2016 (8) TMI 1060 - AT - Central Excise

Cenvat credit - services availed for construction and repair of the workers quarters - Held that - Hon ble Bombay High Court in the case of Commissioner of Central Excise, Nagpur vs. Manikgarh Cement 2010 (10) TMI 10 - BOMBAY HIGH COURT has held that rendering taxable services at the residential colony established by the assessee for the benefit of the employees, is not an activity integrally connected with the business of the assessee, therefore, do not constitutes input service so as to claim credit of service tax paid on such services under Rule 2(l) of the CENVAT Credit Rules, 2004. In view of the above observations Cenvat Credit of services used in maintenance, repair and civil construction used in the residential colony of the appellant is not admissible. Cenvat credit - utilization of items in making of support structures of the machinery - Held that - in view of the decision of Hon ble Allahabad High Court in the case of Bajaj Hindusthan Ltd. v. UOI 2013 (9) TMI 24 - ALLAHABAD HIGH COURT , the Appellant is not eligible to credit on the items used in making of the support structures for the machines. It has also been admitted by the Appellant before the first appellate authority that Appellant does not have any evidence to the effect that items are used in the maintenance and repairs of capital goods. Imposition of penalty - Held that - it is observed that admissibility of Cenvat Credit on the impugned inputs and services has remained a disputable point. Therefore, penalty imposed by the lower authorities upon the appellant is not justified and is set aside when on the issue contrary case laws were existing. - Decided partly in favour of assessee

Summary

Issues involved:
1. Eligibility of Cenvat Credit for maintenance and repair services of staff quarters.
2. Admissibility of Cenvat Credit for items used in support structures of machinery.

Analysis:

Issue 1: Eligibility of Cenvat Credit for maintenance and repair services of staff quarters:
The Appellant contended that Cenvat Credit for services related to construction and repair of workers' quarters should be allowed as it is essential for taxable activities. However, the Tribunal referred to a judgment by the Hon'ble Bombay High Court which emphasized the necessity of establishing a nexus between the services rendered and the business activities. The High Court held that services like repairs, maintenance, and civil construction in residential colonies do not qualify as input services for claiming Cenvat Credit. Consequently, the Tribunal ruled that Cenvat Credit for such services in the appellant's residential colony is not admissible.

Issue 2: Admissibility of Cenvat Credit for items used in support structures of machinery:
Regarding the Cenvat Credit for items used in support structures of machinery, the Tribunal cited a judgment by the Hon'ble Allahabad High Court. The High Court highlighted that the appellant failed to provide sufficient evidence to verify the claims of utilizing structural steel items in the fabrication of capital goods. Additionally, the Court clarified that the amendment to Rule 2(k) by a notification in 2009 was merely clarificatory in nature, excluding certain items used for construction from the definition of inputs for capital goods. As the appellant could not substantiate the use of items in the maintenance and repair of capital goods, the Tribunal concluded that the appellant was not eligible for Cenvat Credit on the items used in support structures for machinery.

Penalty Imposition:
The Tribunal observed that the admissibility of Cenvat Credit on the disputed inputs and services was a contentious issue, leading to the conclusion that the penalty imposed by lower authorities on the appellant was unjustified. Consequently, the Tribunal set aside the penalty, considering the existence of conflicting case laws on the issue.

Conclusion:
The Tribunal rejected the appellant's appeal concerning the confirmation of demand and interest. However, the penalty imposed on the appellant was overturned, allowing the appeal only in that regard. The order was pronounced in the open court, emphasizing the decision's operative part.