2024 (8) TMI 656 - AT - Central Excise

CENVAT Credit - input service - services used for construction of housing units in the colony for staff - nexus with the manufacturing activity or for transport or storage of the final product, or not - time limitation - suppression os facts or not. HELD THAT - The fact of remote location of the unit with difficult accessibility and lack of dwellings is undisputed. The Cenvat credit is availed for construction of barracks and hostel for the CISF personnel, that provide 24X7 security cover to the plant, while residential quarters were meant for the employees that were crucial to the smooth operation of the appellant s works and plant. It is evident from the language, that the expressions made use of in Rule 2(l) call for being considered in an unrestricted and uninhibited sense and thereby give the expression an exhaustive and a wider meaning so as to expand language and the arch of the expression used giving it the widest amplitude. The Hon ble apex Court in the case of GOOD YEAR INDIA LIMITED VERSUS COLLECTOR OF CUSTOMS, BOMBAY 1997 (9) TMI 100 - SUPREME COURT , had held that the expression such as would indicate the description to be illustrative and not exhaustive. Further, in the case of ADITYA BIRLA NUVO LTD. VERSUS CCE, BHAVNAGAR 2009 (1) TMI 117 - CESTAT AHMEDABAD , it has been held by the Tribunal that the words and includes provides for giving the definition of input services a wide interpretation, and bring into ambit those services which may not be considered as directly or indirectly relatable to manufacture. The intention being to provide the benefit of credit of service tax paid on such services. The rules specifically provide for allowing Cenvat credit of any service used by manufacturer, whether directly or indirectly in or in relation to the manufacturer of final products, and clearance of the final product up to the place of removal. In the facts and circumstances of the factory running 24X7, it is imperative for the assessee to provide and maintain the facility of residential colony adjacent to the factory, being located at a remote location - the construction services used in construction of barracks and hostel for the jawans and residential complex for the employees not only goes in to offer efficiency of the system and production of finished goods but also ensures and guarantees the unhindered production of the same. These services are certainly made use of in relation to manufacture of goods. Time Limitation - suppression of facts - HELD THAT - In any case the appellant were filing the returns regularly along with which they had also enclosed, copies of input, credit, registers, capital goods, registers, input service registers, clearly indicating the credit availed on a monthly basis as demonstrated by them during the course of hearing. Thus they cannot be charged for suppression as they had laid open their complete account details to the authorities - the Tribunal in the case of COMMISSIONER OF CENTRAL EXCISE, RAIPUR VERSUS RAJARAM MAIZE PRODUCTS 2010 (7) TMI 339 - CESTAT, NEW DELHI in a case where the issue involved is subject to different or alternative interpretations, had held that adoption of any particular interpretation cannot be held as a device adopted by the manufacturer/service provider to suppress the information with intention to evade payment of duty. Thus no suppression clause can be invoked in view of the fact that the appellant had disclosed all particulars required to be disclosed under law. The order of the lower authority is set aside - Appeal allowed.

Summary

Issues Involved:
1. Eligibility of Cenvat credit on services used for construction of housing units for staff.
2. Interpretation of the term "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004.
3. Nexus between the services used and the manufacturing activity.
4. Applicability of larger period of limitation for demand under Section 11A of the Central Excise Act, 1944.

Detailed Analysis:

1. Eligibility of Cenvat Credit on Services Used for Construction of Housing Units for Staff:
The appellant contended that the services used for constructing housing units for staff should qualify as "input services" under Rule 2(l) of the Cenvat Credit Rules, 2004. The appellant emphasized that providing residential accommodation was indispensable for the smooth functioning of the factory, especially given its remote location. They relied on the Andhra Pradesh High Court's decision in CCE vs. ITC Ltd., which held that services crucial for maintaining staff colonies were intrinsically linked to the manufacturing activity and thus qualified as "input services."

The Tribunal noted that the Cenvat credit was availed for constructing barracks and hostels for CISF personnel and residential quarters for employees, which were crucial for the smooth operation of the appellant's plant. The Tribunal referenced several judicial precedents, including the decisions in Good Year India Ltd., Coca Cola Private Limited vs. Commissioner of Central Excise, Pune, and Dell International Services India Private Limited v. CCE, Bangalore, which supported a broad interpretation of "input services" to include activities related to business.

2. Interpretation of the Term "Input Service" Under Rule 2(l) of the Cenvat Credit Rules, 2004:
The Tribunal examined the definition of "input service" under Rule 2(l), which includes services used directly or indirectly in relation to the manufacture of final products. The Tribunal emphasized that the term "includes" in the definition was intended to expand the scope of "input service" to cover a wide range of activities related to business.

The Tribunal cited several cases, including Aditya Birla Nuvo Limited vs. Commissioner of Central Excise, Bhavanagar, and the Karnataka High Court's decision in Commissioner of Central Excise, Bangalore vs. Millipore India Pvt. Ltd., which supported a wide interpretation of "input services" to include services that are indirectly related to the manufacturing process.

3. Nexus Between the Services Used and the Manufacturing Activity:
The Tribunal considered whether the services used for constructing housing units had a nexus with the manufacturing activity. The Tribunal noted that the residential quarters and barracks were essential for the smooth functioning of the factory, especially given its remote location. The Tribunal referenced the decision in Hindustan Zinc Ltd vs. CCE Jaipur, which held that providing residential accommodation in remote locations was essential for the smooth operation of the factory and thus qualified as "input services."

The Tribunal also considered the decision in CCE Vs. Endurance Systems India Ltd., which held that services included in the CAS-4 (Cost Accounting Standards) would form part of the manufacturing cost and thus qualify for Cenvat credit.

4. Applicability of Larger Period of Limitation for Demand Under Section 11A of the Central Excise Act, 1944:
The Tribunal addressed the issue of limitation, noting that the appellant had regularly filed returns and disclosed all relevant details, including input credit registers. The Tribunal held that there was no suppression of facts or intent to evade duty, and thus the extended period of limitation could not be invoked. The Tribunal referenced several cases, including CCE, Chennai vs. Essar Engineering & Contractors Ltd. and Sujana Metal Products Ltd. vs. CCE, Hyderabad, which supported the view that adoption of a particular interpretation could not be considered as suppression of facts.

Conclusion:
The Tribunal concluded that the appellant was entitled to availment of input service tax credit for the construction of houses for its employees and barracks and hostels for the jawans. The Tribunal also held that the demand was barred by limitation, as the appellant had disclosed all relevant details in their returns. Consequently, the order of the lower authority was set aside, and the appeal was allowed with consequential relief as per law.