2018 (11) TMI 1452 - AT - Central Excise

CENVAT Credit - input services - health services - manpower supply services availed to maintain Occupational Health Centre (OHC) at the factory engaged in hazardous manufacturing process - Held that - Admittedly, health services are put under exclusion clause in 2012 amendment to CENVAT Credit Rules, 2004. Therefore, such health services if provided by a manufacture or service provider to its employees generally is no more to be treated as admissible credit but when there is statutory requirement to have provisions for first aid facility and primary treatment for employees in case of accident and injuries sustain by them and the said service is made available to other employees additionally without any extra expenditure, it cannot be excluded from the preview of availment of credit since to obtain licence and run such hazardous manufacturing unit, emergency health care facility by way of OHC is a basic requirement and the same has a relation to the manufacturing process. Denial of CENVAT credit on the ground that they fail to keep records of emergency treatment would not deprive the appellant to avail such credit, since it is made to meet a contingency/emergency situation and without any such hazardous accident also, the manpower engaged are entitled to get their remunerations. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of CENVAT credit on Service Tax paid for manpower supply services for maintaining "Occupational Health Centre" (OHC) at a hazardous manufacturing factory.

Analysis:
1. The appellant, engaged in manufacturing hazardous products, maintained an OHC at its factory to address medical exigencies for workers. The department disallowed CENVAT credit of Service Tax amounting to ?1,17,676 during an Excise Audit, leading to a demand for recovery. The appellant contended that OHC maintenance is mandatory under the Factory Act, 1948, and cited legal precedents to support the argument that first aid facilities for workers are integral to the manufacturing process, thus justifying CENVAT credit.

2. The Department, represented by the Assistant Commissioner, upheld the Commissioner (Appeals) decision and highlighted Rule 2(l)(c) of the CENVAT Credit Rules, 2004, which excluded manpower supply services from CENVAT credit eligibility since July 2012. It was also pointed out that the OHC was considered a Community Health Centre (CHC) where various employees, including contract labor, received general health treatment, implying that the Tribunal should not interfere with the original decision.

3. After considering arguments from both sides and examining relevant documents like the factory license and pollution control board certificates, it was established that the factory was hazardous and required an OHC as per statutory regulations. The appellant had paid 75% of the Service Tax under the Partial Reverse Charge Mechanism and had availed the credit. The Tribunal noted that the OHC was essential for emergency health care in a hazardous manufacturing unit, and denial of CENVAT credit based on lack of separate emergency treatment records was unjustified.

4. The Tribunal found that while health services were excluded from CENVAT credit in the 2012 amendment, the OHC's provision for first aid and primary treatment for employees in case of accidents was a statutory requirement. The facility's availability to other employees at no extra cost did not negate its relation to the manufacturing process. Denying credit due to lack of emergency treatment records was deemed unreasonable, as the OHC served as a contingency/emergency measure even without hazardous incidents.

5. Consequently, the Tribunal allowed the appeal, overturning the Commissioner of Central Tax (Appeals-I), Pune's decision. The appellant was deemed entitled to CENVAT credit for payments made to the service provider for maintaining the OHC, as it was a necessary and integral part of ensuring employee safety and compliance with statutory regulations.

*The judgment was pronounced in court on 26.11.2018.*