2020 (10) TMI 153 - AT - Central Excise

CENVAT Credit - input services or not - residential accommodation for the housing of their staff as well as their officers, working in the factory - nexus with output service or not - HELD THAT - This issue had come up before the Tribunal in the case of M/S ULTRATECH CEMENT LTD., (UNIT BIRLA WHITE) VERSUS CCE AND ST, JAIPUR II 2018 (3) TMI 1371 - CESTAT NEW DELHI wherein it was held that the assessee/appellant requires the residential colony for availability of the workers for manufacture of dutiable goods and, as such, security services is essential in order to maintain the residential/industrial colony of the appellant. Accordingly, I hold that the appellant is entitled to the Cenvat credit under dispute. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of cenvat credit on services received by the appellant for maintaining residential colony.
2. Interpretation of 'input service' under Rule 2(l) of the Credit Rules.
3. Appeal against the order-in-original disallowing cenvat credit.
4. Consideration of the concept of an industrial township for availing cenvat credit.

Analysis:
1. The appellant, engaged in manufacturing Lead and Zinc, received services for maintaining a residential colony near the factory. The services included repairs, maintenance, construction, and annual upkeep of various facilities. The appellant availed cenvat credit on these services, but a show cause notice was issued proposing denial of credit amounting to ?25,74,883 on the grounds that the services were not directly or indirectly used in or in relation to the manufacture of final products.

2. The appellant contended that the input services were indeed used in relation to the manufacture of final products as part of their business activity. However, the Assistant Commissioner, in the order-in-original, upheld the denial of cenvat credit, relying on a previous case law. Subsequently, the Commissioner (Appeals) also confirmed the denial of credit, along with interest and penalty, leading to the appellant filing an appeal before the Tribunal.

3. During the appeal before the Tribunal, both sides were heard, and the Tribunal referred to a previous case involving Ultratech Cement Ltd. The Tribunal noted that the appellant's residential colony was essential for the availability of workers to run the factory round the clock, considering it as an industrial township. The Tribunal found the denial of credit based on the location of the colony vague and not factual, ultimately allowing the appeal and setting aside the impugned order.

4. The Tribunal's decision emphasized the significance of the industrial township concept in determining the eligibility for cenvat credit. It highlighted the necessity of the residential colony for the manufacturing process, acknowledging the essential role it played in ensuring the availability of competent workers for the factory's operations. By recognizing the unique circumstances of the appellant's location and the purpose of the residential colony, the Tribunal allowed the appeal and granted consequential relief in accordance with the law.