C. C.E. Meerut vs M/S. Bajaj Hindustan Ltd

[Arising out of Order-In-Appeal No. 252-CE/MRT-I/2009-10 dated 18.03.2010 passed by CCE Meerut-I]

For approval and signature:

Hon'ble Mr. S.K. Mohanty, Member (Judicial)

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

C. C.E. Meerut ...Appellant

Vs.

M/s. Bajaj Hindustan Ltd. Respondent

Appearance:

Mr. R K Mishra, DR for the Appellant

Mr. P K Mittal, (Advocate) for the Respondent

CORAM:

Hon'ble Mr. S.K. Mohanty, Member (Judicial)

Date of Hearing. 13.07.2015

Final Order No. 52204/2015_

Per S K Mohanty:

The Revenue-appellant is in appeal against the impugned order dated 18.03.2010, wherein the Ld. Commissioner (Appeals) Central Excise, Meerut-I has allowed cenvat credit of Service Tax paid on construction services to the respondent for construction of residential colony/ dormitory located in the precinct of the factory.

2. The Ld. DR Sh. R. K. Mishra appearing for the appellant submits that the Residential colony though is adjacent to the factory, but the said area is not finding a place in the ground plan approved by the jurisdictional Range Superintendent. He further submits that the disputed service is no way connected with the manufacture of the final product by the respondent, and thus, the same cannot be termed as input service. To justify his above stand, the Ld. DR relies on the judgment of the Honble Bombay High Court in the case of CCE vs Manikgarh Cements reported in 2010 (20) STR 456 (Bom.).

3. Per contra, Sh. P.K. Mittal, the Ld. Advocate appearing for the Respondent submits that the residential colony/dormitory is located within the precinct of the factory and the respondent constructed the houses in the adjoining place for the reason that the factory is situated at a remote place, where no facilities were available for accommodating their staff/ workers. He further submits that in order to maintain continuity in the sugar manufacture, construction of the dormitories/ residential colony within the precinct of the factory is a basic necessity and is also a requirement under Section 47 of the Factories Act, 1948. It is his submission that the cost incurred for construction of the colony/ dormitory have been considered in the accounts of the respondent, and thus, such service should be considered as activities relating to business, and qualify as input service for the purpose of taking Cenvat credit. To justify his above stand, the Ld. Advocate relies on the judgment on Honble Bombay High Court in the case of CCE vs Ultratech Cement Ltd. Reported in 2010 (260) ELT 369 (Bom.) and the judgment of Honble Andhra Pradesh High Court in the case of CCE vs ITC Ltd. Reported in 2013 (32) STR 288 (Andhra Pradesh). He further submits that in the case of the appellant itself, this Bench of the Tribunal vide final order No. A-51861-51863/2015-SM(Br.) dated 8.6.2015 and final order No. A-51868-51969/2015-SM(Br.) dated 17.06.2015 have allowed the cenvat credit of service tax paid on construction services used for construction of the residential colony/dormitory located within/ precincts of the factory.

4. Heard the Ld. Counsel for both the sides and perused the records.

5. I find that by relying on the judgment of Ultratech Cement and ITC Ltd. (Supra), this Tribunal vide Final order dated 08.06.2015 and 17.06.2015 has allowed cenvat credit of service tax paid on construction service to the present respondent. Since, operation of the said orders have not been stayed by the higher courts, I am of the view that the issue involved in the case in hand is no more open for any debate, and therefore, the cenvat benefit on the disputed services are available to the respondent. The Judgment of Honble Bombay High Court in the case of Manikgarh Cement (supra) cited by the Ld. DR is not applicable to the facts of the present case, in as much as, though the issue involved in the said decided case was with regard to establishing the nexus between the services rendered and the business carried on by the assessee, but the phrase activities relating to business as contained in the definition clause of input service has not been discussed therein, while arriving at the conclusion that the appellant is not entitled to cenvat credit on the construction services. Rather, in the case of Ultratech Cement (supra), the Honble Bombay High Court upon analysis of the inclusive part of the definition of input service, have held that 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. In the present case, construction of residential colony/dormitory adjacent to the factory premises was the necessity because of the location of the factory in a remote area, where if the accommodation is not provided to the staff/workers, the continuous/round the clock manufacturing activity will hamper. Further, the cost towards such construction has also been considered as expenditure in the books of accounts of the respondent. Thus, I am of the opinion that such construction activity is in relation to the business of the respondent, and therefore, service tax paid for accomplishing the purpose of business, merits consideration as input service for the purpose of Cenvat benefit.

6. In view of the above, I am of the considered opinion that the respondent is eligible for cenvat credit on the disputed services and, therefore, there is no infirmity in the impugned order passed by the Commissioner (Appeals). Hence, the appeal filed by the Revenue-appellant is dismissed.

(Dictated and pronounced in open court)

(S. K. Mohanty) Member (Judicial)

Neha

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