2018 (12) TMI 1105 - AT - Central Excise

CENVAT Credit - input services - outdoor catering services - club membership services - medical health services - Held that - As far as outdoor catering services is concerned the services have been obtained by the appellant company for all its employees in general while holding an event for the employee of the company as a whole. In that scenario the term personal use as in the above definition cannot be attributed to the given circumstances and cenvat credit cannot be denied on the outdoor services - In the present case also admittedly the cost of catering services has been born by the appellant company and has not been recovered from the employees. Such service is therefore held to be an input service for which the appellant was entitled to take the credit. Club membership fees - Held that - The adjudicating authorities below while denying the cenvat credit thereupon have held that there is no evidence produced by the appellant to prove any nexus of the services availed by the assessee to the business activity of the appellants. No doubt appellant was supposed to produce such evidence as may prove as to who actually paid the said fee. As it will be the deciding criteria as to whether the fee was paid for the company as a whole under any of its policy for enhancing employee efficiency or those have been born by the individual employee for the sake of their own entertainment. Apparently there is no such evidence on record - impugned order upheld - credit rightly denied. Health check up of employees - Held that - It cannot be ruled out that the good health of employee will make them readily available for rendering the activities related to business. The appellants are in telecommunication business. Their employees are required to function for long hours and even at odd hours. The health of an employee may affect the activity of the appellants business - the expenditure incurred by the appellant company for getting medical check-up of their employees though individually is definitely an input service - credit allowed. CENVAT Credit - capital goods - desktop - chairs - fire extinguishers - Held that - Any goods which are used for providing output service can be classified as the capital goods. Appellant admittedly are providing telecommunication services. Admittedly the services are provided through various servers. The individual employee to remain connected to those servers need computer/desk-top. Therefore these are opined as an indispensible tool used by the employees of the appellant company for providing the output services of telecommunications - credit allowed. It is only in case of factory of a manufacturer of final product that any equipment or appliances used in his office are excluded from the definition of capital goods. The appellant herein admittedly is not a factory. His activity is covered under Section 2 (a) (A) (2) of CCR 2004 and as such the credit cannot be denied merely holding these articles to technically be called as equipment or appliances. Keeping in view the same even the chairs used in the office of a telecommunication company are the capital goods. Fire extinguishers - Held that - Fire extinguishers are qualified under Chapter 84. Hence are the capital goods in view of Rule 2 (A) (i) of CCR. Otherwise also fire extinguishers are the statutory mandate for any premise to be sanctioned for its use - credit allowed. Denial of cenvat credit for Membership Fee of the Clubs upheld - other credits allowed - appeal allowed in part.

Summary

Issues Involved:
1. Cenvat credit on outdoor catering services.
2. Cenvat credit on membership fees of clubs.
3. Cenvat credit on health checkup of employees.
4. Cenvat credit on items like desktop, chairs, and fire extinguishers.

Issue-wise Detailed Analysis:

1. Cenvat Credit on Outdoor Catering Services:
The appellant argued that the outdoor catering services were used for events organized for employees and were related to the company's business activities, not for personal use. They cited statutory obligations under Section 46 of the Factories Act and relevant case laws. The Department countered that these services were rightly denied as input services. The Tribunal found that prior to April 1, 2011, there was no exclusion for personal use, making such services eligible for cenvat credit. For the period from April 2011 to September 2011, the Tribunal held that since the services were for all employees and not recovered from them, they could not be considered for personal use. Thus, the cenvat credit for outdoor catering services was allowed for the entire disputed period.

2. Cenvat Credit on Membership Fees of Clubs:
The appellant claimed that club membership fees were part of business development policies and essential for maintaining professional relationships. The Department argued that these fees were for personal benefit and rightly denied. The Tribunal upheld the denial, noting the appellant failed to provide evidence linking the fees to business activities. It referenced a decision where club fees for worker recreation were not eligible for credit, affirming the lower authority’s decision.

3. Cenvat Credit on Health Checkup of Employees:
The appellant contended that health checkups under the company's Medi-claim Policy were for business interest, enhancing employee efficiency. The Department maintained that the services were provided to individual employees, not the company. The Tribunal disagreed with the Department, stating that the expenditure was for business interest as employees’ health impacts business operations, especially in telecommunication services requiring long and odd hours. It cited a supportive decision and set aside the denial, allowing the cenvat credit for health checkups.

4. Cenvat Credit on Items Like Desktop, Chairs, and Fire Extinguishers:
The appellant argued that these items were essential for business operations and should be classified as capital goods. The Department contended that only specific categories mentioned in Rule 2 (a) (A) Clauses (i) (iii) of Cenvat Credit Rules qualify as capital goods. The Tribunal reviewed the definition of capital goods and concluded that desktops and chairs, being indispensable for providing telecommunication services, and fire extinguishers, being a statutory requirement, qualified as capital goods. It referenced a decision where similar items used by an insurance company were considered capital goods and set aside the denial, allowing the cenvat credit for these items.

Conclusion:
Except for the denial of cenvat credit for club membership fees, the Tribunal set aside the order under challenge and allowed the appeal partly.