2015 (9) TMI 1222 - AT - Service Tax

Cenvat credit - input services - construction services in relation to construction dormitory - Held that - Although 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, I hold that the construction of dormitory for this purpose of stay of technicians / engineers is integrally connected with the manufacturing activity of the appellant - in the case of ITC Ltd (2011 (11) TMI 516 - ANDHRA PRADESH HIGH COURT), the High Court of Andhra Pradesh has held that maintenance of residential colony in the remote area is entitled to take input services credit for the services of maintenance of residential colony as the factory is located in remote area. Therefore, the credit is available as that service has been availed in the business of manufacturing activity. Further, I find that in appellants own case for earlier period this Tribunal has allowed the cenvat credit on the impugned input service. - Decided in favour of assessee.

Summary

Issues:
- Denial of input service credit on construction services of dormitory under Rule 2(1) of Cenvat Credit Rules, 2004.

Analysis:
The appellant, a manufacturer of sugar and molasses, appealed against the denial of input service credit on the construction services of a dormitory within the factory premises. The revenue contended that the dormitory did not qualify as an input service under Rule 2(1) of the Cenvat Credit Rules, 2004. The appellant argued that the dormitory was constructed for the stay of technicians/engineers required for plant maintenance in the remote factory area. The appellant asserted that the technicians/engineers' presence was directly linked to the manufacturing activity, making the dormitory construction an integral part of the manufacturing process. The appellant cited precedents where courts allowed input service credit for maintenance of residential colonies in remote areas, emphasizing the essential connection between the dormitory construction and manufacturing activity.

The appellate tribunal examined the location of the dormitory, finding that it was within the factory premises as confirmed by the appellant's response to the show cause notice. The tribunal noted that the dormitory's purpose was to accommodate technicians/engineers for immediate plant and machinery maintenance due to the factory's remote location. The tribunal distinguished the case from a previous judgment where a residential colony was located outside factory premises. Relying on a precedent where input service credit was allowed for maintenance of a residential colony in a remote area, the tribunal concluded that the dormitory construction was integral to the manufacturing activity. Additionally, the tribunal referenced a previous ruling in the appellant's favor regarding input service credit. Consequently, the tribunal set aside the impugned order, allowing the appeal and any consequential relief.

In summary, the tribunal's decision centered on the direct connection between the dormitory construction and the manufacturing activity, emphasizing the essential role of the technicians/engineers in plant maintenance. The tribunal's analysis of the dormitory's location within the factory premises and the precedents supporting input service credit for similar situations formed the basis for allowing the appellant's claim for Cenvat Credit on construction services related to the dormitory.