2013 (12) TMI 1432 - AT - Service Tax

Canteen Construction in Factory: Input Service Eligibility Upheld by Tribunal

POSITIVE PACKAGING INDUSTRIES LTD Versus COMMISSIONER OF CENTRAL EXCISE

The Tribunal held that constructing a canteen building within a factory premises qualifies as an input service under the Cenvat Credit Rules, 2004. ... Construction service - Construction of canteen building covered under the definition of Input services under Rule 2(1) of Cenvat credit Rules 2004 OR not – Held that:- Canteen can to be considered as integral part of the factory and cannot be considered as outside the factory - the construction service used in constructing the canteens should not be allowed - canteen is an integral part of factory and factory cannot be limited to the manufacturing area alone - Input service includes services used in relation to setting up of the factory as also, for an office relating to such factory - for purpose of definition of the input services as the definition of input services includes not only the factory but also the office relating to such factory - Relying upon Commissioner of Central Excise, Ahmedabad-I Vs. Ferromatik Milacron India ltd. [2010 (4) TMI 649 - GUJARAT HIGH COURT] - The appellant would be eligible to take the input service credit relating to construction services at the material time i.e. July 2005 - The definition of input service has undergone change w.e.f 1.3.2011, the situation may not be the same from that date – Decided in favour of Assessee. Issues:1. Whether the construction of a canteen building within a factory premises qualifies as an input service under the Cenvat Credit Rules, 2004.Analysis:The appellant constructed a canteen building within their factory premises and claimed credit of input service for construction service. The Revenue objected, stating that the canteen building does not fall under the definition of input services. The original authority and Commissioner (Appeals) upheld the demand.The appellant argued that the canteen building, with two floors used for storage of raw material and as a canteen, should be considered an integral part of the factory. Referring to various court judgments, the appellant contended that the canteen is a statutory requirement under the Factories Act, making it part of the factory and eligible for credit. The appellant highlighted cases where outdoor catering services within canteens were considered input services due to statutory obligations.The Additional Commissioner contended that the canteen is not a manufacturing place and, therefore, not part of the factory, thus disallowing credit on construction services. It was noted that initially, the appellant did not claim the ground floor was used for storage, only later during adjudication.The Tribunal analyzed the definition of input service, which includes services related to setting up the factory or office. Considering the Factories Act's mandatory provision for canteen services, the Tribunal held that the canteen building should be considered part of the factory for input service definition. Referring to court judgments, the Tribunal affirmed that canteen services are indispensable for manufacturing and fall within the ambit of input services. Therefore, the appellant was allowed to take credit for the construction services related to the canteen building.The Tribunal concluded that the appellant was eligible for input service credit for construction services at the relevant time. It was noted that the definition of input services had changed from March 1, 2011, affecting the situation post that date. Consequently, the appeal was allowed, emphasizing the canteen's integral role in the factory.This detailed analysis of the judgment showcases the interpretation of input services in the context of constructing a canteen building within a factory premises under the Cenvat Credit Rules, 2004, highlighting the statutory obligations and court precedents influencing the decision.