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TAXAP/21/2011 8/ 8 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 21 of 2011
To
TAX
APPEAL No. 23 of 2011
=========================================================
COMMISSIONER
CENTRAL EXCISE AND CUSTOMS - Appellant(s)
Versus
M/S
ULTRATECH CEMENT LTD - Opponent(s)
=========================================================
Appearance
:
MR
YN RAVANI for
Appellant(s) : 1,
MR AP NAINAWATI for Opponent(s) :
1,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE AKIL KURESHI
and
HONOURABLE
MS JUSTICE SONIA GOKANI
Date
: 30/09/2011
ORAL
ORDER
(Per
: HONOURABLE MR.JUSTICE AKIL KURESHI)
Revenue
has challenged the common judgment of the Tribunal dated 29.6.2010.
While issuing notice of final disposal, we had framed substantial
question of law for consideration in following terms :
“Whether
the service tax credits on services of Insurance for residential
colony buildings is admissible, when such services are not related
directly or indirectly to the manufacture of final product, as input
service defined under Rule 2(1) of the Cenvat Credit Rules, 2004?”
In
response to such notice, learned counsel Shri Anand Nainawati
appeared for the respondent. We have heard both sides for final
disposal of the appeals.
Respondent
company is a manufacturer of cement. Respondent clears its goods
manufactured by it upon payment of excise duty and also availed
Cenvat credit in respect of duty paid input and capital goods
used in manufacture of such final product. Department, however, was
of the opinion that certain services on which the assessee was
claiming Cenvat credit was not allowable as per the rules. In the
present case, we are concerned with the Cenvat credit claimed by the
assessee on service tax paid on services of insurance services for
residential colony. The Tribunal in the impugned judgment allowed
such a claim. The Tribunal rejected the Revenue’s contention that
such services are not used directly or indirectly in the manufacture
of the final product and upheld the assessee’s contention that the
phrase “activities relating to business” as appearing in
the inclusive part of the definition of input service is wide enough
to cover such services. The Tribunal distinguished the decision
of the Apex Court in the case of Maruti Suzuki Ltd. (2009
TIOL-94-SC-DX). The Tribunal placed reliance on the decision of the
Delhi Bench in the case of M/s.Triveni Engg. & Industrial Ltd.
v. CCE, Meerut, 2008 (12) STR 330 (Tri-Del.).
Counsel
for the Revenue submitted that services cannot be stated to be
utilized for manufacturing of final product. He submitted that the
same would not be covered by the definition of the term ‘input
service’ as defined in rule 2(l) of the Cenvat Credit Rules.
On
the other hand, counsel for the respondent, supported the decision of
the Tribunal contending that no question of law arises and tax
appeals may therefore be dismissed.
Before
us both sides brought our attention to a decision of this Bench in
the case of Commissioner of C.Ex. & Customs v. Gujarat
Heavy Chemicals Ltd., 2011 (22)
S.T.R.610 (Guj.). It was a case wherein the assessee was claiming
Cenvat credit on the service tax on security services utilized for
residential colony of the Company. The Tribunal had accepted the
assessee’s case. The Department had thereupon approached this Court
by filing Tax Appeal. Such Tax Appeal was allowed by the
above-mentioned decision dated 11.5.2011. Since the issue dealt with
by this Court in the said decision is closely connected with the
present controversy, we may record the discussion and finding in
such judgment, as under:
“7.
Learned counsel for the Revenue submitted that service tax paid on
security service maintained by the assessee in the residential
quarters cannot be covered under the definition ‘input service’ as
defined in rule 2(l) of the Cenvat Credit Rules. He submitted that
there is no nexus between the business activity of the assessee and
service provided. Reliance was placed on the decision of the Bombay
High Court in the case of CCE, Nagpur v. Manikgarh Cement,
2010(20) STR 456 (Bom.). He pointed out that the Tribunal in the
impugned judgment has placed reliance on a decision of Bombay
Tribunal in the case of
Manikgarh Cement v. Commissioner of C.Ex. & Customs, Nagpur
reported in 2008(9) STR 554 (Tri.-Mumbai) which was reversed by the
Bombay High Court in the case Manikgarh Cement (supra). Counsel also
relied on the decision of the Apex Court in the case of Maruti
Suzuki Ltd v. CCE, Delhi, 2009
(240) ELT 641 (SC).
8. On
the other hand, counsel for the respondent assessee contended that
the definition of the term ‘input service’ contained in section
2(l) of the Cenvat Rules is sufficiently wide to include range of
services used by the manufacturer for and or in relation to
business. Counsel pointed out that the Bombay High Court
subsequently in the case of CCE, Nagpur v. Ultra Tech
Cement Ltd., 2010 (20) STR
577(Bom.) has examined the issue at length and held that outdoor
catering services provided by the manufacturer is an ‘input service’
within the meaning of rule 2(l) of the Cenvat Credit Rules. Counsel
further relied on the decision of the Bombay High Court in the case
of Coca Cola India Pvt. Ltd v. CCE Pune, III,
2009 (15) STR 657 (Bom.) wherein the Bombay High Court was pleased to
allow benefit of Cenvat Credit on service tax to the manufacturer of
concentrate on advertising service used for marketing of soft drink.
Counsel also relied on a decision of the Apex court in the case of
Ramala Sahkari Chini Mills Ltd. v. CCE, Meerut -I,
2010 (260) ELT 321 (SC) by which, the decision of the Apex Court in
the case of Maruti Suzuki Ltd (supra) has been referred to a Larger
Bench.
9. Having
thus heard the learned counsel for the parties, short question that
confronts us is whether the security service provided by the
respondent at the residential quarters maintained for the workers
would be included in the term ‘input service’ as defined in rule
2(l) of the Cenvat Credit Rules. Term ‘input service’ has been
defined in section 2(l) as under:
“”Input
service” means any service –
used
by a provider of taxable service for providing an output service, or
used
by the manufacturer, whether directly or indirectly, in or in
relation to the manufacture of final products and clearance of final
products from the place of removal,
and
includes services used in relation to setting up, modernization,
renovation or repairs of a factory, premises of provider of output
service or an office relation to such factory or premises,
advertisement or sales promotion, market research, storage upto the
place of removal, procurement of inputs, activities relating to
business, such as accounting, auditing, financing, recruitment and
quality control, coaching and training, computer networking,credit
rating, share registry, and security, inward transportation of
inputs or capital goods and outward transportation upto the place
of removal;”
10. Definition
of input service is expressed in the form of ‘means’ and ‘includes’.
‘Means’ part of the definition contains, inter alia, service used
by the manufacturer whether directly or indirectly or in relation to
the manufacture of final products and clearance of final products
from the place of removal. This definition, of course, is worded to
include variety of services used not only for, but in relation to
manufacture of final products and also for clearance of final
products upto the place of removal. This Court in Tax Appeal No.419
of 2010 and connected matters decided on 6th
April 2011 held that the said definition is exhaustive in nature.
11. Despite
such wide connotation of the term ‘input service’ as defined in rule
2(l) 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).
12. We
may notice that the Apex Court in the case of Maruti Suzuki Ltd.
(supra) was of the opinion that the electricity generated by the
assessee and cleared to grid for distribution would not be part of
manufacturing activity and be categorized as input used in
manufacture of final product. We are conscious that the said
decision of the Apex court is referred to Larger Bench. However, at
this stage, the ratio laid down therein prevails.
13. In
the case of Ultra Tech Cement Ltd. (supra), on which counsel for the
respondent has placed heavy reliance, the Bombay High Court was
considering outdoor catering service provided by the employer for
its employees. It was a case wherein to provide for the canteen
facilities to the workers was mandatory and failure to do so would
entail penal consequences. It was on this background, the Bombay
High Court held that outdoor catering services provided by the
manufacturer to its workers would be covered within provisions of
rule 2(l) of the Rules. In the present case, the act of providing
residential quarters by the manufacturer to its employees was
voluntary. Providing further security service in such residential
quarters was also an act voluntary in nature. Independently, we
find that such activity cannot be termed within the sweep of
expression of ‘input service’ as provided in rule 2(l) of the Rules.
14. In
the result, Revenue’s appeal is allowed. The question is answered
in favour of the Revenue and against the assessee. The impugned
judgment of the Tribunal is set aside. Appeal is disposed of
accordingly.”
To
our mind, though there is somewhat difference in the nature of
services involved in the present appeals, in so far as all material
aspects are concerned, the entire issue has been discussed threadbare
and decided in the above-mentioned judgment in the case of Gujarat
Heavy Chemicals Ltd. As already noted, in the case of Gujarat Heavy
Chemicals Ltd., the Court was considering the eligibility of the
manufacturer to avail Cenvat credit on the service tax credit on
security services in residential colony of the Company. In the
present case, the issue presented before us pertains to service
tax credit on insurance of the vehicles. We may notice that such
vehicles are used only for the residents of the colony and not for
the business purpose of the Company. Such being the facts, decision
of this Court in the the case of Gujarat Heavy Chemicals Ltd. (supra)
would conclude the issue.
In
the result, following the ratio of the decision in the case of
Gujarat Heavy Chemicals Ltd. (supra), we hold that the assessee
would not be entitled to Cenvat credit on service tax paid on such
services. The decision of the Tribunal is therefore, reversed. To
the above extent, all the tax appeals are allowed.
(Akil
Kureshi J.)
(Ms.Sonia
Gokani, J.)
(vjn)
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