AI Structured Summary
Not yet generated for this judgment
Judgment
The present appeal is directed against the impugned order dated 31.12.2019 passed by the Commissioner of Central Tax (Appeals), Bangalore whereby the Commissioner (Appeals) has confirmed the demand towards availment of CENVAT credit on various input services except on Hotel Inn, Guest House and Club Services and interest and penalty therein.
Briefly the facts of the present case are that the appellant is a wholly owned subsidiary of M/s Honda Motor Company Pvt. Ltd., Japan and is engaged in the manufacture and sale of two-wheelers. The appellant is registered with the Central Excise Department and undertakes the manufacturing activity in its registered premises and availed various input services which aid in the manufacturing activity in one way or the other. During the disputed period, ranging from February 2013 to June 2017, the appellant was availing certain input services and was also availing credit of the service tax paid on the same. The Department entertained the view that the appellant is not entitled to avail credit on certain input services as they do not qualify as input service as defined under Rule 2(l) of CCR, 2004. The detail of the disputed services and the ground for disallowing the credit thereof is given in the table below:
Disputed period
Category of service
Amount of credit
Reasons of denial in the impugned order
February 2013 - December 2015
Erection, Commissioning and installation (crane Services)
9,80,256
Credit availment does not relate to Erection, Commissioning and Installation of any specific capital goods.
February 2013 - December 2015
Event Management Services
8.20,817
No nexus with output service or manufacture
February 2013 - December 2015 and January 2016 - June 2017
Management, Maintenance and Repair
10,88,889
Since diesel is a consumable, credit on the same cannot be allowed.
February 2013 - December 2015 and January 2016 - June 2017
Auctioneer Service
4,51,489
Credit not allowed as such services are availed for auction of scrap which is not final product of appellant
February 2013 - December 2015 and January 2016 - June 2017
Outdoor Catering
96,906
That such service is excluded from the definition of 'input service'. Reliance was placed on the case of CST vs. Ford Business Service Centre : 2015 (38) STR 700 (Tri.- Chennai)
Total
34,38,364
2.1. Department carried out the investigation against the appellant and after the completion of investigation, the Department issued a SCN dated 07.12.2016 for the period February 2013 to December 2015 demanding ineligible service tax credit availed on ineligible services to the tune of Rs.50,64,772/- in terms of Rule 14 of CCR read with Section 11A(1) and Section 11A(4) of the Central Excise Act, 1944 along with interest under Rule 14 of CCR, 2004 and for imposition of penalty under Rule 15(2) of CCR, 2004. Subsequently, a statement of demand dated 11.12.2017 was issued to the appellant for the period January 2016 to June 2017 demanding ineligible service tax credit on ineligible services to the tune of Rs.7,93,324/- in terms of Rule 14 of the CCR read with Section 11A (1) and Section 11A(4) of Central Excise Act, 1944 along with interest under Rule 14 of CCR, 2004 read with Section 11AA of Central Excise Act, 1944 and for imposition of penalty under Rule 15(2) of CCR, 2004. Both the SCNs and statement of demand was adjudicated vide Order-in-Original dated 27.03.2018 by the Additional Commissioner of Central Tax, Bangalore whereby the adjudicating authority disallowed and confirmed the demand of the irregularly availed CENVAT credit amounting to Rs.58,58,096/- along with interest and also imposed equal penalty under Rule 15(2) of the CCR, 2004. Aggrieved by the said order, the appellant filed appeal before the Commissioner who allowed the CENVAT credit on Hotel Inn, Guest House and Club services and the interest and penalty thereon but upheld the Order-in-Original with regard to the remaining input services amounting to Rs.34,38,364/- for the reason stated in the table above.
Heard both the parties and perused the records of the case.
Learned Counsel for the appellant submitted that the impugned order denying the CENVAT credit of the service tax paid on disputed services is not sustainable in law as the same has been passed without properly appreciating the definition of Input Service and the various judicial precedents on these disputed services. She further submitted that as per Rule 3 of CCR, a manufacturer or service provider is eligible to avail credit of duty paid on input or capital goods or input service and the impugned services availed by the appellant are all used in relation to manufacture and have sufficient nexus with the appellant's manufacturing activity and is squarely covered under the definition of Input Service provided under Rule 2(l)(ii) of CCR. Learned Counsel made specific submission on each of the disputed services which are as under:
(i) Erection Commissioning and Installation Service- As far as this service is concerned, learned Counsel submitted that the appellants have availed services relating to crane for loading, unloading and shifting of dies, moulds and machines within the factory and not for erection, commissioning and installation as is the Department's understanding. She further submitted that the appellant is engaged in the manufacture of automobiles, heavy machines and goods are required to be moved from time to time. Such movement is undertaken with the help of cranes and the appellant has availed services relating to cranes. It is practically impossible to undertake the manufacturing activity without the help of cranes to move machines as well as final products. Thus, the services relating to cranes availed by the appellant becomes indispensable to manufacturing activity thereby bringing it within the ambit of input service. She further submitted that this service has been held to be input service in the following decisions:
· M/s Ultratech Cement Ltd. Vs Commissioner of CGST, 2018 (2) TMI 6-CESTAT
· Sarvana Global Energy Ltd. Vs CCE, Pondicherry, 2017 (52) STR 179 (Tri. Chennai)
· Aluminum Powder Co. Ltd. Vs CCE & ST, Madurai, 2016 (42) STR 776 (Tri. Chennai)
(ii) Event Management Service- As far as this service is concerned, learned Counsel submitted that the appellant availed various services of event management for conducting 'inauguration ceremony' of the newly set up manufacturing unit for the period February 2013 to December 2015. These services included travel, boarding and lodging of their management team, advertisement, designing promotional video and pandal etc. The appellant conducted such event with an intention of promoting its business and products and to enhance the sales of its motor vehicles. She further submitted that in the impugned order, both authorities have wrongly held that such event was conducted as a company event and there were no consumers or consumer associations were present during the event whereas, in fact, the appellant's customers (dealers in this case) were attendees of the said event. She further submitted that this kind of activity is covered in the inclusive portion of the definition of Input Service which covers services used in relation to advertisement and sales promotion activities, market research etc. She further submitted that this service was held to be Input Service in the appellant' own case by the CESTAT reported in 2019 (4) TMI 927-Chandigarh. She also submitted that this service has been held to be Input Service by other decisions of the Tribunal which are as under:
· IBM India Pvt. Ltd. Vs CCE, Bangalore- LTU, 2017 (35) STR 384 (Tri. Bang.)
· Monarch Catalyst Pvt. Ltd. Vs CCE, 2016 (44) STR 96 (Tri. Mumbai)
· Castrol India Ltd. Vs CCE, Vapi, 2013 (30) STR 214 (Tri. Ahmd.)
(iii) Management, Maintenance and Repair Services- As far as this service is concerned, learned Counsel submitted that under this service, the appellant has availed the services of management, maintenance and repair for the DG sets installed in its premises during the period February 2013 to December 2015 for generation of electricity for carrying out the manufacturing activity. She also submitted that vendor raised two separate bills-one pertaining to hiring of DG sets and other pertaining to running expenses and maintenance charges for DG sets which is based on the diesel consumed and service tax is charged on both invoices. However, the Commissioner (Appeals) has disallowed the credit on service tax paid on diesel charges on the ground that the same is not an input, input services and capital goods but a consumable. She also submitted that the Department has not disputed the credit availed on hiring of DG sets. Consequently, the Department should allow the credit of service tax paid on running expenses and maintenance charges as diesel which is an input and is essential for the functioning of DG sets.
(iv) Auctioneering Service- As far as this service is concerned, the learned Counsel submitted that during the manufacturing process undertaken by the appellant, some amount of scrap is generated which requires disposal and/or removal for smooth running of the factory and for removal of scrap, the appellant availed services of auctioneers. She further submitted that this service has been held to be Input Service by the Division Bench of the Chennai Tribunal in the case of Sundaram Clayton Vs CCE, Chennai-II reported at 2016 (42) STR 741 (Tri. Chennai) and also in the decision of M/s Mudhra Fine Blanc Pvt. Ltd. Vs Commissioner of CGST reported at 2019 (8) TMI 486 -CESTAT Chennai.
(iv) Outdoor Catering Service- As far as this service is concerned, learned Counsel for the appellant submitted that the appellant has engaged a contractor for providing outdoor catering service within the premises of manufacturing unit which is used by the appellant mainly for serving food and beverage to visiting guests like vendors, dealers, etc. and are not meant for the employees. She further submitted that due to location of appellant's plant in a remote location, catering food to vendor and other guest visitors becomes necessary and this service has also held to be Input Service in the case of Hindustan Coca Cola Beverages Ltd. Vs CGST reported at 2019-VIL604-CESTAT-KOL-ST and M/s Mediacom Media India Pvt. Ltd. Vs CGST Mumbai reported at 2019-VIL-625-CESTAT-MUM-ST. Learned Counsel also submitted that the Department has invoked the extended period of limitation whereas the appellant has not suppressed any material fact from the Department and has been disclosing the CENVAT credit of input services and moreover, the eligibility to avail credit hinges on the determination whether the impugned service qualifies to be an input service and such determination involves interpretation of law and mala fide cannot be alleged against the appellant.
On the other hand, learned AR defended the impugned order and submitted that the appellant is not entitled to avail the credit on disputed input services as the same do not qualify as Input Service defined under Rule 2(l) of CCR, 2004. He further submitted that mainly the CENVAT credit has been denied on account of nexus with the output service or manufacture.
After considering the submissions of both the parties and perusal of the material on record, I find that the appellants have availed the impugned services and use it in relation to manufacture and the appellant has been able to establish sufficient nexus with the manufacturing activity as far as cranes services are concerned which the Department has misunderstood as erection, commissioning and installation service. Further, I find that this service of hiring of crane has been held to be Input Service in a manufacturing unit like the appellant as held in the decisions cited supra by the appellant. Further, as far as Event Management Service is concerned, these services have been used for conducting the inaugural ceremony of the newly set up manufacturing unit where the management team travel to the factory premises and it also involved advertisement, designing, promotional video and pandal services wherein not only the employees of the company but its customers also attended and this service has also been held to be Input Service in the appellant's own case by the decision of the CESTAT, Chandigarh and various other decisions relied upon by the appellant cited supra. Further, as far as Management, Maintenance and Repair Service is concerned, this pertains to the management, maintenance and repair of DG sets which is required for generation of electricity for carrying out the manufacturing activity and once the hiring of DG sets has been allowed by the Department then it is necessary to allow the credit of service tax paid on running expenses and maintenance charges as diesel is an input which is essential for the functioning of the DG sets hence this service also falls within the definition of Input Service. Further, as far as Auctioneering Service is concerned, this service was availed for auctioning the scrap generated in the process of manufacture which is necessary and the Division Bench of the Chennai Tribunal in the case of Sundaram Clayton Vs CCE, Chennai-II cited supra has held that "auction service is also integral part of the manufacturing activity since, clearance of the dumped goods having no utility is necessary to be removed in order to store raw materials or finished goods". Hence, I hold that this service is an Input Service. As far as Outdoor Catering Service is concerned, the appellants says that they have engaged contractors who provide food for the guest and the dealers but this outdoor catering service has been subsequently excluded from the definition of Input Service w.e.f 01.04.2011 and the Larger Bench decision of the Tribunal in the case of Wipro Ltd. Vs CCE, 2018-TIOL-3256- Tribunal (LB) wherein it has been exclusively held that CENVAT credit of outdoor catering service in view of the amended definition of Input Service w.e.f. 01.04.2011 is not available and by following the decision of the Larger Bench, I hold that the appellant is not entitled to CENVAT credit on Outdoor Catering Service.
In view of my discussion above and by following the ratios of various decisions cited supra, I hold that the appellant is entitled to CENVAT credit on input services viz. Erection Commissioning and Installation Service (Crane Service), Event Management Service, Management, Maintenance and Repair Service and Auctioneering Service and is not entitled for CENVAT credit on Outdoor Catering Service and the said credit is recoverable from him with interest. Accordingly, the appeal is partially allowed to the above extent.
(Order pronounced in the open court on 25.03.2021.)