2018 (3) TMI 1371 - AT - Central Excise

CENVAT credit - input service - security services deploy at the residential colony situated outside/adjacent to the factory - Rule 2 (l) of the CCR 2004 - Held that - the assessee/appellant require the residential colony and availability of the workers for manufacture of dutiable goods and, as such, security services is essential part in order to maintain the residential/industrial colony of the appellant - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues: Admissibility of input service credit for security services at a residential colony under Rule 2(l) of the Cenvat Credit Rules, 2004.

Analysis:
1. The Revenue contended that the Cenvat credit of service tax paid on security services used at a residential colony was not covered under the definition of input services, proposing disallowance under Rule 2(l) of Cenvat Credit Rules, 2004, along with a penalty. The appellant argued that providing security to the colony was essential for uninterrupted factory operations, citing relevant tribunal rulings and maintaining proper records.

2. The order-in-original confirmed the demand, disallowing the credit for security services at the residential colony, stating it was not directly or indirectly related to the manufacture of final products. The Commissioner (Appeals) upheld this decision, referencing previous tribunal rulings and certificates of cost accounting submitted by the appellant.

3. The appellant, in their appeal, emphasized the indirect nexus between the residential colony, factory operations, and the manufacture of final products. They cited relevant tribunal and High Court rulings to support their claim, highlighting the importance of the residential colony for continuous manufacturing.

4. The Revenue, relying on previous judgments, argued that the security services at the residential colony did not have a direct or indirect connection to manufacturing activities, citing the definition of input service under Rule 2(l) and emphasizing the need for a nexus with the business activity of the assessee.

5. The Tribunal found that the colony's proximity to the factory was crucial for the availability of competent workers to run the factory round the clock. It noted the remote location of the factory and the absence of municipal services, indicating the industrial nature of the residential colony. The Tribunal disagreed with the lower court's observation that the colony was away from the manufacturing area, concluding that security services were essential for maintaining the residential/industrial colony and allowing the Cenvat credit claimed by the appellant.