal of the order of the Commissioner (Appeals), it does appear that providing security in the office area is connected with the business activity of the Appellant, but providing se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alling within the ambit of Rule 2(l) of the Cenvat Rules, 2004. It also held that plantation activity had an obvious nexus with the manufacturing activity. The High Court also noticed that the Tribunal had also observed that the matter had to be viewed in a broader perspective. The High Court, therefore, found no cogent reason to interfere with the order passed by the Tribunal and the appeal filed by the Department was, accordingly, dismissed. 28. At this stage, reference also needs to be made to the two matters decided by the Gujarat High Court and the Bombay High Court on 11 May, 2011 and 11 October, 2010 respectively. The issue that arose before the Gujarat High Court in Commissioner of Central Excise Customs vs Gujarat Heavy Chemicals Ltd. 2011(22) STR 610 (Guj.) was whether the Tribunal was correct in holding that Cenvat Credit on security services utilized in residential colony is admissible. The Gujarat High Court observed that security services provided in residential quarters cannot be said to be services used by the manufacturer directly or indirectly in relation to the manufacture of final product and in this connection reliance was placed on an earlier decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal are as follows : 8. Having considered the rival submissions and case laws and the facts on record, I find that the finding of the Adjudicating Authority, that the colony is located away from manufacturing area and has no relationship with the manufacture of goods is vague and not based on the facts on record. The appellant had categorically stated that the colony is located outside the manufacturing area but near to the factory, to ensure availability of competent Workers/personnel to run their factory round the clock, which fact have not found to be untrue. It was further categorically stated that the factory is located at the remote place where there is no township in the sense of municipality or municipal corporation available to provide the municipal services, where residential colony is situated. Thus, such residential is industrial township, it is the onus of the concerned industry to maintain the civil/municipal services. I find that from the ruling relied upon by the Revenue, the concept of Industrial Township was not considered. Further, there is mistake of fact in the order of court below in observing that the colony is located away from the manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In Hindustan Zinc Limited (decided on 09 August, 2016), the Tribunal observed that Cenvat Credit taken for security was denied by the adjudicating authority for the reason that the factory had not submitted any evidence in support of its contention that the said security service had also been used for security of plant area and cash rooms. The Tribunal held that since the Appellant had not produced any document to show that the security guards had been deployed in the factory area, the adjudicating authority was justified in holding that the services had been utilized for providing security guard at the residence of Senior Executives which would be in the nature of welfare activity and, therefore, the Cenvat Credit would not be available to the Appellant in view of the judgment of the Bombay High Court in Manikgarh Cement. 36. The factual position in ITC Limited is very similar to the factual position emerging in the present case Appeal. In ITC Limited the factory was located in a remote scheduled area and the nearest town with a railway station was at a distance of 35 kms. In the present Appeal, the nearest towns are situated at a distance of 250 kms and 350 kms. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, the Appellant would not be entitled to Cenvat Credit. Likewise, in IFB Industries Limited a general observation has been made that maintenance of a guest house will not fall within the definition of input service‟. 40. It is not the case of the Department that the employees/workers are living in private residential houses where security has been provided by the factory. It is an admitted fact that the residential colony is provided by the factory and it is situated within the premises owned by the Appellant and close to the mining area and offices. The residential colony has been built by the Appellant for the benefit of its employees/workers and has been maintained by the Appellant. It is necessary for the Appellant to maintain the residential colony close to the mines area for better business results. Therefore, the services, so provided, do have a nexus with the business undertaken by the Appellant. The Joint Commissioner had examined all these aspects and had arrived at a conclusion that such services had a nexus with the business of the Appellant, but the Commissioner (Appeals) without giving any reason, much less a cogent reason, has made an observation th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of the Appellant. 44. Learned Authorised Representative of the Department has, however, placed reliance upon a decision of the Tribunal in Hindustan Zinc Ltd. that was decided on 22 November, 2012. This decision of the Tribunal placed reliance upon the decision of the Bombay High Court in Manikgarh Cement. Paragraph 9 of the decision is reproduced below : 9. As regards the service of rent-a-cab availed for transportation of employees‟ children to schools/tuition centres, this, in our considered view, is a welfare activity which is not covered by the definition of Input Service‟ in view of judgment of Bombay High Court in the case of CCE, Nagpur v. Manikgarh Cement reported in 2010 (20) S.T.R. 456 (Bom.). Hence the Cenvat credit demand of ₹ 62,435/- is upheld along with interest. 45. Learned Authorised Representative of the Department has also placed reliance upon a decision of the Tribunal in Orient Paper Mills vs Commissioner of Central Excise, Bhopal 2016 (46) STR 854 (Tri.-Del) wherein it has been held that credit on rent-a-cab service could be taken only upto 31 March, 2011 in view of the provisions of Rule 2(l)(B) of the 2004 Rules unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e manufacturing activities of the Appellant. Thus, the demand made in respect of Cenvat Credit on rent-a-cab service and hotel accommodation was set aside. 48. In M /s Terex India Pvt. Ltd. vs Commissioner of GST CE, Salem Excise Appeal No. 40441/2018 decided on 13 July, 2018, the Chennai Bench of the Tribunal also took the same view. The issue that arose for consideration was whether the Appellant was eligible for credit on rent-a-cab service after 01 April, 2011. 49. In the present case, it is not in dispute that the bus is being utilized for the purpose of transporting the employees from the residence to the factory and from factory to the residence. This is in connection with the business activity of the Appellant and, therefore, there is no good reason to deny Cenvat Credit on such input service in view of the aforesaid decisions relied upon by learned Chartered Accountant for the Appellant. The demand made under this head cannot, therefore, be sustained and is, accordingly, set aside. 50. In this view of the matter, it is not necessary to examine the contention raised by the Appellant that the extended period of limitation in regard to the first show cause notice ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
