2015 (2) TMI 917 - AT - Central Excise

Cenvat credit on Outdoor catering Service and House Keeping Service - Welfare activities as mentioned in agreement or Covered under Input service definition as activities relating to business - Held that - In our view, just because the agreement mentions these activities as welfare , the same do not become welfare activities, as from the language of the agreement, it is clear that it is an obligation of the appellant company to provide each visiting personnel of M/s SMC, Japan, with furnished western style house with all the facilities including cooking facility. Therefore, in our prima facie view, these services would be covered by the activities relating to business as these activities have nexus with the manufacturing business of the appellant. As emphasized by Hon ble Bombay High Court in the case of Ultratech Cement 2010 (10) TMI 13 - BOMBAY HIGH COURT , for categorizing a service as input service covered by Rule 2(l) of Cenvat credit Rule 2004, what is relevant is as to whether it has nexus with the manufacturing business of the appellant in contrast to the nexus with the manufacture of the final product in case of Input. Prima facie case in favour of assessee . The requirement of pre-deposit of the Cenvat credit demand, interest and penalty is, therefore, waived for hearing of the appeal and recovery thereof is stayed. - The stay applications are allowed.

Summary

Issues:
1. Admissibility of Cenvat credit for outdoor catering and house-keeping services provided under a license agreement.
2. Interpretation of whether such services fall under "welfare activities" or "activities relating to business."
3. Application of relevant case laws to determine the eligibility of Cenvat credit.

Analysis:
1. The appellant, a manufacturer of motor vehicles, availed Cenvat credit for Central Excise Duty and Service Tax paid on input and capital goods. The dispute arose regarding the admissibility of Cenvat credit for outdoor catering and house-keeping services provided under a license agreement with M/s Suzuki Motors Corporation, Japan.

2. The Department contended that these services were of a "welfare nature" and thus not eligible for Cenvat credit. The Commissioner confirmed the demand for Cenvat credit along with interest and penalty. The appellant argued that the services were part of their business obligations under the agreement and should be considered as "activities relating to business," citing relevant case laws to support their claim.

3. The Tribunal analyzed the agreement terms, noting that the appellant had to provide furnished housing with facilities to visiting personnel of M/s SMC, Japan. The Tribunal observed that just because the agreement labeled these services as "welfare," it did not automatically exclude them from being considered as business-related activities. Referring to precedents, the Tribunal emphasized the nexus of these services with the manufacturing business of the appellant.

4. The Tribunal differentiated between services directly related to manufacturing and those supporting the business operations, concluding that the outdoor catering and house-keeping services were integral to the manufacturing process. It held that the services were covered under "activities relating to business" and not merely welfare activities. The Tribunal found in favor of the appellant, waiving the pre-deposit requirement and staying the recovery of Cenvat credit demand, interest, and penalty.

5. In summary, the Tribunal ruled in favor of the appellant, allowing the Cenvat credit for outdoor catering and house-keeping services as they were deemed essential for the manufacturing business. The judgment highlighted the importance of the nexus between services and business operations in determining Cenvat credit eligibility, setting aside the Department's view that these services were solely welfare activities based on the agreement's classification.