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2017 (1) TMI 1280 - AT - Central ExciseCENVAT credit - Guest House Maintenance charges - Colony Up-keeping charges - Held that - since the factory is located at a remote area in Gulbarga District of Karnataka and there is no nearby township where the employees of the company can get accommodation therefore it becomes necessary for the appellant to provide a Guest House as well as residential colony for its employees and all these things are directly linked to the manufacturing activity - reliance placed in the case of DCM Shriram Consolidated Ltd. 2015 (2) TMI 45 - CESTAT NEW DELHI , where the Tribunal has allowed the cenvat credit on Maintenance of Guest House by observing that up-keeping of guest house which is adjacent to the factory premises is necessary business requirement inasmuch as the factory is located outside the said complex and similarly the maintenance of residential premise has also been held to be associated with the business activity. Colony Up-keeping charges - Held that - reliance placed in the case of COMMISSIONER OF CUS. & C. EX., HYDERABAD-III Versus ITC LIMITED 2011 (11) TMI 516 - ANDHRA PRADESH HIGH COURT , where it was held that the staff colony being directly and intrinsically linked to its manufacturing activity could not therefore be excluded from consideration - 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. Credit allowed - appeal allowed - decided in favor of assessee.
Issues:
Three appeals filed against a common impugned order dated 16.12.2011 by the Commissioner (Appeals) regarding the disallowance of cenvat credit on service tax paid on Guest House Maintenance and Colony Up-keeping charges. Analysis: Issue 1: Disallowance of Cenvat Credit The appellants, engaged in cement and clinker manufacturing, availed cenvat credit on duty paid on inputs, capital goods, and input services under Rule 3 of Cenvat Credit Rules, 2004. The Department disallowed certain credits of service tax, leading to show-cause notices and subsequent disallowance of irregularly availed cenvat credit under Rule 14 of the Cenvat Credit Rules, 2004. The Commissioner (Appeals) upheld the disallowance, prompting the appeals. The main contention was the denial of credit on Guest House Maintenance and Colony Up-keeping charges, which the appellants argued were integral to their business activities. Issue 2: Arguments and Submissions The appellant's counsel argued that the denial of cenvat credit on these charges was incorrect and against judicial precedents. They emphasized that during the relevant period, the definition of 'input services' was broad, covering any service used directly or indirectly in or in relation to the manufacture and clearance of final products. They cited various authorities to support their position, highlighting the necessity of Guest House Maintenance and Colony Up-keeping for their business operations. Issue 3: Decision and Rationale After hearing both parties and reviewing the records, the Tribunal found that the Guest House and Colony Up-keeping were essential due to the factory's remote location without nearby accommodation options. Citing precedents where similar activities were considered integral to business operations, the Tribunal allowed the cenvat credit on these charges. The Tribunal emphasized the direct link between these services and the manufacturing activity, setting aside the impugned order and granting relief to the appellant based on the cited decisions. In conclusion, the Tribunal ruled in favor of the appellant, allowing the cenvat credit on Guest House Maintenance and Colony Up-keeping charges, considering them crucial for maintaining business operations. The decision was based on the direct link between these services and the manufacturing activity, as established by relevant judicial precedents.
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