2016 (12) TMI 1227 - AT - Central Excise

Remand granted for CENVAT Credit on Garden, Car Rental, Canteen Services. Verification of eligibility emphasized.

The appeals were allowed by way of remand, directing the appellants to produce necessary evidence to support their claim for CENVAT Credit on Garden ... CENVAT Credit - input service - services used in or in relation to manufacture of finished goods - mandatory statutory obligation under the Factories Act - statutory requirement under pollution control law - activities in relation to business - remand for factual verificationCENVAT Credit - services used in or in relation to manufacture of finished goods - input service - Entitlement to CENVAT credit of Garden Maintenance Service, Car Rental Service and Canteen Service was not finally adjudicated and required factual verification. - HELD THAT: - The Tribunal observed that availability of credit depends on the services being used in or in relation to manufacture of finished goods and qualifying as an input service. Although an earlier Tribunal order in the appellant's own case had allowed credit for these services, that decision did not examine the factual matrix. The Revenue relied on the principle that only activities integrally connected with the business of manufacture qualify (as noted from the cited authority emphasising activities in relation to business). The appellant asserted statutory compulsion (under the Factories Act and pollution-control law) and use of services for employees and manufacture, but the record lacks specific averments or evidence establishing (a) that the appellant is covered by the mandatory canteen provisions of the Factories Act, (b) that garden maintenance is mandated by pollution-control law, and (c) that the hired car service is shown to be used in relation to manufacture. The Tribunal found contradictory averments in the appellant's own communications regarding recovery of canteen costs and therefore concluded that the facts material to entitlement require verification by the original adjudicating authority. [Paras 4, 5]Impugned orders set aside and the matter remanded to the original adjudicating authority for verification of facts and production of necessary evidence to determine entitlement to CENVAT credit of the said services.Final Conclusion: The Tribunal set aside the impugned orders and allowed the appeals by remanding the matter to the original adjudicating authority for factual verification and receipt of evidence on whether the canteen, garden maintenance and car rental services are mandatorily required and/or used in or in relation to manufacture, with the appellants directed to produce necessary proof. Issues:Appeal against denial of CENVAT Credit on Garden Maintenance Service, Car Rental Service, and Canteen Service.Analysis:The appellant, M/s Larsen & Toubro Ltd., appealed against the denial of CENVAT Credit on various services. The appellant argued that their case is covered by a previous decision of the Tribunal where credit for the same services was allowed. They contended that they are entitled to avail credit for Garden Maintenance Service due to mandatory provisions under the Maharashtra Factories Rules, 1963 for planting trees. Additionally, they argued that they provide canteen services as required by the Factories Act without recovering costs from employees and that the car hired by them is used for employees directly related to manufacturing finished goods.The learned Assistant Commissioner, on the other hand, relied on the impugned order and pointed out that while providing canteen services is mandatory under the Factories Act, the appellant did not specifically state that they are covered by these provisions. He also challenged the appellant's claim regarding the necessity of garden maintenance under Pollution Control Law, stating it lacked proof. The Assistant Commissioner argued that credit for these services is only available if they are used in or in relation to the manufacture of finished goods, which the appellant failed to establish. He cited a decision of the Hon'ble Bombay High Court emphasizing that services must be integrally connected with the business to qualify as input services.Upon reviewing the submissions, the Member (Technical) found that while the previous Tribunal decision covered these services, the factual aspects were not examined. It was noted that the appellant did not provide specific details regarding the applicability of mandatory provisions of the Factories Act or the provision of canteen services to employees. Similarly, there was a lack of evidence regarding the mandatory nature of garden services under Pollution Control Law as claimed by the appellant. An inconsistency was also identified in the appellant's statements regarding canteen services. As a result, the matter was remanded to the original adjudicating authority for further verification of the facts presented by the appellant.In conclusion, the impugned orders were set aside, and the appellants were directed to produce necessary evidence to support their case. The appeals were allowed by way of remand, emphasizing the need for verification of the facts regarding the eligibility of CENVAT Credit for the disputed services.