2014 (10) TMI 90 - AT - Central Excise

CENVAT Credit - input services - manpower supply agent service - Service of first-aid facilities to the workers - Nexus with manufacturing activity - Held that - Providing of first-aid facilities to the workers, whether in the factory or in mines is the requirement of the Factories Act, 1948 and also the Mines Act, 1952 and if a manufacturer wants to carry on manufacturing activities, he has to comply with the provisions of the Factories Act and the Mines Act. In view of this, the availment of service for maintenance of the first-aid facilities for the workers has to be treated as the service used in or in realtion to the manufacture of final products. I find that the same view has been taken by the Hon ble Gujarat High Court in the case of Ferromatik Milacron India Ltd. (2010 (4) TMI 649 - GUJARAT HIGH COURT). Under the provisions of Section 46 of the Factories Act, it is mandatory for the employer to provide canteen services to the staff. Thus, provision of canteen services is a statutory requirement. Provision of canteen services being indispensable, it is incumbent on a manufacturer of goods, to provide the same if he desires to run his factory. In view of the definition of input service which means any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products, the input service does not have to used directly in the manufacture of final products, it may be a service which is only indirectly used in relation to the manufacture of final products. In the circumstances, canteen services which are indispensable in relation to manufacture of the final products would certainly fall within the ambit of input service as defined under the Rules. impugned order denying the cenvat credit is not sustainable - Decided in favour of assessee.

Summary

Issues:
1. Whether availing services for maintaining first-aid facilities for workers can be considered as an activity in or in relation to the manufacture of final products for the purpose of availing cenvat credit under Central Excise Law.

Analysis:
The appellant, a cement plant engaged in manufacturing cement and clinker, availed services from manpower supply agents for hiring trained persons to provide first-aid to workers, as required by the Factories Act, 1948, and Mines Act, 1952. The dispute arose when the department contended that these services had no nexus with manufacturing, leading to a demand for recovery of cenvat credit. The Asstt. Commissioner confirmed the demand and imposed a penalty, a decision upheld by the Commissioner (Appeals). The appellant argued that compliance with the Factories Act and Mines Act is essential for carrying out manufacturing activities, making the maintenance of first-aid facilities integral to the manufacturing process. Citing a judgment by the Hon'ble Gujarat High Court in a similar case, the appellant contended that services like these should be considered as activities in or in relation to the manufacture of final products, thus eligible for cenvat credit.

The Commissioner (Appeals) and the department, represented by the learned DR, maintained that the maintenance of first-aid facilities did not directly relate to the manufacture of final products. However, the tribunal, after considering the arguments from both sides and examining the relevant legal provisions, including the definition of 'input service' under Rule 2(l) of the Rules, found in favor of the appellant. The tribunal noted that providing first-aid facilities to workers is a statutory requirement under the Factories Act and Mines Act, and compliance with these laws is necessary for carrying out manufacturing activities. Drawing on the judgment of the Hon'ble Gujarat High Court, the tribunal concluded that services like maintaining first-aid facilities, even if indirectly related to manufacturing, should be treated as activities in or in relation to the manufacture of final products. Therefore, the tribunal set aside the impugned order denying cenvat credit, allowing the appeal and the stay application filed by the appellant.