2014 (7) TMI 397 - AT - Central Excise

CENVAT Credit - Repair and maintenance service - Service rendered as residential premises - Nexus with manufacturing activity - Held that - following the decision of the Hon ble Bombay High Court in the case of Mani-garh Cement (2010 (10) TMI 10 - BOMBAY HIGH COURT) and the Hon ble Gujarat High Court in the case of Gujarat Heavy Chemicals Ltd. (2011 (5) TMI 132 - GUJARAT HIGH COURT), the input service credit on repair and maintenance of the residential colony of the staff is not admissible. Accordingly, I do not find any infirmity in the order passed by the Commissioner (Appeals) - Decided against assessee.

Summary

Issues:
Denial of CENVAT credit on maintenance and repair charges for residential premises in manufacturing activity.

Analysis:
The case involves a dispute over the denial of CENVAT credit on maintenance and repair charges for residential premises used in the manufacturing activity of Cement. The appellants claimed the credit, arguing that providing residential quarters to staff is directly related to the manufacturing activity. The adjudicating authority and Commissioner (Appeals) denied the credit, citing lack of connection with manufacturing activity.

The appellant's counsel referred to a judgment by the Hon'ble Andhra Pradesh High Court in a similar case, where input service credit on maintenance of staff colony was allowed. The court emphasized the importance of facilities like housing colonies in enhancing employee productivity and directly linked the maintenance of the residential colony to the manufacturing activity, contrary to the adjudication order's view.

On the other hand, the respondent's representative cited decisions by the Hon'ble Bombay High Court and Hon'ble Gujarat High Court, which disallowed CENVAT credit on repair and maintenance services in residential colonies, emphasizing the necessity of establishing a nexus between the services rendered and the business activity to qualify as input services.

The appellant's counsel highlighted that the decision of the Hon'ble Supreme Court in a related case was referred to a Larger Bench, and the Hon'ble Bombay High Court allowed credit for outdoor catering, suggesting a broader interpretation of input services. However, the presiding judge, after considering all arguments and precedents, sided with the decisions of the Hon'ble Bombay High Court and Hon'ble Gujarat High Court, concluding that the input service credit on repair and maintenance of the residential colony is not admissible in this case. Therefore, both appeals filed by the appellants were rejected based on the lack of nexus between the services and the manufacturing activity.

In conclusion, the judgment highlights the importance of establishing a direct connection between services rendered in residential colonies and the core business activity to qualify for CENVAT credit. The conflicting decisions by different High Courts underscore the need for clarity and consistency in interpreting input services under the CENVAT Credit Rules, 2004.