TaxTMI 
TaxTMI 
2018 (2) TMI 1745
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....5,809/-, for the period between February 2014 to January 2015 & November 2014 and October 2015, respectively. Notices proposing recovery of CENVAT credit were issued. under Rule 14 of the CENVAT Credit Rules, 2003, r/w. Section 11A(1)(a) of the Central Excise Act, 1944, along with applicable interest. Show cause notices also proposed to impose penalty, under Rule 15(1) of the CENVAT Credit Rules, 2004. 3. After considering the submissions of the revenue and assessee, in respect of the show cause notice, dated 5/3/2015, the adjudicating authority, viz., Superintendent of LTU, vide his order-in-original No. LTU/155/2016, dated 29/3/2016, confirmed the demand against the respondent and imposed penalty of Rs. 5,085/-, under Rule 15(1) of the CENVAT Credit Rules. Similarly, in respect of the show cause notice, dated 8/3/2016, the adjudicating authority, imposed a penalty of Rs. 6,582/-. 4. Being aggrieved by the orders imposing penalty, M/s. Rane TRW Steering Systems Ltd., Guduvancherry, appellant herein, filed an appeal, in Appeal Nos. 119/2016 and 120 of 2016, to the Commissioner (Appeals - I), Central Excise and Service Tax, Large Tax Payer Unit, Chennai, on the grounds inter a....
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....e 2(l) of the Cenvat Credit Rules, 2004, is wide enough to include any service used directly or indirectly, in or in relation to any manufacturing activity. She also submitted that garden maintenance service has been availed, to the factory to prevent air pollution and it is an essential input service, for availing license, for the manufacturing activity. 9. In support of the above contention, attention of this Court was invited, to the consent order of the Tamil Nadu Pollution Control Board, dated 22/2/2017, wherein one of the conditions imposed on M/s. RANE TRW Steering Systems Private Limited (Pump Division), Guduvancherry, appellant herein is that the unit shall continue to develop the green belt 25% of the total land area. She further added that when there is a statutory requirement to have 25% of the total land area, for continuation of licence, to run the factory site, availment of such input service, cannot be said that it is not in relation to manufacture. According to her, when maintenance of green belt, stated supra, is a compulsory requirement, availment of garden maintenance service has to be considered as a necessary "input service", within the definition of Rule 2....
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....t Rules, 2004, after the amendment and the order of CESTAT, in assessee's own case, in Commissioner of Central Excise and Service Tax, Chennai 1 Vs. Rane TRW Steering Systems Ltd., (C.M.A. No. 3346 of 2010), held in favour of the assessee, made prior to the amendment when the words "setting up" and "activities in relation to business", existed in the Statute, cannot be made applicable, after the amendment to Rule 2(l) of the CENVAT Credit Rules, 2004. 13. On the above aspect, learned counsel for the respondent, placed strong reliance, to para 33, of judgment in the Commissioner of Central Excise, Nagpur Vs. Ultra Tech Cements Ltd. {2010 (260) ELT-369-Bombay}, and submitted that even though, input services in Section 2(l) of the CENVAT Credit Rules, 2004, is inclusive in nature, unless and until the assessee, satisfies the substantive part of the provision that it is directly or indirectly in relation to manufacture of the final product, any service availed by the assessee cannot be treated as input service for availing credit. 14. He strenuously contended that availment of credit in service, should be in relation directly or indirectly to manufacture of a product and when....
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....iece;] (D) motor vehicles; (E) any goods, such as food items, goods used in a guest house, residential colony, club or a recreation facility and clinical establishment, when such goods are used primarily for personal use or consumption of any employee; and (F) any goods which have no relationship whatsoever with the manufacture of a final product." 18. "Input Service", as per Section 2(l), as stood before amendment is as follows:- (1). "Input Service" means any service-- (i) used by a provider of taxable service for providing an output service; or (ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products, from the place of removal, and includes services used in relation to setting up, modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and....
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....such person; or] (C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee;] [Explanation : For the purpose of this clause, sales promotion includes, services by way of sale of dutiable goods on commission basis.] 20. The words "setting up" and "activities relating to business", as stood, in Section 2(k) of the CENVAT Credit Rules, 2004, have been deleted, vide Notification No. 3/2011-CE-NT : dated 1/3/2011, with effect from 1/4/2011. 21. In both the appeals, in the show cause notices, dated 5/3/2015 and 8/3/2016, the period covered are between February 2014 to January 2015 & November 2014 and October 2015, respectively. Thus garden maintenance service availed after the amendment, to CENVAT Credit Rules, 2004, is contended by the revenue, as not falling within "input service" in respect of service, used for setting up or activity rela....
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....reme Court, in Doypack's case, held as follows:- "The expression "in relation to" has been interpreted to be the words of widest amplitude." 27. Interpretation of Section 4 of Swadeshi Cotton Mills Company Limited (acquisition and transfer of undertakings) Act, 1986, was the subject matter of the discussion in Doypack's case. Adverting to the above, the Hon'ble Supreme Court, at paragraph No. 64, in Doypack's case, observed thus:- "Section 4 appears to us to be an expanding section. It introduces a deeming provision. Deeming provision is intended to enlarge the meaning of a particular word or to include matter which otherwise may or may not fall within the main provisions. It is well settled that the word "includes" is an inclusive definition and expands the meaning. The Hon'ble Supreme Court has referred to the decision in Corporation of the City of Nagpur Vs. Its Employee { 1960 2 SCR 942) and Vasudev Ramchandra Shelat Vs. Pranlal Jayanand Thakar and Others (1975 1 SCR 534). 28. Reverting to the case on hand, when Rule 2(l) of the CENVAT Credit Rules also uses the words "includes", there is no ambiguity that such inclusive definition has to be inte....
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....g 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) cylinders for packing gases; (v) plywood for tea (chests; or). (vi) bags or sacks made out of fabrics (whether or not coated, covered or laminated with any other material) woven from strips or tapes of plastics." 29. In Collector of Central Excise Vs. Solaris Chemtech Limited { 2007 (214) ELT 481 (SC), the Hon'ble Supreme Court, explained as to how the expression "in or in relation to manufacture of final products", employed in Rule 57 A of erstwhile Central Excise Rules, 1944, has to be understood and interpreted. 30. In the reported case, the question involved was electricity, which was generated inside the plant by heating of LSHS, and which is captively consumed and used to manufacture of cement/caustic soda. Rule 57 A of the erstwhile Central Excise Rules, 1944, had an explanation clause, which state as to what inputs are included in MODVAT Credit. Explanation clause (c) refers to "input used as fuel". The said clause was introduced by Noti....
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....e 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 Salt Act, 1944 (for short, 'the said Act'). It is for this reason that this Court has repeatedly held that the expression "in relation to" must be given a wide connotation. The Explanation to Rule 57A shows an inclusive definition of the word "inputs". Therefore, that is a dichotomy between inputs used in the manufacture of the final product and inputs used in relation to the manufacture of final products. The Department gave a narrow meaning to the word "used" in Rule 57A. The Department would have been right in saying that the input must be raw-material consumed in the manufacture of final product, however, in the present case, as stated above, the expression "used" in Rule 57A uses the words "in relation to the manufacture of final products". The words "in relation to" which find place in Section 2(f) of the said Act has been interpreted by this Court to cover processes generating intermediate products and it is in this context that it has been repeat....
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....hile 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 Court, explained the expression, in relation to manufacture, dealing with electricity, generated inside the plant and captively consumed for the manufacture of cement and caustic soda, the said decision, can be made applicable to the extent that even though the "input" does not enter into the finished goods, the inclusive definition has to be given wider meaning to the expression in relation, directly or indirectly in the manufacture of goods. In Solari's case, the Hon'ble Supreme Court considered the term "input" and the instant case, we are dealing with Section 2(l) of the CENVAT Credit Rules, "Input Services". 33. "Input" as defined in Rule 2(k) of the CENVAT Credit (Amendment) Rules, 2011, is different from input services, as defined in 2(l) of the CENVAT Credit (Amendment) Rules, 2011. Decision rendered in Solaris case, can be made applicable with reference to Rule 2(k) of the CENVAT Credit (Amendment) Rules, 2011, with the exception to the interp....
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....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, market research etc.) and includes services rendered in relation to business such as auditing, financing ........ etc. Thus, the substantive part of the definition "input service" covers services used directly or indirectly in or in relation to the manufacture of final products, whereas the inclusive part of the definition of "input service" covers various services used in relation to the business of manufacturing the final products. In other words, the definition of "input service" is very wide and covers not only services, which are directly or indirectly used in or in relation to the manufacture of final products but also includes various services used in relation to the business of manufacture of final products, be it prior to the manufacture of final products or after the manufacture of final products. To put it differently, the definition of input service is not restricted to services used in or in rel....
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....elevant. 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 is "used in or in relation to the manufacture of final product". It is the functional utility of the said item which would constitute the relevant consideration. Unless and until the said input is used in or in relation to the manufacture of final product within the factory of production, the said item would not become an eligible input. The said expression "used in or in relation to the manufacture' have many shades and would cover various situations based on the purpose for which the input is used. However, the specified input would become eligible for credit only when used in or in relation to the manufacture of final product. Hydrogen gas used in the manufacture of sodium cyanide is an eligible input, since it has a significant role to play in the manufacturing process and since the final product cannot emerge without the use of gas. Similarly, Heat Transfer Oil used as a heating medium in ....
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....ent 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 service is an "input service", falling under the "input service", an inclusive definition. 38. Though the learned counsel for the revenue submitted that the decision of the assessee's own case, in Commissioner of Central Excise and Service Tax, Large Tax Paying Unit, Chennai Vs. M/s. Rane TRW Steering Systems Limited, in C.M.A. No. 3346 of 2010, cannot be made applicable, to the facts and circumstances of the instant case, on the grounds that the said decision, was rendered before 1/4/2011 and further submitted that the decision in Ultratech's case, can be made applicable to the facts of this case, as to how the expression in relation to the manufacture of final products, has been considered and interpreted, let us consider as to how the assessee's own case, in C.M.A. No. 3347 of 2010, came to be decided. Perusal of the judgment in C.M.A. No. 3347 of 2011, dated 27th March 2015, show....
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....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 Private Limited's case. In the reported case, assessee M/s. Millipore India Private Limited was engaged in the manufacture of excisable goods, viz., filtration apparatus. Besides availing many services, assessee was also engaged in landscaping of factory garden, which was a requirement, under the pollution laws. The Tribunal held that the aforesaid services utilised by the assessee falls within phrase, "activities relating to business", as mentioned in definition of input services and therefore, assessee was entitled to the benefit of CENVAT Credit on those services and accordingly, restored the benefit of the assessee. Being aggrieved, revenue went on appeal before the High Court and one of the substantial questions of law raised before the High Court was that whether on the facts and circumstances of the case, the Tribunal was correct in interpreting the term "input services", as enumerated in Rul....
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....9; 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 'obiter dictum' as distinguished from a ratio decidendi is an observation by Court on a legal question suggested in a case before it but not arising in such manner as to require a decision. Such an obiter may not have a binding precedent as the observation was unnecessary for the decision pronounced, but even though an obiter may not have a bind effect as a precedent, but it cannot be denied that it is of considerable weight. The law which will be binding under Article 141 would, therefore, extend to all observations of points raised and decided by the Court in a given case. So far as constitutional matters are concerned, it is a practice of the Court not to make any pronouncement on points not directly raised for its decision. The decision in a judgment of the Supreme Court cannot be assailed on the ground that certain aspects were not considered or the relevant provisions were not brought to t....
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....hat 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 courts have sometimes given dicta the same effect as holdings, particularly where "judicial dicta" as distinguished from "obiter dicta" are involved." 22. 23. The Wharton's Law Lexicon (14th Ed. 1993) defines term "obiter dictum" as an opinion not necessary to a judgment; an observation as to the law made by a judge in the course of a case, but not necessary to its decision, and therefore of no binding effect; often called as obiter dictum,; a remark by the way. 24. The Blacks Law Dictionary, (9th ed, 2009) defines term "obiter dictum' as a judicial comment made while delivering a judicial opinion, but one that is unnecessary to the decision in the case and therefore not precedential (although it may be considered persuasive). --Often shortened to dictum or, less commonly, obiter. "Strictly speaking an "obiter dictum" is a remark made or opinion expressed by a judge, in hi....
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.... 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 stare decisis rule, even on courts inferior to the court from which such expression emanated, no matter how often it may be repeated. This general rule is particularly applicable where there are prior decisions to the contrary of the statement regarded as dictum; where the statement is declared, on rehearing, to be dictum; where the dictum is on a question which the court expressly states that it does not decide; or where it is contrary to statute and would produce an inequitable result. It has also been held that a dictum is not the "law of the case," nor res judicata." 27. The concept of "Dicta" has been discussed in Halsbury's Laws of England, Fourth Edition (Reissue), Vol. 26, para. 574 as thus: "574. Dicta. Statements which are not necessary to the decision, which go beyond the occasion and lay down a rule that it is unnecessary for the purpose in ha....
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....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 authoritative value. The expression of the personal view or opinion of the Judge is just a casual remark made whilst deviating from answering the actual issues pending before the Court. These casual remarks are considered or treated as beyond the ambit of the authoritative or operative part of the judgment." 46. In Millipore's case, the Hon'ble Division Bench has categorically held that landscaping of factory or garden certainly would fall within the concept of modernisation, renovation, repair etc., of the office premises. The Hon'ble Division Bench has also taken note of the fact that environmental law expects the employer to keep the factory without contravening any of those laws and held that fulfillment of a statutory and mandatory obligation, and if any service is availed, the same has to be treated as input service. ....
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.... 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 between the services rendered and the business carried on by the assessee, the benefit of CENVAT credit is not allowable. In the present case, in our opinion, rendering taxable services at the residential colony established by the assessee for the benefit of the employees, is not an activity integrally connected with the business of the assessee and therefore, the Tribunal was not justified in holding that the services such as repairs, maintenance and civil construction rendered at the residential colony constitutes 'input service so as to claim credit of service tax paid on such services under Rule 2(1) of the CENVAT Credit Rules, 2004." 50. From the reasoning of the Hon'ble Division Bench of Bombay High Court, it could be seen that the very aspect of a residential colony for the employees and rendering taxable services was construe....
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....ondition 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 Pollution) Act, 1974 and Air (Prevention and Control of Pollution) Act, 1981 read with relevant Rules. Accordingly, the disallowance is uncalled for and pleads the same to be set aside. 2.5. As regards cleaning expenses of Rs. 33,182/-, it is stated that the residential colony is situated within the factory premises, forming part of the factory area, as per approved map by the Central Excise authority. Further, the colony is an 'industrial township' and the appellant is responsible to provide all types of municipal services in the colony. As such, the disallowance is bad, and fit to be set aside. 3. The learned AR relies on the impugned order and prays for dismissal of the appeal. 4. Having considered the rival contentions and perusing the appeal filed and the documents produced by the appellant, as regards the 'cantee....
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.... 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 warehouse has been used by the appellant for storage of raw material and finished goods, which is a registered place for removal goods. In the circumstances, storage of goods is an integral part of manufacturing, therefore, appellant is entitled to avail Cenvat Credit on these services. 5.2. With regard to Project for Modification/Modernisation services, I find that these services are none other than a renovation of the factory premises which is covered by the Rule 2(l) of Cenvat Credit Rules, 2004. Therefore, I hold that the appellant is entitled to avail Cenvat Credit for project for Modification/Modernisation services. 5.3 With regard to Horticulture services, I find that the appellant is compulsorily required to maintain a garden in their factory to pollution control norms. Therefore, the horticulture services are directly related to ....
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....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 below the details of those input services with nexus distributed as ISD to its manufacturing units. 58. In Ms. Orient Bell Ltd., Vs. Commissioner of Central Excise, Noida, reported in, the following services were availed by the assessee, and Cenvat Credit claimed was rejected, imposing duty and penalty. 59. When correctness of the order of the appellate authority was tested, CESTAT, Delhi ordered as hereunder:- So far as garden maintenance is concerned, the same is input service as it is a pollution control requirement and improves the aesthetics and overall atmosphere and thus is an expenditure in or in relation to manufacture. 60. At para No. 7, Cestat, Delhi, held thus:- "7. Accordingly, I hold that all the above services are eligible to input service, save and except the service at serial number 10, 11, 18 & 19 (of the ....
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....g 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 amount is not reflected in the invoice/bills. The Ld. counsel have taken me through the applicable bills, placed in the appeal file and I find that the Court below have committed mistake of fact as service tax have been duly charged and paid in the bills raised by Hyatt Hotel. Further the service tax on repair of UPS battery, is also held as eligible input service as the same is incurred to ensure uninterrupted power supply which is essential to run the business." 62. In Commissioner of Central Excise, Delhi - III, Suzuki Motor Cycle India Private Limited {2017 (47) STR 85 (Tri-Chan), Insurance service gardening maintenance service, availed prior to 1/4/2011 and latter have been considered. At paragraph No. 4 of the order, in Suzuki Motor Cycle India Private Ltd.'s case, CESTAT, Chandigarh held as follows:- "With regard to the gardening ....
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....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 of the final product, but they may be integrally connected and that there should be nexus with manufacture. 65. Ordinarily speaking, 'integral' means "of a whole or necessary to the completeness of a whole' and as "forming a whole' (Concise Oxford Dictionary). Meaning of the word, "integral" as mentioned in Black's Law Dictionary at page 808, VI Edition, is that "essential part of the facts, which constitute cause of action for getting relief". In Macmillan Dictionary, word "integral" means, forming an essential part of something and needed to make it complete. 66. In Orient Bell Limited vs. Commissioner of Central Excise, Noida, { 2017 (52) STR 56 (Tri-ALL)}, the relevant period under the notice was 1/12/2010 to 30/11/2012. Among the services for which Cenvat credit claimed was gardening maintenance and as regards ....