CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench  SMB
Court  I

Date of Hearing: 18/12/2009
                                    		    Date of decision:..

Appeal No.E/334/08

(Arising out of Order-in-Appeal No.04/2008-CE dt. 22/1/2008 
passed by CCE(Appeals), Mangalore )


For approval and signature:

Honble Mr. M.V.Raindran, Member(Judicial)


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


No
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?


No
3.
Whether their Lordship wish to see the fair copy of the Order?

Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes

M/s. Brakes India Ltd.
..Appellant(s)

Vs.
CCE, Mysore
Respondent(s)

Appearance Mr.R.Raghavan, Advocate for the appellant.

Mr.M.Ravi Rajendran, SDR for the Revenue.

Coram:

Honble Mr. M.V.Ravindran, Member(Judicial) FINAL ORDER No._______________________2009 Per M.V.Ravindran This appeal is directed against the Order-in-Appeal No. 04/2008-CE dt. 22/1/2008.

2. The relevant facts that arise for consideration are that the appellant is a manufacturer of rubber seals, case bottom, bush blanks and polymers. The appellant is availing credit of service tax paid on manpower supply service. The said manpower supply services are towards canopy, house keeping, sundry and civil maintenance of gardens. The credit of the service tax availed by the appellant was disputed by the Revenue on the ground that the service tax paid on the maintenance of gardens does not come under the purview of input service used in or in relation to the manufacture of final product in terms of Rule 2(1) of the Cenvat Credit Rules, 2004. Coming to such conclusion, a show cause notice was issued of denying and for reversal of the said cenvat credit availed. The adjudicating authority vide his order dt. 11/7/2007 confirmed the demand and also imposed penalties besides demanding the interest. Aggrieved by such order appellants preferred an appeal to the ld. Commissioner(Appeals). The ld. Commissioner(Appeals) after considering the submission made before him came to the conclusion that the Order-in-Original is correct and does not require any interference. Hence this appeal.

3. Ld. Counsel appearing on behalf of the appellant submits that both the lower authorities have not considered the factual matrix. It is his submission that the garden is maintained by the appellant as a statutory requirement of the Govt. of Karnataka as per the Water (Prevention and Control of Pollution) Act, 1974 and Air (Prevention and Control of Pollution Act, 1981. It is his submission that the factory of the appellant is under the supervision of pollution control authorities and every action with reference to increase in production capacity or diversification, needs approval of pollution control authorities. He would draw our attention to the orders dt. 30/3/2002, 16/6/2003 and 25/2/2004 of Karnataka State Pollution Control Board for the submission that there is a requirement in treating the sewage and effluent within the factory premises to use the said treated water for irrigation/gardening within the factory premises without letting it out outside the factory premises. He would also submit that the appellants factory is certified under ISO 9000 and ISO 14001 which mentions that there should be complete environmental management. It is his submission that the decision of the Honble High Court of Bombay in the case of Coca Cola India Pvt. Ltd. Vs. CCE, Pune-II [2009(15) STR 657(Bombay)] would cover the issue in favour of the appellant. He would also rely upon the decision of the Tribunal in the case of Millipore India Ltd. Vs. CCE, Bangalore-II ]2009 (13) STR 616 (Tri. Bang.)].

4. Ld. DR on the other hand would submit that the services rendered for maintenance of garden would not come under the definition of services used in or in relation to the manufacture of final product. He would rely upon the decision of the Tribunal in the case of Kirloskar Oil Engines Ltd. Vs. CCE, Aurangabad [2009 (241) ELT 474 (Tri. Mum.)] for the proposition that the service tax paid on the garden maintenance service is not related to the manufacture and clearance of excisable goods. It is his submission that the ratio of the said decision was also followed in the case of Kirloskar Oil Engines Ltd. Vs. CCE, Aurangabad [2009-TIOL-1908-CESTAT-MUM], GKN Sinter Metals Ltd. Vs. CCE, Aurangabad [2009-TIOL-1040-CESTAT-MUM].

5. I have considered the submission made by both sides and perused the records. The issue involved in this case is regarding the eligibility to Cenvat Credit on the service tax paid on the services of garden maintenance covered under the category of Manpower supply. The Revenue is seeking to deny the said credit only on the ground that the said services cannot be considered as input services and cannot be considered as activities related to business. It is also the Revenues contention that the said services are not directly or indirectly connected in relation to manufacture of final product and clearance of final product.

6.1. At the outset, I find that the order of the Karnataka State Pollution Control Board (KSPCB) dt. 30/3/2002 gives a consent to the appellant authorizing them to operate their industrial plant subject to the existing air pollution control and water pollution control norms as set by the authorities. Further I note that while granting consent to appellant for manufacture of additional product, the KSPCB vide their letter dt. 16/6/2003 has put the following restrictions in respect of the water usage:-

1. The effluent treatment flow sheet submitted by the industry for treatment of trade effluent is generally agreeable and the industry may go ahead with the implementation of the same as cited above.

2. The total quantity of trade and domestic effluents after expansion shall not exceed 2.5 M/day and 22.5M/day respectively and the same shall be treated in the combined effluent treatment plant.

3. The industry shall treat the trade and domestic effluents to the prescribed standards as laid down in Annexure-I and utilize the same into on land for irrigation (Gardening) within the plant premises. There shall not be any discharge of trade and treated effluents into outside the plant premises. 6.2. It can be seen from the above reproduced restriction that the KSPCB has given the consent for the manufacturing of the products subject to the following all the conditions as laid down by them as reproduced herein above. It can be seen from the above reproduced conditions, specifically condition No.3 that the appellant is required to treat the trade and domestic effluents (industrial and domestic effluents) to the prescribed standards and utilize the same into on land for irrigation i.e. gardening within the plant premises. It would indicate that the treated water from their plant has to be used by the appellant within the plant premises in order to adhere the condition laid down by the KSPCB, failing which the consent given to them would have been in jeopardy.

7.1. On this factual matrix, I find that the appellant has availed the services of garden maintenance from a person, who paid the service tax. The service tax paid on the said services can be availed as cenvat credit as the creation and maintenance of garden within the factory premises was mandatory requirement as per the order of the KSPCB. I find that the Honble High Court of Bombay in the case of Coca Cola India Pvt. Ltd.(supra) had laid down the criteria for availing of cenvat credit of the service tax paid on the services. In para 39 of the said judgment, their Lordships while interpreting the definition of input service held, which I may reproduce in extenso:-

39. The definition of input service which has been reproduced earlier, can be effectively divided into the following five categories, in so far as a manufacturer is concerned :

(i) Any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products

(ii) Any service used by the manufacturer whether directly or indirectly, in or in relation to clearance of final products from the place of removal

(iii) Services used in relation to setting up, modernization, renovation or repairs of a factory, or an office relating to such factory,

(iv) Services used in relation to advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs,

(v) Services used in relation to activities relating to business and outward transportation upto the place of removal.

Each limb of the definition of input service can be considered as an independent benefit or concession exemption. If an assessee can satisfy any one of the limbs of the above benefit, exemption or concession, then credit of the input service would be available. This would be so even if the assessee does not satisfy other limb/limbs of the above definition. To illustrate, input services used in relation to setting up, modernization, renovation or repairs of a factory will be allowed as credit, even if they are assumed as not an activity relating to business as long as they are associated directly or indirectly in relation to manufacture of final products and transportation of final products upto the place of removal. This would follow from the observation of the Supreme Court in Kerala State Co-operative Marketing Federation Ltd. and Ors. v. Commissioner of Income-tax - 1998 (5) SCC 48, which is as under :

7.?We may notice that the provision is introduced with a view to encouraging and promoting growth of co-operative sector in the economic life of the country and in pursuance of the declared policy of the Government. The correct way of reading the different heads of exemption enumerated in the section would be to treat each as a separate and distinct head of exemption. Whenever a question arises as to whether any particular category of an income of a co-operative society is exempt from tax what has to be seen is whether income fell within any of the several heads of exemption. If it fell within any one head of exemption, it would be free from tax notwithstanding that the conditions of another head of exemption are not satisfied and such income is not free from tax under that head of exemption. 7.2. It can be noted from the above reproduced ratio of the judgment of the Honble High Court, that any service used by the manufacturer whether directly or indirectly in or in relation for the clearance of final product from the place of manufacture would be eligible for the cenvat credit on the service tax paid on the services. As has already been reproduced by me hereinabove, that the appellant is statutorily bound to maintain the garden within the factory premises in order to manufacture and clear the final products as per the requirement of KSPCB, the services which are engaged by appellant would be covered under the definition of Manpower supply as an infrastructure required for the manufacture and clearance of final products. I find that the said ratio has been followed by this very Bench in the case of Millipore India Ltd.(supra).

8.1. As regards the decision relied upon by the ld. DR in the case of Kirloskar Oil Engines Ltd. Vs. CCE, Aurangabad (supra), I find that the Bench came to the conclusion on the following findings:

4.?.. For this simple reason, it has to be held that garden maintenance service has no nexus, even remotely, to manufacture or clearance of excisable goods. In other words, the above service was not used, directly or indirectly, in relation to the manufacture or clearance of excisable goods. I, therefore, concur with the lower authorities on the point. Whether repairs and maintenance of vehicles is part of the issue covered by the show-cause notice is something to be considered by the original authority.  . . 8.2. It can be noted from the above reproduced finding that the statutory requirement of maintaining any garden by the appellant therein was not brought on record, in the facts of that case. In the absence of any such requirement and in the facts and circumstances of that case, the Tribunal came to such a conclusion. It is also seen that other two cases as relied upon by the ld. DR also do not indicate the factual matrix, whether the assessees therein were required to maintain the garden under some statutory provisions.

9. In the current case before me, there is being a statutory requirement of maintaining a garden, by using the treated industrial and domestic sewage water, I am of the view that the ratio as laid down by the Honble High Court of Bombay in the case of Coca Cola India Ltd. (supra) would cover the issue in favour of the appellant. Accordingly, I hold that the appellant is eligible to avail the cenvat credit of the service tax paid on the garden maintenance services falling under Manpower supply. In view of these reasonings, I am of the view that the impugned order is incorrect and liable to be set aside and I do so. The impugned order is set aside and the appeal is allowed with consequential relief, if any.

(Pronounced in court on.) (M.V.Ravindran) Member (Judicial) Nr 9