2017 (10) TMI 1368 - AT - Central Excise

CENVAT credit - Input service - housekeeping service - denial on account of nexus - Held that - Services in question are vital for keeping the factory including the shop-floor machines etc. clean and provides the requisite environment for carrying out the manufacturing process of paper and that the services in question are thus related to the manufacturing activity - Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of input service credit on housekeeping services for the period from April 2013 to January 2014.
2. Appeal against the order confirming the demand, interest, and penalty imposed by the original authority and upheld by the Commissioner (Appeals).

Analysis:
1. The case involved a show cause notice seeking to disallow input service credit availed by the appellant on housekeeping services provided by specific service providers. The notice alleged that these services were not covered under the CENVAT Credit Rules, 2004, as they were deemed to have no direct or indirect relation to the manufacturing of the final products. The appellant was asked to justify why the CENVAT credit amounting to ?19,42,614 should not be disallowed and recovered, along with interest and penalty under Rule 15(1). The appellant contested this, emphasizing the essential nature of housekeeping services for maintaining cleanliness in the factory, including the shop-floor and machines, which are crucial for the manufacturing process of paper and paper products. The appellant argued that as per Section 11 of the Factories Act, 1948, maintaining a clean and hygienic factory environment is a prerequisite for manufacturing activities.

2. During the proceedings, the appellant's counsel highlighted that a similar issue had been addressed in the appellant's favor in a previous tribunal decision for a subsequent period. Referring to Final Order No. 41601 to 41602/2017, the Tribunal had allowed CENVAT credit on services like housekeeping. Citing precedents such as Commissioner of Central Excise, Delhi Vs. Pricol Ltd. and Easun MR Tap Changers P. Ltd. Vs. Commissioner of Central Excise, LTU, Chennai, along with a decision by the Madras High Court in the case of Commissioner of Central Excise Vs. Rane TRW Steering Systems Ltd., it was established that the issue had already been settled in favor of allowing CENVAT credit on such services. Consequently, the impugned order was set aside, and the appeal was allowed with any necessary consequential relief.

In conclusion, the judgment resolved the issue of denying input service credit on housekeeping services by referencing previous decisions that supported the appellant's position. The Tribunal's decision in similar cases and the application of relevant legal provisions led to setting aside the original order and allowing the appeal in favor of the appellant.