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TMI Blog2018 (2) TMI 1745X X X X Extracts X X X X X X X X Extracts X X X X ..... may not in all cases, be in or in relation to manufacture of the final product, but they may be integrally connected and that there should be nexus with manufacture. The garden maintenance service would fall within the definition of input service , in terms of Rule 2(1) of the Cenvat Credit Rules, 2004 - he Tribunal was not right in denying input service credit availed on garden maintenance service. - decided in favor of assessee. - Civil Miscellaneous Appeal Nos. 65, 66 of 2018 and C.M.P. Nos. 937, 938 of 2018 - - - Dated:- 12-2-2018 - S. Manikumar and V. Bhavani Subbaroyan, JJ. For Appellant: P. Srija for M. Karthikeyan For Respondents: V. Sundareswaran JUDGMENT S. Manikumar, J. 1. Civil Miscellaneous Appeals are filed against the common order, made in Appeal Nos. 119 and 120 of 206, dated 29/11/2016, on the file of the CESTAT, Madras. 2. Facts leading to the appeals are that the Commissioner of Central Excise and Central Tax, Chennai, respondent herein, is a registered manufacturer of motor vehicle parts. They were issued with two show cause notices, alleging they have availed CENVAT credit, in respect of Garden Maintenance Service, which cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, for the above said period. 6. Being aggrieved by the portion of common order, by which CESTAT, Madras, confirmed tax liability and recovery, instant appeals have been filed on the following substantial questions of law:- a. Whether the Tribunal is right in denying the Input Service Credit availed on Garden Maintenance service as ineligible, to avail credit in terms of Rule 2(I) of Cenvat Credit Rules, 2004. b. Whether the CESTAT, Madras, is correct in holding that the ratio of decision of High Court in the appellant's own case in respect of the issue under dispute cannot be relied on as the said decision was rendered taking note of the availment of the Input Service Credit before amendment of CENVAT Credit Rules, 2004. 7. Supporting the substantial questions of law, Ms. P. Srija, learned counsel for the appellant, invited the attention of this Court, to the definition of the term Input Service , under Rule 2(l) of the CENVAT Credit Rules, 2004 and submitted that the definition of the term Input Service is inclusive, in respect of services used in relation to modernisation, renovation or repairs of a factory and such other input services, included in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27th March 2015, (v). HCL Technologies Ltd., Vs. Commissioner of Central Excise, Noida { 2015 (40) STR - 369 (Tribunal) - Delhi, (vi). Lifelong Meditech Ltd. Vs. Commissioner of Central Excise, Sales Tax, Gurgaon - II { 2016 (44) STR 626 Tribunal - Chandigarh, (vii). Mukand Limited Vs. Commissioner of Central Excise, Belapur { 2016 (42) STR - 88 (Tribunal) - Mumbai and (viii). Commissioner of Central Excise, Nagpur Vs. Ultra tech Cements Limited Vs. 2010 (260) ELT - 369 Bombay, learned counsel for the appellant submitted that common order of CESTAT, Madras, in E/40511/2017 E/40512/2017 are liable to be set aside. 12. Opposing the prayer sought for and inviting the attention of this Court, to Rule 2(l) of the CENVAT Credit Rules, 2004, as stood before the amendment, issued on 1/3/2011, given effect from 1/4/2011, Mr. V. Sundareswaran, learned Standing Counsel for the revenue submitted that before amendment, the words setting up and activities relating to business , in Rule 2(l), were in existence and by the said amendment, the said words were deleted by the legislature. Thus, even taking for granted that input services were used in setting up of factory or it is an activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (k) input means-- (i) all goods used in the factory by the manufacturer of the final product; or (ii) any goods including accessories, cleared alongwith the final product, the value of which is included the value of the final product and goods used for providing free warranty for final products; or (iii) all goods used for generation of electricity or steam [or pumping of water] for captive use; or (iv) all goods used for providing any [output service; or] (v) all capital goods which have a value upto ten thousand rupees per piece,] but excludes-- (A) light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol; (B) any goods used for-- (a) construction or execution of works contract of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of service portion in the execution of a works contract or construction service as listed under clause (b) of section 66E of the Act;] (C) capital goods, except when,-- (i) used as parts or components in the manufacture of a final product; or (ii) the value of such capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of inputs or capital goods and outward transportation upto the place of removal; [but excludes]-- (A) Service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) insofar as they are used for-- (a) construction or execution of works contract of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or] (B) [services provided by way of renting of a motor vehicle], insofar as they relate to a motor vehicle which is not a capital goods; or (BA) service of general insurance business, servicing, repair and maintenance, insofar as they relate to a motor vehicle which is not a capital goods, except when used by-- (a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such person; or (b) an insurance company in respect of a motor vehicle insured or reinsured by such person; or] (C) such as those provided in relation to outdoor catering, beauty t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to ), is a very broad expression which pre-supposes another subject matter. These are words of comprehensiveness which might both have a direct significance as well as an indirect significance depending on the context, though State Wakf Board Vs. Abdul Aziz (AIR 1968 Madras 79, 81, paragraph 8 and 10, following and approving Nitai Charan Bagchi Vs. Suresh Chandra Paul (66 CWN 767), Shyam Lal Vs. M. Shayamlal (AIR 1933 All. 649) and 76 Corpus Juris Secundum 621). 25. At paragraph No. 48, in Doypack's case, the Hon'ble Supreme Court also referred to Corpus Juris Secundum at pages 620 and 621, wherein the term relate has been defined as meaning to bring into association or connection with. In Doypack's case, the Hon'ble Supreme Court also opined that it has been clearly mentioned that relating to , has been held to be equivalent to or synonymous with as to concerning with and pertaining to . The expression pertaining to is an expression of expansion and not of contraction. 26. While considering the term includes , at paragraph No. 64, the Hon'ble Supreme Court, in Doypack's case, held as follows:- The expression in relation to has been i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt may specify the goods or classes of goods in respect of which the credit of specified duty may be restricted. Explanation. For the purpose of this rule, inputs includes- (a) Inputs which are manufactured and used within the factory of production in or in relation to manufacture of final products. (b) Paints and Packing material, (c) Inputs used as fuel. (d) inputs used for the generation of electricity, used within the factory of production for manufacture of final products or for any other purpose. but does not include (i) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products; (ii) packaging materials in respect of which any exemption to the extent of the duty of excise payable on the value of the packaging materials is being availed of for packaging any final products; (iii) packaging materials the cost of which is not included or had not been included during the preceding financial year in the assessable value of the final products under section 4 of the Act; (iv) cyli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacture of the final products . Electricity is one form of heat. It gets generated in several ways. LSHS is a fuel used in the generation of electricity. Since, electricity is self-generated and since it comes into existence as an intermediary product, its utilization for production of final product is crucial. Hence, MODVAT credit on LSHS used in production of electricity cannot be denied. Lastly, we may point out that in order to appreciate the arguments advanced on behalf of the Department one needs to interpret the expression in or in relation to the manufacture of final products . The expression in the manufacture of goods indicates the use of the input in the manufacture of the final product. The said expression normally covers the entire process of converting raw-materials into finished goods such as caustic soda, cement etc. However, the matter does not end with the said expression. The expression also covers inputs used in relation to the manufacture of final products . It is interesting to note that the said expression, namely, in relation to also finds place in the extended definition of the word manufacture in Section 2(f) of the Central Excises and Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he process of electrolysis was not possible. Therefore, keeping in mind the expression used in relation to the manufacture in Rule 57A we are of the view that the assessees were entitled to MODVAT credit on LSHS. In our opinion, the present case falls in clause (c), therefore, the assessees were entitled to MODVAT credit under Explanatory clause (c) even before 16.3.95. Inputs used for generation of electricity will qualify for MODVAT credit only if they are used in or in relation to the manufacture of the final product, such as cement, caustic soda etc. Therefore, it is not correct to state that inputs used as fuel for generation of electricity captively consumed will not be covered as inputs under Rule 57A. 32. Thus, the Hon'ble Supreme Court, explained as to how the expression, in relation to manufacture of final products , have to be understood. The Hon'ble Supreme Court held that words, in relation to manufacture, in Rule 57 A of the erstwhile Central Excise Rules, 1944, have been used to wider and explain the scope, meaning and content of the expression inputs , so as to attract goods, which do not enter into finished goods. Though the Hon'ble Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts or capital goods and outward transportation upto the place of removal. Thus, the definition of 'input' service not only covers services, which fall in the substantial part, but also covers services, which are covered under the inclusive part of the definition. 35. In Ultratech, the Bombay High Court considered as to whether outdoor catering services are covered under the inclusive definition of input service . The Bombay High Court also considered an earlier decision, in Maruti Suzuki Ltd., Vs. Commissioner of Central Excise, Delhi - III { 2009 (240) ELT 641 (SC). After considering the same, at paragraph Nos. 28 to 30, the Bombay High Court, held as follows:- 28. In the present case, the question is, whether outdoor catering services are covered under the inclusive part of the definition of input service . The services covered under the inclusive part of the definition of input service are services which are rendered prior to the commencement of manufacturing activity (such as services for setting up, modernization, renovation or repairs of a factory) as well as services rendered after the manufacture of final products (such as advertisement, sales promotion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tle the manufacturer to take credit. Oils and lubricants mentioned in the definition are required for smooth running of machines, hence they are included as they are used in relation to manufacture of the final product. The intention of the Legislature is that inputs falling in the inclusive part must have nexus with the manufacture of the final product. 16. In our earlier discussion, we have referred to two considerations as irrelevant, namely, use of input in the manufacturing process, be it direct or indirect as also absence of the input in the final product on account of the use of the expression used in or in relation to the manufacture of final product . Similarly, we are of the view that consideration such as input being used as packing material, input used as fuel, input used for generation of electricity or steam, input used as an accessory and input used as paint are per se also not relevant. All these considerations become relevant only when they are read with the expression used in or in relation to the manufacture of final product in the substantive/specific part of the definition. In each case it has to be established that inputs mentioned in the inclusive part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expression 'such as' in the definition of 'input service' do not relate to any particular class or category of services, but refer to variety of services used in the business of manufacturing the final products. There is nothing in the definition of 'input service' to suggest that the Legislature intended to define that expression restrictively. Therefore, in the absence of any intention of the Legislature to restrict the definition of 'input service' to any particular class or category of services used in the business, it would be reasonable to construe that the expression 'such as' in the inclusive part of the definition of input service is only illustrative and not exhaustive. Accordingly, we hold that all services used in relation to the business of manufacturing the final product are covered under the definition of 'input service' and in the present case, the outdoor catering services being integrally connected with the business of the manufacture of cement, credit of service tax paid out on catering services has been rightly allowed by the Tribunal. 37. Now the question remains to be considered is whether garden maintenance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the definition? , 40. At paragraph No. 9, in the assessee's own case, this Court in C.M.A. No. 3347 of 2010, dated 27/3/2015, held as follows:- A cursory reading of the said judgment reveals that the facts in issue therein are similar to the facts in the present case. It is clear from the decision that where an employer spends money to maintain their factory premises is an eco-friendly manner, the tax paid on such services would form part of the cost of the final products and the same would fall within the ambit of input services and, therefore, the assessee is entitle to claim the benefit. This Court is in agreement with the ratio laid down in Millipore India Pvt. Ltd., case (Supra), which is equally applicable to the case on hand and following the said decision, this appeal is liable to be dismissed. Accordingly, the substantial question of law is answered in favour of the assessee/respondent and against the appellant/revenue. 41. It could be from the above that even at the time of framing the substantial question of law, the Hon'ble Division Bench has taken note of both Solari's and Maruthi Suzuki's cases. Now, let us revert to Millipore India P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in Director of Settlements, A.P. v. M.R. Apparao reported in AIR 2002 SC 1598, held that, So far as the first question is concerned. Article 141 of the Constitution unequivocally indicates that the law declared by the Supreme Court shall be binding on all Courts within the territory of India. The aforesaid Article empowers the Supreme Court to declare the law. It is, therefore, an essential function of the Court to interpret a legislation. The statements of the Court on matters other than law like facts may have no binding force as the facts of two cases may not be similar. But what is binding is the ratio of the decision and not any finding of facts. It is the principle found out upon a reading of a judgment as a whole, in the light of the questions before the Court that forms the ratio and not any particular word or sentence. To determine whether a decision has 'declared law' it cannot be said to be a law when a point is disposed of on concession and what is binding is the principle underlying a decision. A judgment of the Court has to be read in the context of questions which arose for consideration in the case in which the judgment was delivered. An & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question of whether or not a certain part thereof is or is not a mere dictum is sometimes a matter of argument. And while the terms dictum and obiter dictum are generally used synonymously with regard to expressions in an opinion which are not necessary to support the decision, in connection with the doctrine of stare decisis, a distinction has been drawn between mere obiter and judicial dicta, the latter being an expression of opinion on a point deliberately passed upon by the court. Further at pg. 525 and 526, the effect of dictum has been discussed: 190. Decision on legal point; effect of dictum... In applying the doctrine of stare decisis, a distinction is made between a holding and a dictum. Generally stare decisis does not attach to such parts of an opinion of a court which are mere dicta. The reason for distinguishing a dictum from a holding has been said to be that a question actually before the court and decided by it is investigated with care and considered in its full extent, whereas other principles, although considered in their relation to the case decided, are seldom completely investigated as to their possible bearing on other cases. Nevertheless court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f law which are not pertinent, relevant, or essential to determination of issues before court is obiter dictum . 26. The concept of Dicta has also been considered in Corpus Juris Secundum, Vol. 21, at pg. 309-12 as thus: 190. Dicta a. In General A Dictum is an opinion expressed by a court, but which, not being necessarily involved in the case, lacks the force of an adjudication; an opinion expressed by a judge on a point not necessarily arising in the case; a statement or holding in an opinion not responsive to any issue and not necessary to the decision of the case; an opinion expressed on a point in which the judicial mind is not directed to the precise question necessary to be determined to fix the rights of the parties; or an opinion of a judge which does not embody the resolution or determination of the court, and made without argument, or full consideration of the point, not the professed deliberate determination of the judge himself. The term dictum is generally used as an abbreviation of obiter dictum which means a remark or opinion uttered by the way. Such an expression or opinion, as a general rule, is not binding as authority or precedent within the star ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich has no binding effect. See ADM, Jabalpur v. Shivakant Shukla. It is also well settled that the statements which are not part of the ratio decidendi constitute obiter dicta and are not authoritative. (See Divisional Controller, KSRTC v. Mahadeva Shetty) 30. In Girnar Traders v. State of Maharashtra (2007) 7 SCC 555, this Court has held: Thus, observations of the Court did not relate to any of the legal questions arising in the case and, accordingly, cannot be considered as the part of ratio decidendi. Hence, in light of the aforementioned judicial pronouncements, which have well settled the proposition that only the ratio decidendi can act as the binding or authoritative precedent, it is clear that the reliance placed on mere general observations or casual expressions of the Court, is not of much avail to the respondents. 31. In view of above, it is well settled that obiter dictum is a mere observation or remark made by the court by way of aside while deciding the actual issue before it. The mere casual statement or observation which is not relevant, pertinent or essential to decide the issue in hand does not form the part of the judgment of the Court and have no au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the same are not covered in the definition of inputs service defined under Rule 2(l) of CENVAT Credit Rules, 2004 and judicial authorities have held that such service would not fall as inputs service in terms of Rule 2(l) ibid. 49. After considering Maruti Suzuki Limited's case, at paragraph Nos. 8 and 9, the Hon'ble Division Bench of Bombay High Court, held as follows:- 8. In our opinion, establishing a residential colony for the employees and rendering taxable services in that residential colony may be a welfare activity undertaken while carrying on the business and such an expenditure may be allowable under the Income Tax Act. However, to qualify as an input service, the activity must have nexus with the business of the assessee. The expression 'relating to business' in Rule 2(I) of CENVAT Credit Rules, 2004 refers to activities which are integrally related to the business activity of the assessee and not welfare activities undertaken by the assessee. 9. Applying the ratio laid down by the Hon'ble Apex Court in the case of Maruti Suzuki Limited v. Commissioner of Central Excise, Delhi (supra), we hold that unless the nexus is established betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal. One of the contentions raised by the assessee therein before CESTAT was that the garden maintenance was essential for running the factory. Likewise, in the instant appeal, letter of Maharashtra Pollution Control Board, captioned as Consent to Operate was produced. Cestat, Mumbai, after considering the definition of input services and the contention of the assessee at paragraph Nos. 2.4 and 4.1, held as follows:- 2.4. As regards gardening expenses, it is pointed out that the same are essential for running the factory in support of which the appellant have produced the Consent to operate letter issued by the 'Maharashtra Pollution control Board' dated 26-3-2007, wherein the Pollution Control Board considering the parameters that the Trade Effluent and discharge sewage, etc, have given the consent subject to the condition that green belt afforestation is to be done up to 33% on available open space land as per the said consent letter. Thus, maintenance/afforestation and green belt in and around factory premises is an essential part, is the Mandatory Activity under the law of the land, so as to comply with the provisions of Water (Prevention and Control of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t paragraph No. 10, ordered as follows:- In a series of judgments, the Tribunal has held Garden Maintenance Services qualify as input services. Therefore, the observation of the authorities below that it has no nexus with the output service is untenable. The same is therefore allowed. 56. In Lifelong Meditech Ltd., Vs. Commissioner of Central Excise and Service Tax, Gurgaon - II { 2016 (44) STR 626 (Tri-Chan)}, one of the input services credit has been denied, to the appellant therein, was horticulture service. Placing reliance on Millipore India Pvt. Ltd.'s case, submission has been made before CESTAT, Chandigarh, that the appellant/assessee therein is compulsorily required to maintain the factory in the garden. Without maintenance of the garden, appellant cannot run the factory. Submission has been made that horticulture service is indirectly linked to the manufacturing activity and therefore, the appellant is entitled to avail Cenvat Credit on the said service. Having regard to the above said submissions, at paragraph Nos. 5.1 to 5.5, CESTAT, Chandigarh, held as follows:- 5.1. On careful consideration of the submissions made by the learned counsel, I find that wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt submitted that the impugned order is not sustainable in law as the same is passed by ignoring the definition of 'input services' as contained in Rule 2(1) of CENVAT Credit Rules as well as various decisions of the higher judicial fora. He further submitted that all the input services on which refund has been claimed have been used in or in relation to the manufacture of the goods. He also submitted that the refund claim has been rejected mainly on the ground that the appellant failed to produce the sufficient documents whereas the appellant has all the documents which can clearly establish the nexus between the input service and the manufacture of the goods. He further submitted that the impugned order does not have any specific findings under the ISD head. In support of his submission, the counsel has given a table containing the nature of service and the nexus as well as the decision, which is reproduced herein below: 4.1. The learned counsel also submitted that bills of certain input services were received at the corporate office and the corporate office after registering as an ISD has distributed the credit to the manufacturing unit and appellant has also given be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nagement as regards the overall industry scenario and the consumer tastes and preferences etc. Further, for such services, the agreement provides a monthly retainer's fee of ₹ 2,50 lakhs + reimbursement of certain costs like - Photocopying, Postage, Courier, Car hire, Video conferencing, Broadcasting, Preparation Translation of Press Releases, Cost of Electronic Media Monitoring etc., etc. I also find that he bills have been raised in consonance with the agreement, as one of the bills, dated 28/2/2011, have been raised for organising Press Conference for launch of showroom at Hyderabad. Accordingly, I hold that the said services have been availed with respect to sales promotion, which is an eligible input service and, accordingly, the same is held to be allowable. So far, the services received with respect to tax compliances like; Filing of VAT/Income Tax Returns, the same is also held to be eligible input service as tax compliances are also essential and it is important not to make errors and make timely compliances. So far, the common area maintenance services received, the disallowance of service tax on bills etc., is concerned, the allegation is that the service tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for the revenue that input services should be restricted only to the manufacture of final product, either directly or indirectly cannot be countenanced. At this juncture, this Court deems it fit to consider a decision of the Hon'ble Supreme Court in Ramala Sahkari Chini Mills Ltd., Vs. CCE, reported in { 2010 (14) SCC - 744}, wherein the Hon'ble Supreme Court held that the definition of input services , cannot be restricted. 64. All the input services used in relation to modernisation, renovation or repairs of a factory, advertisement or sales promotion, security, legal services, etc., are included in the inclusive definition of input services. Requirement of 25% of the green belt is mandatory, for the very purpose of existence and consequently, manufacture of the final product. It is not only the process of manufacture which results in the production of excisable goods, attracting duty, but the input services which are integrally connected with the manufacture of such final products, should also be considered, so as to give effect to the inclusive definition of input services. Such input services may not in all cases, be in or in relation to manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X
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