2017 (9) TMI 776 - AT - Central Excise

CENVAT credit - whether various services like repair, maintenance services and construction services used in the residential colony of the employees is eligible for CENVAT credit? - Held that - reliance placed in the case of Reliance Industries Ltd. Versus Commissioner of CE & ST (LTU), Mumbai 2015 (11) TMI 100 - CESTAT MUMBAI , where it was held that once the cost of service has been taken as expenses and included in the cost of final product, the credit is admissible - CENVAT credit in respect of services used in the residential colony, is admissible - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether services like repair, maintenance, and construction used in the residential colony of employees are eligible for CENVAT credit.

Analysis:
The appellant, represented by Shri J.C. Patel, argued that expenses incurred for such services were included in the value of the final product, making them eligible for credit. Reference was made to judgments in the cases of Coco Cola India Pvt. Ltd. and Reliance Industries Ltd. to support this argument. The appellant contended that the services were indirectly related to the manufacture of goods, as stated in the statement of the Dy General Manager (Finance) and supported by a Chartered Accountant's certificate.

On the other hand, the Revenue, represented by Shri S.V. Nair, maintained that CENVAT credit should only be allowed for services directly related to the manufacture of the final product. The Revenue cited the decision in the case of Manikgarh Cement, where the High Court of Bombay denied credit for services used in the residential colony, as they were deemed unrelated to manufacturing activities. Reference was also made to judgments in the cases of Indo Rama Synthetics (India) Ltd. and CCE vs Gujarat Heavy Chemicals Ltd. to support this position.

The Tribunal, led by Shri Ramesh Nair, considered both arguments and past judgments. It noted that the High Court's decision in the appellant's own case did not address the specific scenario where the cost of services was included in the expenses of the final product. By referencing the judgments in the cases of Coco Cola India Pvt. Ltd. and Reliance Industries Ltd., the Tribunal concluded that if the cost of services was absorbed in the cost of the final product, CENVAT credit should be allowed. The Tribunal emphasized that the expenses were considered as part of the cost of production and were not contested by the lower authorities. Therefore, the Tribunal held that CENVAT credit for services used in the residential colony was admissible, overturning the impugned order and allowing the appeal.