2018 (2) TMI 1487 - AT - Central Excise

CENVAT credit - common input services for all divisions - whether the appellant are entitled for the CENVAT credit on common input services namely gardening, canteen, premises maintenance, housekeeping, fire protection etc. for all divisions situated in the premises at Kanjur Marg? - Held that - except outdoor catering services, all other services are used in or in relation to the running of the factory which is engaged for production of final product, therefore services received are admissible for inputs credit - there is no dispute, it is common amenities such as gardening, canteen, premises maintenance, housekeeping, fire protection etc. which are commonly used for all the divisions located in the premises of the appellant s factory. Therefore it is evident that the entire service was not used by the appellant themselves but part of the services was attributed to other divisions. Even as per Rule 7 of CENVAT Credit Rule, if the common services are related to various units of one company the same should be distributed as per turnover of individual unit. On this analogy also though the appellant are entitled for the CENVAT credit but not for the whole of the credit but only to the extent it is attributed to the turnover of the appellant s unit - it needs to be re-quantified in accordance with the turnover of the appellant s unit vis-a-vis total turnover of all the units - matter on remand. Outdoor catering services - Held that - the outdoor catering service is provided for the personal consumption of the employees. As per the exclusion clause in the definition of input service the outdoor catering service used for personal consumption of the employee is clearly excluded therefore the appellant is not entitled for CENVAT credit in respect of outdoor catering services - credit not allowed. Partly decided against appellant and part matter on remand.

Summary

Issues: Entitlement of CENVAT credit on common input services, specifically outdoor catering services, for all divisions within a factory premises.

Analysis:
The issue at hand revolved around the entitlement of the appellant for CENVAT credit on common input services utilized by various divisions within a factory premises. The appellant was alleged to be ineligible for taking credit on input services shared among all divisions operating in the factory. The show-cause notice led to the impugned Order-in-Original, which was challenged by the appellant through an appeal before the Commissioner (Appeals) and subsequently before the Tribunal.

The appellant's counsel argued that since there was a common factory premises housing various divisions under one umbrella company, and the bills for services were in the name of the Transformer division, the credit should be admissible. It was emphasized that no other division availed any part of the credit. The counsel relied on several judgments to support their argument.

On the other hand, the Revenue contended that while certain services were admissible for credit, outdoor catering services were excluded from the definition of input services effective from a specific date. Additionally, it was argued that since services were availed by different divisions independently registered, the credit could not be attributed solely to the appellant. The Revenue highlighted that outdoor catering services were for personal consumption of employees, thus falling outside the realm of input services.

After considering both sides' submissions, the Tribunal found that except for outdoor catering services, all other services used in or related to the factory's production process were eligible for input credit. However, common amenities like gardening, canteen, premises maintenance, housekeeping, and fire protection were shared among all divisions, necessitating a distribution of credit based on individual unit turnover. The Tribunal upheld that the appellant was entitled to credit only to the extent attributed to their unit's turnover. Regarding outdoor catering services, the Tribunal ruled that personal consumption by employees excluded it from input services, thereby denying CENVAT credit for such services. The Tribunal differentiated a prior judgment where personal consumption was not a factor, thus upholding the demand for CENVAT credit on outdoor catering services. The appeal was disposed of by remanding the matter to the Adjudicating Authority for re-quantification based on turnover proportions.