TaxTMI 
TaxTMI 
2020 (2) TMI 1004
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....ause 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 mines are situated at Singrauli which is at a distan....
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....ning 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, upheld that part of the order of the Joint Commissioner by which credit was allowed on the travelling expenses incurred on the Chartered Accountants to the extent....
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....e 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 like tree trimmings; grass and bush cutting; fabrication, fixing and display of sign board and banners in township; repair and maintenance of residential quarters; cleaning services used in project offices; and dismantling of old structure, bu....
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....itation 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) 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, up to the place of removal, and includes services used in relation to....
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....fically 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, expenses incurred on CA‟s travelling etc. clearly mentioned the provision of service as "CA/Audit". That, as manufacturer of coal, such availment of services is mandatory requirement of management of financial records and other related works which is very important input. Further, on the basis of such services, they formulate and develop the ....
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....n 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 engaged and out of which only 4 security guard was deputed in Residential colony i.e. one at each colony Basant Kunj Colony, Vikas Kunj Colony, Shiv Kunj Colony and CETI Colony. Only 1.18% (4 out of 338) is employed in residential colony." Xxxxxxx xxxxxxx xxxxxxx I further opine that if accommodation was not provided by the notice-Company to its employees at this remote location ne....
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.... 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 kms. The Company maintained a residential accommodation for its managers/employees in the vicinity so as to create a conducive working/living environment for its employees. It, therefore, availed Cenvat Credit on the input services relating to the maintenance of its staff colony. The Assistant Commissioner, however, denied the claim of the Company to avail Cenvat Credit in connection with the maintenance of the....
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....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 security service provided by the manufacturer in the residential quarters maintained for the workers as having any direct or indirect relation in the activity of manufacture of the final product. This is also the view of the Bombay High Court in the case of Manikgarh Cement (supra)." 29. The issue before the Bombay High Court in Manikgarh Cement was, whether credit on services of repair, maintenance and civil construc....
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.... 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 colony was denied on the ground that the said service had no nexus with the manufacture of the final product. The Tribunal noticed that the residential colony was constructed adjacent to the factory because the factory was located far away from the city and unless a residential colony was constructed near the factory, the Appellant would not be in a position to get proper/adequate manpower for running the plant. Placing reliance upon....
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....y 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 the 2004 Rules. 37. In Manikgarh Cement, a general observation was made by the Bombay High Court that establishing a residential colony for the employees and providing services may be a welfare activity undertaken, but such service would not qualify as "input service‟ since the activity should have some nexus with the business. This decision of the Bombay High Court in Manikgarh Cement was followed by the Gujarat High Court in Gujarat He....
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....ision 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 involved in the said appeal was from March, 2011 to March, 2012 and April, 2012 to June, 2012. In paragraph 9 of the decision, it has been clearly stated that the Appellant on its own had reversed the credit and not disputed it even before the issuance of the show cause notice. The only issue that was raised by the Appellant was with regard to the imposition of penalty and that was decided in favour of the Appellant. It cannot, therefore, be urged by the Depar....
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....n 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 services. The motor vehicle will always be a capital good or otherwise for the person who is providing the services. For service provider falling under the category of renting of motor vehicle the motor vehicle would always be a capital good. As such the expression- which is not a capital good appearing in the said exclusion clause would require examination vis-a-vis the service provider and not vis-a-vis the services recipient. As such the interpretation of the lower authorities that mo....