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2018 (12) TMI 936 - HC - Central ExciseCENVAT Credit - input services - guest houses located next to the factory premises - scope of SCN - Held that - The term input service contained in CENVAT Credit Rules 2004, contains certain exclusion clause. Clause (C), inter alia, excludes travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily, for personal use or consumption of any employee. Accordingly, if the guest houses were utilized by the Assessee for extending benefit to the employees, for the personal use or consumption, the Assessee was not entitled to avail CENVAT credit thereof. Even in relation to a guest house which may not have been situated close to the manufacturing unit of the Assessee, if it is pointed out that the use thereof was not for the personal use or consumption of the employees, exclusion clause in the definition of input service, may not apply. In the circumstances, while the Tribunal has already remanded the issue for fresh consideration, we do not interfere with the remand order. Appeal disposed off.
Issues:
1. Remanding of appeal to original adjudicating authority for an issue not raised in show cause notice. 2. Credit eligibility for guest houses next to and away from the factory premises. 3. Jurisdiction of CESTAT to decide issues beyond the show cause notice. 4. Usage of guest houses by employees for official work affecting eligibility of input services. Issue 1: Remanding of appeal The Appellant, a Private Limited Company engaged in manufacturing, claimed input credit for services related to guest houses at various locations. The Department issued a show cause notice questioning the credit. The Assessing Officer confirmed the demand, leading to an appeal before the Tribunal. The Tribunal remanded the matter to the Assessing Officer, distinguishing guest houses for personal employee use from those near the factory premises, allowing credit for the latter. The High Court observed the exclusion clause in CENVAT Credit Rules 2004 regarding personal employee benefits and disagreed with the Tribunal's test, emphasizing that the location alone should not determine credit eligibility. The Court upheld the remand order but directed a fresh consideration without the Tribunal's specific tests. Issue 2: Credit eligibility for guest houses The key question was whether the Appellant could avail CENVAT credit for services related to guest houses, considering the exclusion clause for personal employee benefits. The Tribunal differentiated between guest houses near and away from the factory premises, allowing credit for the former. The High Court highlighted the need to prove that guest houses were not used for personal employee consumption, emphasizing that proximity to the factory alone should not determine credit eligibility. The Court allowed the Appellant to demonstrate to the Assessing Officer that the guest houses were not used for personal employee benefits, maintaining an open stance on all contentions. Issue 3: Jurisdiction of CESTAT The Tribunal's jurisdiction to decide issues beyond the show cause notice was questioned. The High Court acknowledged the Tribunal's authority to remand the matter but disagreed with the specific tests applied. The Court emphasized the need to prove that guest houses were not used for personal employee benefits, irrespective of their proximity to the factory premises. The Court upheld the remand order but directed a fresh consideration without the Tribunal's specific tests, allowing the Appellant to present their case to the Assessing Officer. Issue 4: Usage of guest houses by employees The eligibility of input services hinged on whether guest houses were used for personal employee consumption. The Tribunal differentiated between guest houses near and away from the factory premises, allowing credit for the former. The High Court stressed the importance of proving that guest houses were not used for personal employee benefits, emphasizing that proximity to the factory alone should not determine credit eligibility. The Court allowed the Appellant to demonstrate to the Assessing Officer that the guest houses were not used for personal employee benefits, maintaining an open stance on all contentions.
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