2014 (7) TMI 185 - AT - Central Excise

CENVAT Credit - Nexus with manufacturing activity - whether during the period from March 2007 to March 2010, they were eligible for Cenvat credit of service tax paid in respect of outdoor catering service for providing canteen facility to the workers in the factory, manpower supply service for maintenance of lawns and green belt around the factory and for maintaining cycle stand for the workers - Held that - Number of workers in the appellant s factory is more than 250 and the charges for providing canteen facility are not recovered from the workers. The appellant in terms of the provisions of Section 46 of the Factories Act are required to provide canteen facility to the workers for which they have availed the outdoor catering service and hence this service has to be treated as service availed in or in relation to manufacture of final product. As regards, the service of manpower supply for maintaining green belt and lawn, the same has been availed to comply with the directions of Rajasthan State Pollution Control Board under their letter dated 8th January 2008 under which while permitting the discharge of Industrial/Domestic effluents from the factory, the Pollution Control Board has put a condition that 33% of the total area of the factory premises shall be covered by the tree plantation. Since, without maintaining the green belt around the factory, the manufacturing operations would not be allowed, I am of the view the services for maintenance of lawn and green belt have to be treated as services used in or in relation to manufacture of final product or in other words this service has nexus with the manufacture of final product and, hence, would be eligible for Cenvat credit. I find that same view has been taken by the Tribunal in the case of CCE, Bhavnagar vs. Nirma Ltd. reported in 2010 (6) TMI 315 - CESTAT, AHMEDABAD and in the case of JBM Auto System Pvt. Ltd. vs. CCE, Chennai reported in 2011 (7) TMI 412 - CESTAT, CHENNAI . In view of this, denial of Cenvat credit in respect of the service availed for maintenance of lawn and green belt also not sustainable - Decided in favour of assessee.

Summary

Issues:
- Eligibility for Cenvat credit of service tax paid for outdoor catering service for canteen facility
- Eligibility for Cenvat credit of service tax paid for maintaining green belt and lawn
- Eligibility for Cenvat credit of service tax paid for maintaining cycle stand for workers

Analysis:

Issue 1: Eligibility for Cenvat credit of service tax paid for outdoor catering service for canteen facility:
The appellant, a manufacturer of chemicals, availed Cenvat credit on services like outdoor catering for providing canteen facility to workers. The department contended that these services lacked nexus with manufacturing and were not eligible for credit. The Assistant Commissioner upheld this view, leading to an appeal. The appellant argued that providing canteen facilities to over 250 workers was mandatory under the Factories Act, supported by judgments from various High Courts. The Tribunal found in favor of the appellant, citing precedents and statutory obligations, setting aside the denial of Cenvat credit for outdoor catering services.

Issue 2: Eligibility for Cenvat credit of service tax paid for maintaining green belt and lawn:
Another disputed service was the maintenance of green belt and lawn to comply with pollution control board directives. Failure to maintain these areas would hinder manufacturing operations. The appellant argued that these services were essential for manufacturing and thus eligible for Cenvat credit. The Tribunal agreed, referencing prior decisions and the necessity of complying with environmental regulations. Consequently, the denial of Cenvat credit for maintaining green areas was overturned.

Issue 3: Eligibility for Cenvat credit of service tax paid for maintaining cycle stand for workers:
The final issue concerned the maintenance of a cycle stand for workers. The appellant contended that this service was crucial for employee welfare and productivity. Citing a previous judgment in a similar case, the Tribunal ruled in favor of the appellant, stating that the service for maintaining the cycle stand was indeed eligible for Cenvat credit. The impugned order was deemed unsustainable, and the appeal was allowed with consequential relief.

In conclusion, the Tribunal found in favor of the appellant on all three issues, emphasizing the nexus between the services in question and the manufacturing process, as well as statutory obligations and environmental compliance. The impugned order was set aside, granting the appellant relief in availing Cenvat credit for the disputed services.