2016 (7) TMI 1115 - AT - Central Excise

Cenvat Credit - eligible input services - guest house services - charges paid by them for accommodation of their employees at the Guest House at Gurgaon managed by their Head Office - Held that - The appellants have categorically asserted that their staff and executives associated with Bhiwadi Unit availed the room facilities at Gurgaon. These accommodation facilities are for official stay billed and paid by the appellant and forming part of their business expenditure. These are not for personal use of employees. - Credit allowed. - Decided in favor of assessee.

Summary

Issues:
Availability of service tax credit for accommodation of employees at Guest House managed by Head Office.

Analysis:
The appeal pertains to the denial of service tax credit by the Revenue on the accommodation charges paid by the appellant for their employees staying at a Guest House managed by the Head Office. The appellant, engaged in manufacturing of casting of Iron and Steel, availed the guest room facilities for their employees at the Guest House in Gurgaon and paid consideration along with service tax, claiming credit under the Cenvat Credit Rules, 2004. The Revenue objected to the credit on the grounds that the services were not taxable and did not qualify as "input services" for credit purposes. The Original Authority and the Commissioner (Appeals) upheld the denial of credit, leading to the appellant filing an appeal before the Tribunal.

The appellant's counsel argued that the taxability or classification of services is not within the jurisdiction of the authority where the credit is availed. It was emphasized that the appellant had discharged service tax and claimed credit accordingly, and the correctness of tax liability or classification is beyond their control. The counsel also highlighted that the employees availing the accommodation were directly associated with the business activities of the unit, justifying the credit availed. On the other hand, the Revenue's representative contended that the services were taxable only from a specific date and lacked nexus to the manufacturing activity of the appellant's unit, thus justifying the denial of credit.

Upon examining the records and arguments from both sides, the Tribunal focused on two main issues. Firstly, it addressed the jurisdictional aspect, citing legal precedents to establish that authorities at the recipient's end cannot determine the correct classification or tax liability of services. The Tribunal emphasized that the denial of credit at the recipient's end based on taxability of input services is not legally tenable. Secondly, it evaluated the eligibility of the Guest House services for credit, concluding that the accommodation expenses were related to the business activities of manufacturing and selling excisable goods. The Tribunal found that the objection raised by the Revenue regarding the eligibility of the services for credit was untenable.

In light of the analysis and legal precedents, the Tribunal set aside the impugned order, allowing the appeal and granting the appellant the service tax credit for the accommodation expenses incurred at the Guest House managed by the Head Office in Gurgaon.