Service tax paid under RCM for supply of manpower for garden maintanance

[deepak kalambate]

Dear Sir,

We have a garden contractor and he is maintaing our garden on basis of fixed monthly amount. We are paying service tax on that under RCM.

Please let us know whether we are eligible to take service credit of the same.

If yes, please give board's clarfication on this.

Regards

Deepak

[Rajagopalan Ranganathan]

Sir,

Garden creates better atmosphere and environment which increases working efficiency. Therefore it is an eligible input service and service tax paid thereon is eligible for taking credit. There are many decisions of CESTAT for and against availing such credit. However I do not come across any circular issued by CBEC in this regard.

According to rule 2 (l) of CENVAT Credit Rules, 2004 (l) “input service” means any service, -

(i) used by a provider of output service for providing an output service; or

(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal. However before taking the credit you seek the advice of your Range Officer or inform him that you are taking credit of service tax paid on gardening service provided by your contractor.

Another interpretation is that you can avail the credit treating it as man power supply service provided by your contractor and the Department cannot have any objection. You need not tell that the man power is for maintenance of the garden.

[Ganeshan Kalyani]

The department denies the service tax credit on gardening services in the factory though the nexus can be justified by assesse for rightly eligibility of credit by relating it to manufacturing activity. If the amount is nominal it can be ignored. Further if you are paying service tax under reverse charge then under which accounting head you are paying the tax. If the supervision and control of the labour of the contractor who takes care of garden maintaining service is with the assesse then the service can be construed as manpower service and credit can be taken. Also the credit of the paid under reverse charge is allowed on challan based hence the invoice of the maintenence contract may not be asked by the service tax department and therfore they may not come to know for what service the service tax credit is taken. moreover if the service is of gardening maintenence then the provider of the service should have charged the tax on invoice and you would have escaped from payment of service tax under reverse charge.

[Mahir S]

If the Garden is maintained in the factory under the statutory obligation, under the Factory Act; then credit is available.

[KASTURI SETHI]

Sh.Ganeshan Kalyani in his reply dated 26.11.2015 has removed all the doubts and echoed the views of Sh.Rajagopalan Ranganathan reflected in his reply dated 26.11.2015. Rather, I would like to say Sh.Ganeshan Kalyani has cemented Sh. Ranganathan's views. Fantastic reply indeed.

[YAGAY andSUN]

2012 (10) TMI 32 - CESTAT, BANGALORE M/s. BASF India Ltd. Versus The Commissioner of Central Excise Mangalore Cenvat credit – input services - rule 2(l) - Service tax paid on watering of lawns, bougainvilleas, creepers, shrubberies and shadow trees, keeping them neat by regular planting and replanting and trimming and pruning etc. inside of appellant s factory premises. Credit taken by the appellant of the service tax paid on these services has been denied on the ground that the same is not covered by the definition of input service – Held that:- Landscaping of factory or garden certainly would fall within the concept of modernization, renovation, repair, etc. of the office premises - concept of corporate social responsibility is also relevant. It is to discharge a statutory obligation, when the employer spends money to maintain their factory premises in an eco-friendly, manner, certainly, the tax paid on such services would form part of the costs of the final products – credit is allowed - in favour of the assessee

[Mahir S]

Sir,

Just want to inform that the word ‘statutory obligation’ cited in the above case law, has also been referred in my earlier reply dated 26.11.2015.

Thanks.

[YAGAY andSUN]

Yes, Mahir, This judgment substantiate your opinion.

Keep it up.

[DR.MARIAPPAN GOVINDARAJAN]

We may justify the taking of credit on service tax payable on gardening on various grounds including statutory obligations. However in some cases credit taken on gardening service is rejected by the Department. The Board should seek clarification as to its eligibility of the same.

[Ganeshan Kalyani]

Yes a clarification is expected for set off availability as considerable amount is spent on gardening.

[DR.MARIAPPAN GOVINDARAJAN]

We, professionals may bring this matter to CBE&C who in turn will act.

[KASTURI SETHI]

Sir,

In such like cases ultimately common sense prevails.

[Ganeshan Kalyani]

Exactly sir the ability to convince and the conviction in the speech matters a lotin winning over department.

AI Summary

Input service credit for garden maintenance may be allowable where nexus to manufacturing or statutory obligation exists. Service tax paid under reverse charge for garden maintenance or contracted manpower used on factory premises can be claimed as Cenvat credit if the service qualifies as an input service and bears a nexus to manufacturing or output services, or where maintenance is a statutory obligation; practice is inconsistent and administrative clarification is advised.