2017 (5) TMI 872 - AT - Central Excise

CENVAT credit - input service - construction of residential building in the factory premises for the employees - whether the Cenvat credit in respect of service of construction of residential building in the factory premises for the employees is admissible as input service or otherwise? - Held that - the credit in respect of construction service of workers quarters in the factory premises of the appellant is admissible input service and the Cenvat credit is permissible - reliance placed in the case of Bajaj Hindusthan Ltd. Versus Commissioner of Central Excise, Meerut 2015 (9) TMI 1222 - CESTAT NEW DELHI , where the credit on construction service and/or service related to the residential building has been allowed - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues involved: Whether Cenvat credit for the construction of residential building in the factory premises for employees is admissible as an input service or not.

Analysis:
1. The appellant's counsel argued that the construction service of workers' colony in the factory premises, meant for smooth factory operation, is a business-related expenditure allowed under the Income Tax Act. Citing precedents like Bajaj Hindustan Ltd. and ITC Ltd., the counsel contended that such services qualify as input services for business activities.

2. The appellant also referenced the interpretation provided by the Bombay High Court in Ultratech Cement Ltd. case, emphasizing that any service used for business activity should be considered an admissible input service. Therefore, the construction service of workers' quarters should be allowed as an input service.

3. On the contrary, the Revenue's representative argued that the construction of workers' quarters is a welfare activity not directly linked to the manufacturing or business activities of the appellant. Citing cases like Manigarh Cement and Clariant Chemicals India Ltd., it was contended that the credit for construction service of workers' quarters should not be allowed.

4. The Tribunal analyzed the arguments and precedents cited by both sides. It noted that in previous cases like Bajaj Hindustan Ltd., ITC Ltd., and Port Officer Gujarat Maritime Board, credits for construction services related to residential buildings were allowed. The Tribunal distinguished the Manikgarh Cement case, where the residential quarters were outside the factory, from the present case where workers' quarters were within the factory premises, leading to a decision in favor of allowing the credit.

5. The Tribunal found that the facts of the cases cited by the Revenue were different from the present case and concluded that the credit for the construction service of workers' quarters in the factory premises is indeed an admissible input service. Consequently, the impugned order was set aside, and the appeal was allowed.