2017 (7) TMI 58 - AT - Central Excise

Input service credit - insurance of vehicle i.e. cars - construction service for making labour colony quarters - Revenue is of the view that the car is being used by the Director of the appellant s company and residential quarters have been constructed for the welfare of the labours/workers, therefore, the same do not qualify as input service as per Rule 2(l) of the CCR, 2004 - Held that - as the factory of the appellant is located in the remote area and the appellant has provided the residential facility to their workers who are working in their factory, in that circumstances, the appellant is entitled to avail cenvat credit on construction services for residential colony. Insurance of vehicle i.e. cars - Held that - the car has been owned by the appellant and being used in their factory, in that circumstance, relying on the decision of this Tribunal in the case of Technical Associates ltd. 2015 (12) TMI 544 - CESTAT NEW DELHI , the appellant is entitled to avail cenvat credit on insurance charges for car. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Denial of input service credit on construction service for making labour colony quarters and insurance of vehicle.

Analysis:
The appellant appealed against the denial of input service credit on construction service for labour colony quarters and vehicle insurance. The appellant's factory is situated in a remote area, prompting the construction of residential quarters for workers and availing cenvat credit on construction service. Additionally, cenvat credit was claimed on insurance charges for a car owned by the company. The Revenue contended that the car was used by the Director and the residential quarters were for worker welfare, not qualifying as input services under Rule 2(l) of the Cenvat Credit Rules, 2004.

The appellant cited precedents where the High Court and Tribunal allowed cenvat credit for construction in remote areas and insurance of company-owned cars. Conversely, the Revenue referred to cases stating that services in residential quarters are not eligible for cenvat credit due to being welfare activities. The Tribunal noted that the Revenue's cases did not address remote area facilities for workers, unlike the appellant's situation.

Relying on the High Court's decision and Tribunal precedents, the Tribunal emphasized the importance of residential facilities for worker efficiency and productivity. It was established that services crucial for maintaining staff colonies, like lawn mowing and garbage cleaning, qualify as input services under Rule 2(l) of the Cenvat Rules, 2004. Consequently, the appellant was deemed eligible for cenvat credit on construction services for residential colonies and insurance charges for company-owned cars used in the factory.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal with any consequential relief. The judgment highlighted the significance of remote area facilities for workers and the eligibility of cenvat credit for services directly linked to manufacturing activities, ultimately supporting the appellant's claim for input service credit.