TaxTMI 
TaxTMI 
2020 (2) TMI 1004
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.... Appellant, with interest and penalty. The cause for filing the appeal by the Revenue arose because the first show cause notice dated 21 December, 2015 for the period 01 July, 2012 to 31 March, 2014 proposed denial of Cenvat Credit of Rs. 1,86,40,085/- on capital goods and Rs. 1,85,32,067/- on input service, while the second show cause notice dated 09 November, 2016 issued for the period 01 May, 2014 to 31 December, 2015 proposed denial of Cenvat Credit of Rs. 35,79,241/- wrongly availed and utilized. The Commissioner (Appeals) modified the order passed by the Joint Commissioner by disallowing Cenvat Credit to the extent of Rs. 69,25,146/-. The assessee has, therefore, filed this appeal. 2. The Appellant, which is engaged in the business of mining and selling coal at mines located in Madhya Pradesh and Uttar Pradesh, was registered with the Central Excise Department on 22 June, 2012. Prior to this, each area office of the Appellant was separately registered with the jurisdictional Central Excise Authorities for payment of Central Excise duty. It needs to be noted that coal became leviable to Central Excise duty w.e.f 01 March, 2011. 3. In the State of Madhya Pradesh, the mine....
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....ng; (d) Fabrication, fixing and display of sign board; (e) Repair and maintenance of residential quarters; (f) Cleaning services used in project offices; (g) Hiring of bus for transportation of its employees (h) Dismantling of old structure 8. The Joint Commissioner, however, found that the Appellant had wrongly availed Cenvat Credit of Rs. 1,08,018/- on ineligible capital goods and the same was ordered to be recovered. The Joint Commissioner also directed for payment of interest at the appropriate rate and imposed penalty of Rs. 1,08,018/-. 9. Feeling aggrieved by that part of the order of the Joint Commissioner by which Cenvat Credit availed by the Appellant was allowed, the Revenue filed an appeal which was decided by order dated 31 January, 2018 by the Commissioner (Appeals). The Commissioner (Appeals) found that the Appellant was not entitled to take Cenvat Credit on welfare activities relating to beautification of premises or welfare of the staff. It was also found that the Appellant was not entitled to take credit for security services and other services used in the residential colony. The Commissioner (Appeals), however, up....
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.... the officers of the Appellant in the work shop conducted for Corporate Social Responsibility, as the said services were availed for business operations and were covered by the inclusive definition of "input services‟ under Rule 2(l) of the 2004 Rules under the Heading "Coaching and Training" and the Joint Commissioner in the order dated 31 March, 2017 had correctly allowed the Appellant to take Cenvat Credit on this service; (ii) The Appellant was entitled to take Cenvat Credit on security services for the places situated within the jurisdiction of the Appellant Headquarters and mines, including the security services in the residential colony, but the Commissioner (Appeals) committed an illegality in denying the Cenvat Credit only for the reason that the Appellant was not entitled to take Cenvat Credit for the security services used in the residential colony and break up for the office and the residential colony had not been provided by the Appellant. In this connection, reliance has been placed upon certain decisions, to which reference shall be made at the appropriate stage; (iii) The Appellant was also entitled to avail Cenvat Credit on various input services lik....
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....lhi in Hindustan Zinc Ltd. vs Commissioner of Central Excise, Jaipur-I 2013 (29) STR 492 (Tri.-Del) and the Chennai Bench of the Tribunal in DCW Ltd. vs Commissioner of Central Excise, Tirunelveli 2018 (332) ELT 142 (Tri.-Chennai); and (iii) The extended period of limitation was correctly invoked in the first show cause notice as the Appellant had willfully suppressed material facts from the Department with an intent to evade payment of duty. 15. The submissions advanced by the learned Chartered Accountant for the Appellant and the learned Authorized Representative of the Department have been considered. 16. In order to appreciate the contentions, it would be appropriate to examine Rule 3 of 2004 Rules that deals with Cenvat credit. It provides that a manufacturer or producer of final products or a provider of output service shall be allowed to take credit of duty paid on any input or capital goods received in the factory of manufacturer of final products or by the provider of output service on or after the 10th day of September, 2004. 17. "Input Service‟ has been defined in Rule 2(l) as follows: "2(l) "input service" means any service,- (i....
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.... the nearest city Varanasi. According to the Appellant, it is for this reason that it had to provide a secured residential colony for the officers and staff working in the offices at Singrauli and Sonbhadra. The case of the Appellant is that in the agreement entered into between the Appellant and the security agency, it was specifically mentioned that the Appellant being a very sensitive industry dealing in coal mining exploration and production was subjected to various internal and external risk, threat, attacks etc. and since the residential buildings were located in the vicinity of the mines and area offices within the premises owned by the Appellant, it was necessary to provide security. 21. The services for which credit has been denied to the Appellant by the Commissioner (Appeals) are being dealt with separately. (A) PARTICIPATION OF OFFICERS IN WORKSHOP FOR CORPORATE SOCIAL RESPONSIBILITY : 22. This aspect had been elaborately dealt with by the Joint Commissioner in the order dated 31 March, 2017 in the following manner : "Here in the case instant, as claimed by the noticee, the relevant documents/invoices raised in respect of CSR workshop, Seminar, e....
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....s, NCL awards contract for availing security services both at its offices and residential buildings. No separate price break is provided by the service providers for security services rendered at the Office and residential buildings in as much as the said residential buildings are considered integral to the overall business of the Company. The said services are in relation to the business of the Company connected to the mining operations and therefore, in or in relation to the manufacture of final product (coal) on which duty is being paid. Further on perusal of the copy of work order and Agreement of the otice with the Security agency, it is observed that in the agreement, it is found mentioned that security agency is required to provide security to all duty places within the Jurisdiction of NCL HQ i.e. office building, stores, workshops, colonies, Madhauli substation etc. It is submitted that single work order is issued to security agency for security service for mines as well as colonies. Regarding the break-up of the security personnel‟s deployment separately at office building and residential colonies, the otice stated that 338 nos. of security staff is....
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....providing security services to residential quarters of the employees is neither directly nor indirectly connected with the manufacturing activity, is not correct. From a bare perusal of the order of the Commissioner (Appeals), it does appear that providing security in the office area is connected with the business activity of the Appellant, but providing security to the residential colony is not in relation to the business activity of the Appellant. Credit has, however, been denied since bifurcation of the amount spent for security for office and residential colony has not been provided. At this stage, it needs to be noted that there are 338 personnel provided by the security agency, out of which only 4 security guards are deployed at the four residential colonies and 334 security staff are for the offices area. 27. This issue has been the subject matter of various decisions. The Andhra Pradesh High Court in Commissioner of Cus. & C. Ex, Hyderabad vs ITC Limited 2013 (32) STR 288 (AP) examined this issue in a judgment rendered on 08 November, 2011. The Respondent Company had a factory located in a remote area and the nearest town with a railway station was at a distance of 35 km....
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....Credit on security services utilized in residential colony is admissible. The Gujarat High Court observed that security services provided in residential quarters cannot be said to be services used by the manufacturer directly or indirectly in relation to the manufacture of final product and in this connection reliance was placed on an earlier decision of the Bombay High Court in Commissioner of Central Excise, Nagpur vs Manikgarh Cement 2010 (20) STR 456 (Bom). The relevant portion of the judgment of the Gujarat High Court is reproduced below : "11. Despite such wide connotation of the term "input service‟ as defined in Rule 2(1) of the Cenvat Rules, the question is whether the present case would be covered in the said definition. Facts are short and not in dispute. Respondent assessee, manufacturer of soda ash, has provided residential quarters for its workers. In such residential quarters, the assessee also provided security services. Can such security services be stated to be service used by the manufacturer directly or indirectly in or in relation to the manufacture of final product? Our answer has to be in the negative. We do not see any connection between the s....
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....uch residential is industrial township, it is the onus of the concerned industry to maintain the civil/municipal services. I find that from the ruling relied upon by the Revenue, the concept of Industrial Township was not considered. Further, there is mistake of fact in the order of court below in observing that the colony is located away from the manufacturing area. In this view of the matter, I hold that the assessee/appellant requires the residential colony for availability of the workers for manufacture of dutiable goods and, as such, security services is essential in order to maintain the residential/industrial colony of the appellant. Accordingly, I hold that the appellant is entitled to the Cenvat credit under dispute. The appeal is allowed with consequential relief in accordance with law. The impugned order is set aside." [emphasis supplied] 31. The judgment of the Andhra Pradesh High Court in ITC Limited was also followed by the Tribunal in Mangalam Cement Limited vs Commissioner of Central Excise & Service Tax, Jaipur-I 2016 (44) STR 422 (Tri.-Del). In this case, Cenvat Credit of Service Tax taken by the Appellant on maintenance and repair works of its residential c....
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....position in ITC Limited is very similar to the factual position emerging in the present case Appeal. In ITC Limited the factory was located in a remote scheduled area and the nearest town with a railway station was at a distance of 35 kms. In the present Appeal, the nearest towns are situated at a distance of 250 kms and 350 kms. The Andhra Pradesh High Court observed that in such circumstances it was necessary for the operation of the factory to have a residential colony in the close vicinity and the residential colony had to be maintained as well. The Tribunal had observed that if accommodation was not provided by the Company to its employees at such a remote location, it would not be feasible for the manufacturer to carry out the manufacturing activity. The High Court, therefore, observed that in such circumstances the finding of the Tribunal that staff colony provided by the Respondent Company, being directly and intrinsically linked to its manufacturing activity, could not be excluded was correct and consequently the services which were crucial for maintaining the staff colony had necessarily to be considered as "input service‟ falling within the ambit of Rule 2(l) of th....
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....nexus with the business undertaken by the Appellant. The Joint Commissioner had examined all these aspects and had arrived at a conclusion that such services had a nexus with the business of the Appellant, but the Commissioner (Appeals) without giving any reason, much less a cogent reason, has made an observation that providing such services has no nexus with the business of the Appellant. 41. At this stage, it would be necessary to refer to the decision of the Tribunal rendered in the Appellant‟s own case in Northern Coalfield Limited vs Commissioner of Central Excise, Bhopal 2017 (5) GSTL 217 (Tri.-Del) that has been placed before us by the learned Authorized Representative of the Department. The contention of the learned Authorized Representative is that in the said case the Appellant had reversed the credit taken for security service provided at the residential colony on its own even before the issuance of the show cause notice and, therefore, it is not open to the Appellant to now contend in these proceedings relating to a subsequent year, that the Appellant is entitled to claim Cenvat Credit. 42. A perusal of the aforesaid decision indicates that the period involv....
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....t has also placed reliance upon a decision of the Tribunal in Orient Paper Mills vs Commissioner of Central Excise, Bhopal 2016 (46) STR 854 (Tri.-Del) wherein it has been held that credit on rent-a-cab service could be taken only upto 31 March, 2011 in view of the provisions of Rule 2(l)(B) of the 2004 Rules under which rent-a-cab service has been excluded from availment of Cenvat Credit. 46. Learned Chartered Accountant for the Appellant has, however, placed reliance upon a decision of the Tribunal in M/s Marvel Vinyls Ltd. vs Commissioner of Central Excise, Indore Excise Appeal No. 52257/2016 decided on 02 May, 2016. In this case, the period during which the Appellant therein had availed Cenvat Credit was from August, 2013 to February, 2014. After referring to exclusion clause contained in Rule 2(l)(B), the Tribunal observed as follows : "6. However, I find flaw in the above interpretation of appellate authority. He has for the appellant. A person who is receiving the input services of renting of immovable property, can never avail cenvat credit of duty paid on the motor vehicles and as such motor vehicle can never be a capital good to the recipient of the said servi....