2016 (11) TMI 431 - AT - Central Excise

Denial of CENVAT credit - demand of tax with interest and penalty - House keeping services - Held that - Housekeeping services are undisputedly used for keeping the factory premises neat and clean which is a statutory requirement under Section 11 of the Factories Act, 1948. The service has to be treated as services used by the manufacturer in or in relation to the manufacture of final product as without compliance with the said provisions of the Factories Act, manufacturing operations are not possible. Without the factory being clean tidy, the efficiency of the machinery would get drastically reduced. Further, it should be borne in mind that Housekeeping is crucial for safe workplaces. It can help in preventing injuries and improve the productivity and morale of the employees. It can also help an employer avoid potential fines for non-compliance. Slips, trips and falls are the leading causes of nonfatal occupational injuries or illnesses involving days away from work which is due to bad Housekeeping, which would in turn affect productivity - CENVAT credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility of Cenvat Credit on housekeeping services
- Denial of credit for service tax paid under specific categories
- Imposition of equal penalty for credit denied
- Interpretation of statutory requirements under the Factories Act, 1948

Analysis:

The case involved three appeals arising from a common Order-in-Appeal, where the appellant, a manufacturer of Lubricating Oil Additives, availed Cenvat credit for excise duty paid on inputs and services. The department issued show cause notices proposing to deny credit for input services from December 2010 to June 2011. The adjudicating authority confirmed the demands, leading to appeals. The Commissioner (Appeals) allowed credit pre-01.04.2011 but disallowed it post this date for specific services like housekeeping, rent-a-cab, and outdoor catering.

The appellant contested the denial of credit post-01.04.2011, specifically for housekeeping services. The appellant's counsel argued that maintaining cleanliness in the production area was essential for quality control in manufacturing lubricating oil additives. They cited a tribunal case to support their contention. The Revenue, represented by the AR, supported the Commissioner's decision to deny credit for housekeeping services, emphasizing its relevance to final product manufacturing.

The Judicial Member analyzed the case records focusing on the eligibility of Cenvat Credit for housekeeping services. It was established that housekeeping services were crucial for maintaining a clean and safe workplace, complying with statutory requirements under the Factories Act, 1948. The judgment highlighted the importance of housekeeping in preventing injuries, improving productivity, and ensuring compliance with safety regulations. The decision favored the appellant concerning housekeeping services, rejecting the other appeals not contested by the appellant.

In conclusion, the judgment allowed the appeal related to housekeeping services while rejecting the appeals not contested by the appellant. The decision emphasized the significance of maintaining cleanliness in the factory premises for efficient manufacturing operations and employee safety. The judgment was pronounced on 05-05-16, disposing of all three appeals accordingly.