M/S. Mangalam Cement Ltd vs Commissioner Of Central Excise

[Arising out of Order-In-Appeal No. 67-69(VC)CE/JPR-I/2013 dated 26.06.2013 passed by Commissioner of Central Excise (Appeals), Jaipur.]

For approval and signature:

Honble Mr Ashok Jindal, 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?

M/s. Mangalam Cement Ltd. Appellants

Vs.

Commissioner of Central Excise Respondent

ST, Jaipur I

Appearance:

Shri Vicrant Kackria, Advocate for the Appellants

Shri A K Dhawan, AR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Date of Hearing /decision: 14.1.2015

FINAL ORDER NO. A/ 50183-50185 /2015-Ex(SM)

Per Ashok Jindal :

The appellants are in appeals against the impugned order denying the inputs service credit on the services namely, outdoor catering, rent-a-cab services, auction, club and association, outward transportation service as same do not qualify as input services as per Rule 2(l) of Cenvat credit Rules, 2004.

2. The facts of the case are that appellant is a manufacturer of cement and are maintaining canteen in their factory as per statutory requirement of Factories Act. During the course of their business of manufacturing of cement, the appellant availed apart from other services, services of outdoor catering , rent-a-cab, auction, club and association, and outward transportation services. Input services credit on these services was sought to be denied on the premise that they do not qualify as input service credit as per Rule 2(l) of Cenvat Credit Rules, 2004. Proceedings were initiated against the appellant and impugned orders were passed to deny the Cenvat credit along with interest and penalty also stand imposed on the appellant. Aggrieved from the said orders, appellant is before me in these appeals.

Learned Counsel for the appellants submits that

(A) outdoor catering services: The services have been utilized by them in the factory and as per Factory Act they have to maintain canteen. As per the decision of Honble High Court of Bombay in the case of Ultratech Cement [2010 (260) ELT 369(Bom)], the appellant is entitled to take Cenvat credit of the amount which they have not recovered from the employees. He further submits that as appellant has produced the certificate issued from the Chartered Accountant certifying that the appellant has not recovered any amount towards subsidized food provided to the employees, therefore, appellant is entitled to take Cenvat credit for the period upto 31.3.11. She further submits that for the period April, 11 to September, 2011, the amount denied is only Rs. 862/-. For that he admits their liability for demand of duty by denying the Cenvat credit.

(B) Rent-a-cab service : It is the contention of the appellant that rent-a-cab service has been used by the appellant for transportation of the employees from their residence to factory or vice versa and for visiting of their officials for their plant and office or to some other places. Therefore as held by High Court of Bombay in the case of Ultratech Cement, they are entitled to take the Cenvat credit. Such services have been used in the course of their business of manufacturing of cement.

C) Auction service: It is the submission of the appellant that the auction were held for auction of waste and scrap arising during the course of manufacturing in their factory. Therefore auction services are related to business of manufacturing cement, therefore they are entitled to take Cenvat Credit.

D) Club and Association services: It is the contention of the appellant that club and association services have been used by the employees or the officials of the appellants outside the city in the course of their business. Therefore, they are entitled to take Cenvat credit.

E) Outward goods transport services: It is the contention of the appellant that said service has been used by them for transportation of finished goods upto the place of buyers as per the purchase order and invoices have been issued which evidenced that sale is on FOR basis and delivery is to be given to the place of buyers. It is further submitted that transportation charges have been included in the assessable value of the goods. Therefore, they are entitled to take Cenvat credit thereon as per the decision of Ultratech Cement as reported in [2014 (35) STR 641 (Chhattisgarh)] and Lumax Automotives Systems Ltd. vs CCE, Delhi IV [2013 (32) STR 526 (Tri-Del)].

3. On the other hand, learned AR opposed the contention of the learned counsel and submits that for the outdoor catering services, the appellant has failed to provide the details whether they have recovered any amount from the employees towards providing such services. It is further submitted that for rent-a-cab services, the appellant has not provided the details for usage of the cab for transportation of the passengers from their residence to the business place. As such, the activity does not relate to manufacturing of the appellant, therefore on these services, the appellant is not entitled to take Cenvat credit. For auction services, the learned AR relied on the decision of M/s. Sundram Brake Linings Ltd. [2010 (019) STR 172] to say that auction services has no relation to the business of manufacturing. Therefore appellant is not entitled to take Cenvat credit. For Club and association services, she further submits that same are not in relation to the business of manufacture. Therefore, they are not entitled to take Cenvat credit. To deny the Cenvat credit on outward goods transportation, it is the submission of learned AR that appellant is required to qualify three conditions of CBEC Circular No. 97/8/07 dated 23.8.07 that the ownership of the goods remained with the appellant till delivery and the risk and cost is borne by the appellant and the cost of transportation is included in the assessable value as appellant has failed to satisfy the condition that goods remained in the ownership of the appellant till delivery and risk and cost are borne by the appellant , therefore, they are not entitled to take Cenvat credit. In these terms, impugned order is required to be set aside.

4. Heard both sides. Considered the submissions.

5. In this case, Cenvat credit on input services sought to be denied and the services on which the Cenvat credit is denied are to be dealt with individually.

1) Outdoor Catering services  For outdoor catering services, it is the contention of the learned AR that it is not shown by the appellant that any amount has been recovered from the employees towards providing subsidy on food or not. I have seen the certificate issued by the Chartered Accountant certifying that no amount towards providing outdoor catering services has been recovered by the appellant from their employees. In these circumstances, I hold that the appellants are entitled to take Cenvat credit on outdoor catering services upto the period 31.3.2011. Further I find that for the period April, 2011 to September 2011, the amount of Rs.862/- towards outdoor catering services are not entitled for input service credit as per the amended provisions which are effective from April, 2011, wherein input service credit has been denied.

2) Rent-a cab service  It is the contention of the learned AR that rent a cab service for transportation of the passenger from their residence to factory or vice versa is not part of manufacturing activity and further the appellant has not shown that any amount being recovered from the employees for transportation of the employees from their residence to the factory or vice versa or not. I have seen that rent a cab service for transportation of the passengers from residence to factory or vice versa is an integral part of the manufacturing activity of the appellant and therefore, I hold that appellant is entitled to take Cenvat credit on these services. Further, I find that in the impugned order or the show cause notice, the allegation leveled against the appellant is that appellant has not segregating the amount of rent a cab pertaining to the transportation of the employees from residence to factory or vice versa and rent a cab services used by them in the course of their business. I therefore, hold that the issue was not before the lower authorities to find out the quantum of recovery made by the appellant from their employees towards providing a rent a cab service. Therefore, I hold that appellant is entitled to take Cenvat credit on rent-a-cab service.

3) Auction and club and association services. The Cenvat credit has been taken on service of auction for the sale of waste and scrap arising during the course of manufacturing. To deny the Cenvat credit, learned AR relied on the decision of Sundaram Clayton Ltd. vs. CCE, Chennai (supra) . In that case, I find that it was only the stay application where the Bench was of the view that on such services, the appellant is not entitled to take Cenvat credit. Therefore to dispense with the condition of pre-deposit, the matter was considered. But there is no final order on that service Further, I find that the sale of waste and scrap which is arising out of manufacturing of the final product is a part of the business of manufacturing of cement by the appellant. Therefore, I hold that on auction services, the appellant is entitled to take Cenvat credit. Further, I find that the charges have been paid for availment of club and association services for the officials visiting outside the city and same has been paid in the case of business of appellant. Therefore, I hold that on this auction and club and association services, the appellant is entitled to take Cenvat credit.

4) Outward transportation services, I find that in this case the purchase order shows that goods are to be delivered at the place of buyer on FOR basis and in the invoice, the transportation cost has formed part of the assessable value as the goods are to be delivered at the buyers place. Therefore. The appellant has satisfied the condition of the CBEC circular No. 97/08/07 dated 23.8.2007 which has been supported by the decision of this Tribunal in the case of Lumax Automotives Systems Ltd.(supra). Therefore, I hold that appellant is entitled to take Cenvat credit on outward transportation service as the transportation charges have formed part of the assessable value and goods are to be delivered at the place of the buyers.

In the result, I hold that appellants are entitled to take Cenvat credit on all services except Rs.862/- on outdoor catering services. As appellants are entitled to take Cenvat credit, therefore demand of interest is not sustainable. Consequently, penalties on the appellants are not imposable. Appeals are allowed in the above terms.

(dictated and pronounced in the open court )

( Ashok Jindal ) Member(Judicial)

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