2016 (2) TMI 862 - AT - Central Excise

Input credit of service tax - Cenvat credit of service tax - Cenvat credit in respect of services utilized for the maintenance or repairs of residential buildings/ quarters - as per Revenue these services will not fall under the ambit of input service in terms of Rule 2 (l) of Cenvat Credit Rules, 2004, notice dated 19/8/11 was issued to disallow and recover the credit - Held that - Similar issue was under consideration by in the case of CC & CE., Hyderabad - III vs. ITC Limited (2011 (11) TMI 516 - ANDHRA PRADESH HIGH COURT ) wherein held that staff colony provided by the company, being directly and intrinsically linked to its manufacturing activity could not therefore be excluded from consideration of credit. Consequently, the services which were crucial for maintaining the staff colony, such as lawn mowing, garbage cleaning, maintenance of swimming pool, collection of household garbage, harvest cutting, weeding etc. necessarily had to be considered as input services falling within the ambit of Rule 2 (l) of the Cenvat Credit Rules, 2004. Cenvat credit of service tax paid on various services which were utilized for residential colony/township of the appellant s factories are eligible for credit. - Decided in favour of assessee.

Summary

Issues:
- Eligibility of Cenvat credit for maintenance or repair services of residential buildings/quarters in a manufacturing unit.

Analysis:

The appeal in question challenges an order by the Commissioner (Appeals) regarding the eligibility of Cenvat credit for services used in the maintenance or repair of residential buildings/quarters in a manufacturing unit. The appellants, engaged in the manufacture of Lead, Zinc, and non-Ferrous Metals Concentrate, availed Cenvat credit amounting to Rs. 12,93,573 for such services. The Revenue contended that these services did not qualify as "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004, leading to a demand notice. The Original Authority upheld the demand and imposed a penalty, a decision affirmed by the Commissioner (Appeals), prompting the appellant to file the present appeal.

The appellant argued that any service related to business should be eligible for Cenvat credit, emphasizing that the maintenance and repair of residential quarters were integral to their business operations. They presented a certificate from a Chartered Accountant supporting the inclusion of such expenses in the final product's cost. Citing various case laws, including decisions by the Hon'ble High Court of Andhra Pradesh and different Tribunals, the appellant sought to establish the admissibility of the credit. On the other hand, the Revenue relied on a decision by the Hon'ble Bombay High Court in a similar case.

Upon reviewing the arguments and case precedents, the Tribunal delved into the concept of "input services" and the requirement of a direct nexus between services and the manufacture of final products. Referencing the decision of the Hon'ble High Court of Andhra Pradesh, the Tribunal concluded that services crucial for maintaining staff colonies, such as lawn mowing and garbage cleaning, should be considered "input services." Drawing from previous Tribunal decisions and High Court rulings, the Tribunal determined that services utilized for residential colonies or townships of a factory are indeed eligible for Cenvat credit. Consequently, the Tribunal allowed the appeal, acknowledging the appellants' entitlement to the input credit of service tax paid on maintenance or repair services related to residential buildings and quarters in their manufacturing unit.

In light of the above analysis and legal interpretations, the Tribunal found in favor of the appellants, granting them the input credit of service tax and allowing the appeal against the Commissioner (Appeals) order.