TaxTMI 
TaxTMI 
2018 (2) TMI 1745
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....014 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 alia that Garden Maintenance Service has been u....
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.... 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(l) of the CENVAT Credit Rules, 2004, and therefore, the Tri....
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....essee'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 it is not so, the Department is empowered to make demand. Attention o....
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....linical 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 quality control, coaching and training, computer networking, credit rating, share registry and security, inward transportation of inputs or capital goods and outward transportation upto the ....
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....enefits 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 relating to business. 22. Further, contention has been made that when legislature has omitted, input services used for setting up of a factory and services used for, an activity relating to business, garden maintenance service, cannot be construed to be ....
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....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 interpreted as, "which may or may not fall within the main provision". Let us also consider as to how the Hon'ble Supreme Court has considered the expression "in relation to"" the manufacture of final products, employed in Rule 57 A of the Central Excise Rules, 1947. For....
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.... 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 Notification No. 4/94, dated 1/3/1994. At that time, the government made it clear that inputs used as fuel were entitled to MODVAT Credit. Fuel either utilised directly or for generating electricity, as an intermediary product, was held to be integrally connected with several operations, which resulted in the emergence of the final product, viz., cement/caustic soda. 3....
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....ust 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 repeatedly held by this Court that if manufacture of final product cannot take place without the process in question then that process is an integral part of the activity of manufacture of the final product. Therefore, the words "in relation to the manufacture" have been used to widen and expand the scope, meaning and content of the expression "inputs" so as to attract goods ....
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....cture 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 interpretation of inclusive definition. 34. Commissioner of Central Excise, Service Tax, Nagpur Vs. Ultra Tech Cement Ltd., 2010 (260) ELT - 369 (Bombay), rendered, on 25/10/2010, is with reference to the period prior to the amendment dated 1/3/2011. While considering the definition of "input service" as stood before the amendment, at paragraph No. 27, the Bombay High Court, exp....
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.... 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 relation to manufacture of final products, but extends to all services used in relation to the business of manufacturing the final product. 29. The expression "activities in relation to business" in the definition of "input service" postulates activities which are integrally connected with the business of the assessee. If the activity is not integrally connected with the business of the manufacture of final product, t....
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....onsideration. 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 the manufacture of LAB is an eligible input since it has a persuasive role in the manufacturing process and without its use it is impossible to manufacture the final product. Therefore, none of the categories in the inclusive part of the definition would constitute relevant consideration per se. They become relevant only when the above crucial requirement of being "used in or in relation to the manufacture" stands complied with. In o....
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....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, shows that the assessee therein, who had availed service tax, on housekeeping and gardening services, was issued with a show cause notice, for recovery of credit of Rs. 3,30,486/-. The Deputy Commissioner, disallowed the credit and also imposed penalty. Appeal preferred by the assessee was dismissed and the matter was taken to CESTAT, Madras, by the assessee. 39. Following the decision, in Commissioner of Central Excise, Bangalore 2 Vs. Millipo....
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....us. 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 Rule 2(1) of the CENVAT Credit Rules, 2004 and allowing the various ineligible input service tax credit, which are not covered or not remotely connected with the manufacture of the final products. 42. Though the learned counsel for the revenue strenuously urged that in Millipore's case, the Hon'ble Division Bench of Karnataka High Court, considered landscaping of factory garden as one falling within the activities relating to business and any se....
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....uire 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 the notice of the Court (See AIR 1970 SC 1002 and AIR 1973 SC 794). When Supreme Court decides a principle it would be the duty of the High Court or a subordinate Court to follow the decision of the Supreme Court." 45. In Arun Kumar Aggarwal v. State of Madhya Pradesh reported in AIR 2011 SC 3056, the Hon'ble Supreme Court explained "obiter dicta", as follows: "21. . ..... The expression obiter dicta or dicta has been discussed in American Jurisprudence 2d....
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....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 his decision upon a cause, 'by the way' -- that is, incidentally or collaterally, and not directly upon the question before the court; or it is any statement of law enunciated by the judge or court merely by way of illustration, argument, analogy, or suggestion.... In the common speech of lawyers, all such extrajudicial expressions of legal opinion are referred to as 'dicta,' or 'obiter dicta,' these two terms being used interchangeably." 25. The Word and Phrases, Perm....
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....isions 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 hand are generally termed "dicta". They have no binding authority on another court, although they may have some persuasive efficacy. Mere passing remarks of a judge are known as "obiter dicta", whilst considered enunciations of the judge's opinion on a point not arising for decision, and so not part of the ratio decidendi, have been termed "judicial dicta". A third type of dictum may consist in a statement by a judge as to what has been done in other cases which have not been reported. Practice notes, being directi....
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....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. 47. Though the learned counsel for the revenue contended that decision in assessee's own case, in C.M.A. No. 3346 of 2010, cannot be made applicable, on the grounds inter alia that the judgment rendered was in respect of input service, prior to the amendment Act, which came into force, on 1/4/2011, we are not inclined to accept the same, for the reason that a Hon'ble Division Bench of this Court, while applying Millipore's case, to identical set of facts on hand, has taken into consideration that landscaping of factory or garden, falls within t....
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....e 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 construed to be a welfare activity, while carrying on business and such an expenditure incurred may be allowed under the Income Tax Act, but then such an activity has no nexus with the business of the assessee. The Hon'ble Division Bench of Bombay High Court, has considered the aspect of residential colony and rendering taxable service only with reference to the expression relating to business or in other words activities in relation to business and thus held that the same would not fall under the definition of input service and hence ineligible as input service. 51. As o....
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....82/-, 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 'canteen expenses', which is only the labour component for manpower engaged for running the canteen, I hold that no proportionate disallowance is called for as there is no element of outdoor catering nor there is any element for recovery of Service Tax from the employees. 4.1. As regards the 'gardening expenses', the credit on the same is fully allowable as the same is required for maintaining the good atmosphere in the manufacturing area and also a condition precedent as laid down by the State Pollution Control Board, without which the appellant cannot resort to manufacturi....
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....nvat 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 the manufacturing activity by the appellant as without maintaining the garden, the appellant cannot run their factory. Therefore, I hold that the appellant is entitled to avail Cenvat Credit for horticulture services. 5.4. I also observe that courier service has been used by the appellant for various correspondences made with suppliers of the goods, without these correspondences, the appellant cannot do their business. Therefore, the courier service is an integral part of their activity. Therefore, I hold that the appellant is entitled to avail Cenvat credit for courier service. 5.5. The transpor....
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....ejected, 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 table), total input service tax amounting to Rs. 35,516/-." 61. At para 6, CESTAT, Bangalore held as follows:- "So far, 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. Similarly, repair and maintenance, plant housekeeping, warehouse sweeping are also expenditure incurred in relation to the manufacture of dutiable output as well as essential for running the factory. So far, housekeeping services are concerned, it is explained that the same have been used in mai....
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....vice 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 maintenance service, I find that the issue came before this Tribunal, in the case of Lifelong Meditech Ltd., vide, Final Order No. A/60023/2016 dated 11/5/2016 { 2016 (44) STR 626 (Tribunal), wherein this Tribunal has observed as under:- "5.3 With regard to Horticulture services, I find that the appellant is compulsory required to maintain a garden in their factory to pollution control norms. Therefore, the Horticulture services are directly related to the manufacturing activity by the appellant as without maintaining the garden, the appellant cannot run their factory. Therefore, I hold that the appellant is entitled to avail cen....