2014 (12) TMI 1216 - AT - Central Excise

Input service credit on construction services of dormitory - denial of claim on the premises that same does not qualify as input service as per rule 2/N of the Cenvat Credit Rules 2004 - Held that - It is alleged in the show cause notice that the dormitory is located outside factory premises but the appellant in reply to the show cause notice has clearly mentioned that this dormitory is constructed within factory premises and the said fact has not been contradicted by the Adjudicating Authority or the first appellate authority. In these circumstances it is held that dormitory is located within the factory and same can be verified by the department on visiting the factory premises. As the dormitory is located within the factory and the use of the dormitory is for the technicians / engineers for their stay in the factory itself which is required for maintenance of plant and machinery and these technicians / engineers should be available immediately as the factory is located in a remote area. Therefore hold that the construction of dormitory for this purpose of stay of technicians / engineers is integrally connected with the manufacturing activity of the appellant. Therefore the credit is available as that service has been availed in the business of manufacturing activity. In these circumstances hold that as construction of dormitory is an integral part of the manufacturing activity of the appellant the appellant is entitled to take Cenvat Credit on construction services. - Decided in favour of assessee

Summary

Issues:
Denial of input service credit on construction services of dormitory under Cenvat Credit Rules, 2004.

Analysis:
The appellant, a sugar and molasis manufacturer, appealed against the denial of input service credit on construction services for a dormitory within their factory premises. The revenue contended that the dormitory did not qualify as an input service under Rule 2(L) of the Cenvat Credit Rules, 2004. The appellant argued that the dormitory was constructed for technicians/engineers required for plant maintenance in the remote factory area, directly connected to their manufacturing activity. The appellant cited precedents where similar services were allowed credit. The revenue argued that the dormitory was outside the factory premises and lacked nexus with manufacturing activity.

Upon review, the tribunal found that the dormitory was indeed within the factory premises, crucial for technicians/engineers to be readily available for machinery maintenance due to the remote location. The tribunal distinguished this case from precedent where the residential colony was outside factory premises. Citing a relevant High Court decision, it held that maintenance of a residential colony in a remote area was eligible for input service credit due to its integral connection with manufacturing activity. Consequently, the tribunal ruled in favor of the appellant, allowing Cenvat Credit on construction services for the dormitory.

In conclusion, the impugned order was set aside, and the appeal was allowed with any consequential relief.