IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO. IV

Appeal No. E/89271/13

(Arising out of Order-in-Original No. Belapur/30/Bel-IV/R-I/COMMR/KA/2013-14 dated 16.7.2013 passed by the Commissioner of  Central Excise (Appeals),  Belapur   ).

For approval and signature:

Honble Shri Anil Choudhary, Member (Judicial)

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1. Whether Press Reporters may be allowed to see		:    No
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	:    Yes	CESTAT (Procedure) Rules, 1982 for publication
	in any authoritative report or not?

3.	Whether their Lordships wish to see the fair copy	:    Seen
	of the order?

4.	Whether order is to be circulated to the Departmental	:    Yes
	authorities?
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M/s Mukand Ltd. 
Appellant

Vs.

Commissioner of Central Excise, Belapur
Respondent

Appearance:
Shri P.V. Patankar, Advocate
for Appellant

Shri Ashutosh Nath, AC  (AR)
for Respondent


CORAM:
SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) 


Date of Hearing: 29.10.2014

Date of Decision: 29.10.2014  



ORDER NO.                                    

Per: Shri Anil Choudhary

The appellant M/s Mukand Ltd. is registered with Central Excise Department and is engaged in manufacturing of excisable goods falling under Chapter 72, 73 & 84 of Central Excise Tariff Act, 1985. A show-cause notice dated 13.4.2012 for the extended period April, 2007 to January, 2012 was issued. As per the show-cause notice it is alleged that the appellant have wrongly availed CENVAT Credit of Service Tax amounting to Rs.1,80,20,547/- on the input services namely, Rent a cab service, Outdoor catering service, services by Air Travel agency, services by CHA in respect of exports, cleaning and Repair/maintenance service of Guest House, Gymansium and sports club/sports ground etc. The assessee was further required to show cause as to why the proposed CENVAT Credit is not disallowed and recovered from it and further as to why not interest be recovered and further why not penalty be imposed under Section 11AC (1A) of the Central Excise Act with Rule 2 of the Cenvat Credit Rules. The appellant contested the show-cause notice by filing written submissions. Vide Order-in-Original dated 16.7.2013, the Commissioner adjudicated the show-cause notice and disallowed proposed disallowance of CENVAT Credit for the amount of Rs.23,03,110/- along with interest and also imposed equal amount of penalty under Rule 15(2) of Cenvat Credit Rules read with Section 11AC. The details of disallowance is indicated in the table below: -

Sr. No. Name of the service Amount of credit disallowed (in Rs.)

1. Canteen expenses 16,33,733/-

2. Cleaning expenses 33,182/-

3. Gardening expenses 82,501/-

4. Repair & Maintenance of residential colony 3,63,399/-

5. Sport Club/Ground 1570/-

6. Vehicle Hire charges 1,88,720/-

Total 23,03,110/-

2. The appellant urges among others the following grounds and said that there is no case of suppression and or any fraud etc. on its part as the CENVAT Credit availed was fully reflected in the statutory book as well as in the accounts book and the same was shown in the return filed, time to time by the Revenue. In such circumstances, the issue is fully interpretational and the invocation of extended period is wrong. The appellants plead that the extended period is fit to be set aside.

2.1 As regards canteen expenses, the appellant states that it was not availed any outdoor catering services and they have not taken credit of Service Tax paid on any outdoor catering service. Within the factory premises, they are maintaining their canteen, which is also a statutory requirement under Section 46 of the Factories Act, where the factory is employing more than 30250 employees. There about 1000 employees are working in the factory of the appellant. They are availing the service of agency to supply them the required manpower/labour to enable them to run the canteen. They have taken credit of the Service Tax paid on the services utilized by them without deployment of manpower to run their canteen. Thus, the input service is not in the nature of canteen service or outdoor canteen service and further the activity of running and maintaining the canteen is relating to the manufacturing business and accordingly, the input service under Rule 2(l) of Cenvat Credit Rules is not available. The learned Commissioner has also accepted that the maintenance of canteen is essential and is an input for the manufacturing activity but at the same time disallowed proportionate when being the Service Tax credit pertaining to the amount collected from the employees. The appellant vehemently argues that there being no outdoor catering service availed, no proportionate disallowance was called for. Further, the appellant have not recovery any amount of Service Tax incurred on the deployment of manpower for running the canteen and accordingly is relying on the ruling of the Hon'ble Bombay High Court in the case of Ultratech Cement Ltd. and prays for setting aside the disallowance in respect of canteen expenses.

2.2 As regards the cleaning expenses incurred for sports club/ground and repair and maintenance of residential colony amounting to Rs.3,63,309/-, the same is not pressed and the grounds stand withdrawn.

2.3 As regards the proportionate disallowance of vehicle hiring charges, the appellant vehemently urges that there was no such proposal in the show-cause notice to disallow the proportionate amount being Service Tax credit pertaining to the amount collected from the employees. As such, the same is beyond the scope of show-cause notice and accordingly, fit to be set aside.

2.4 As regards gardening expenses, it is pointed out that the same are essential for running the factory in support of which the appellant have produced the Consent to operate letter issued by the Maharashtra Pollution Control Board dated 26.3.2007, wherein the Pollution control Board taking into effect to the parameters that the Trade Effluent and .. collected to sewage etc being given the consent subject to the condition that green belt afforestation is to be done up to 33% on available open space land as per para 3(a) of the said letter. Thus, maintenance/afforestation and green belt in and around factory premises is an essential part in the Mandating Activity in the law of the lawn so as to comply with the provisions of Water (Prevention and Control of Pollution) Act, 1974 and Air (Prevention & Control of Pollution) Act, 1981 read with relevant Rules. Accordingly, the disallowance is uncalled for and pleads the same to be set aside.

3. The learned AR relies on the impugned order and prays for dismissal of the appeal.

4. Having considered the rival contentions and perusing the appeal filed and the documents produced and as regards the canteen expenses, which is only the labour component for manpower engaged for running the canteen, I hold that no proportionate disallowance is called for as there is no element of outdoor catering nor there is any element for recovery of Service Tax from the employees.

4.1 As regards the gardening expenses, the credit on the same is fully allowable as the same is required for maintaining the good atmosphere in the manufacturing area and as also as the condition precedent as laid down by the State Pollution Control Board, without which the appellant cannot lead itself under the Board Mandating Activity.

4.2 As regards the cleaning expenses, the same have been incurred in the maintenance of residential colony, which part of the factory premises, I take notice of the fact that the colony is part of the factory premises as per the approved map by the Central Excise authorities. Further, there is no multiplicity in the area where the factory and colony is located for providing the services to a legal body. As such, it is a small internal township created by the appellant for running its factory and as a residential colony, the same is required to be maintained by the Industry itself (Article .. of the Constitution of India). As such the disallowance of cleaning expenses is set aside.

4.3 As regards the proportionate disallowance for the vehicle hiring charges, I find that there is no allegation in the show-cause notice to disallow any proportionate amount towards the amount recovered in part from the employees and as such the said disallowance is held to be unsustainable and the same is set aside. Thus, the appeal is allowed in part in favour of the appellant save and except as regards the disallowance of repair and maintenance of residential colony and maintenance of sports club/grounds, the same are confirmed being not pressed by the appellant.

(Pronounced in Court) (Anil Choudhary) Member (Judicial) Sinha 6