2010 (12) TMI 979 - AT - Service Tax

Cenvat credit denied on LPG used by assessee in their canteen for providing meal to the workers and staff members - duty demand, interest and penalty - Held that - In the case of M.M.R. Khan (1990 (2) TMI 267 - SUPREME COURT) held that providing canteen is an integral part of manufacturing activity of the assessee and as per the decision of Maruti Suzuki Ltd. (2009 (8) TMI 14 - SUPREME COURT) is also any input which has gone into manufacturing of final product directly or indirectly is entitled for input credit, in this case also the respondent is entitled for the input credit on LPG which has gone to the canteen which is as per Factory Act is necessarily required to run their manufacturing activity, no infirmity with the impugned order and the same is upheld. Appeal filed by the Revenue is rejected.

Summary

Issues:
Entitlement to CENVAT credit on LPG used in the canteen for workers.

Analysis:
The appeal concerns the entitlement of the respondent, a scooter manufacturer, to claim CENVAT credit on Liquefied Petroleum Gas (LPG) used in their canteen for providing meals to workers. Initially, an objection was raised regarding the admissibility of credit on LPG used in the canteen, which was upheld by the adjudicating authority. However, the Commissioner (Appeals) set aside the duty demand, interest, and penalty, citing the inclusion of canteen costs in the final product's cost under the Factory Act. The Revenue appealed this decision. The central issue is whether the respondent can claim credit on LPG used in the canteen as an input for manufacturing. The Tribunal referred to the Maruti Suzuki Ltd. case, emphasizing that input credit is available for inputs used directly or indirectly in manufacturing final products. It noted the statutory requirement for the respondent to provide canteen facilities under the Factories Act, linking canteen provision to the manufacturing process. Citing the M.M.R. Khan case, the Tribunal affirmed that canteens are integral to manufacturing activities. Consequently, the Tribunal held that the respondent is entitled to input credit on LPG used in the canteen, as it is essential for their manufacturing operations. The impugned order was upheld, and the Revenue's appeal was rejected.

This judgment clarifies the interpretation of input credit eligibility under CENVAT rules concerning LPG used in canteens for worker meals. By referencing relevant precedents and statutory requirements, the Tribunal established that canteen facilities are essential components of manufacturing activities, making expenses incurred in canteens integral to the manufacturing process. The decision underscores the broad scope of input credit availability, emphasizing that any input contributing directly or indirectly to the manufacturing process is eligible for credit. The ruling provides clarity on the admissibility of credit for expenses related to statutory obligations like maintaining canteen facilities, aligning with the overarching objective of facilitating seamless manufacturing operations within the regulatory framework.