2016 (4) TMI 24 - AT - Service Tax

Admissibility of Cenvat credit - Security services provided to the residential colony of the employees situated adjacent to the factory premises - Appellant contended that residential colony is a necessity for running 24 hours production in the factory therefore security services provided to the residential colony is in relation to the manufacturing of final product - Held that - by following the judgment of M/s. Manikgarh Cement Vs. CCE, Nagpur 2010 (10) TMI 10 - BOMBAY HIGH COURT , the Cenvat credit in respect of Security Services provided to the residential colony is not admissible. Hence the demand of Cenvat credit is upheld. Imposition of penalty - Held that - the issue is not free from doubt and it involves interpretation of definition of input and input services, therefore the appellant is not liable for penalty in the facts and circumstances of the case. Therefore, the penalty imposed is set aside. - Decided partly in favour of appellant

Summary

Issues:
Admissibility of Cenvat credit for security services provided to the residential colony of employees.

Analysis:
The judgment pertains to an appeal against an Order-in-Appeal passed by the Commissioner (Appeals) Central Excise & Customs, Nagpur, where the appellant's appeal was rejected. The issue revolves around the admissibility of Cenvat credit for security services provided to the residential colony adjacent to the factory premises. Both lower authorities deemed the credit inadmissible, stating that the services were not related to the manufacturing of the final product. The Ld. Commissioner (Appeals) relied on a judgment of the Hon'ble Bombay High Court in M/s. Manikgarh Cement Vs. CCE, Nagpur. The appellant contested this decision, arguing that the residential colony is essential for continuous factory operations, thus making the security services integral to the manufacturing process. Reference was made to a judgment of the Hon'ble Andhra Pradesh High Court in a similar case. The Revenue, represented by Ld. Asstt. Commissioner (A.R.), supported the findings of the impugned order.

Upon thorough consideration of the arguments presented, the Tribunal acknowledged conflicting judgments from the Hon'ble Andhra Pradesh High Court and the Hon'ble Bombay High Court. However, as the bench falls under the jurisdiction of the Hon'ble Bombay High Court, the judgment in M/s. Manikgarh Cement was deemed binding. Consequently, the Tribunal upheld the decision that Cenvat credit for security services provided to the residential colony was not admissible. Regarding the penalty imposed, the Tribunal noted conflicting judgments on the issue's merits. The Hon'ble Bombay High Court referenced a case involving Maruti Suzuki Ltd, which was referred to the Larger Bench of the Hon'ble Supreme Court. Due to the legal complexity surrounding the interpretation of the definition of input and input services, the Tribunal concluded that the appellant was not liable for the penalty. As a result, the penalty imposed by the lower authority was set aside, and the impugned order was modified accordingly, partially allowing the appeals on the discussed terms.