Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  Missing seized records must be considered while testing ITC claim; duplicate GST demands ordered corrected: Delhi High Court. *  GST appeal can’t be rejected without addressing taxpayer’s grounds: Allahabad High Court. *  Surplus IGST credit can offset CGST, SGST shortfall: GSTAT. *  GST refund can’t be denied when cancelled airfares are returned with tax: GSTAT. *  3 Hearing notices issued within 2 minutes: Gujarat High Court flags portal flaw, seeks report. *  GSTR-9, GSTR-9C filing for FY 2025-26 enabled; pending GSTR-1 and GSTR-3B must be filed first. *  Dupattas are exempt fabrics, can’t be taxed as fibres at 4%: Madras High Court. *  Full transitional credit allowed on capital goods received after GST rollout: GSTAT denies Rs. 6.99 lakh export duty credit. *  GST return mismatch alone can’t justify fraud proceedings: GSTAT orders fresh adjudication under section 73. *  Supplier found non-existent later can’t alone justify input tax credit denial: GSTAT. *  GST interest stops once tax reaches government account, can’t run until return filing: GSTAT. *  Cancelled flat booking- GST refund can’t be denied without excluding COVID period from limitation: GSTAT. *  India notifies rules of origin for India–New Zealand FTA. *  Incomplete E-bike kits classifiable as complete vehicles, but not eligible for CKD duty concession: CESTAT. *  Same GST rate on main input and output can’t by itself bar inverted duty refund: GSTAT. *  Unjust enrichment doesn’t apply to customs refunds from assessments finalised before July 13, 2006: Gujarat High Court. *  CENVAT credit can’t be denied solely because plant And machinery are embedded in earth: Karnataka High Court. *  DFIA exports ineligible for RoDTEP benefits; customs directs repayment with applicable interest. *  Second E-Way bill alone doesn’t prove another supply: GSTAT. *  Bail denied in Rs. 1.19 crore fake GST refund case over risk of accused absconding again: Punjab and Haryana High Court. *  GST registration can be restored after revocation deadline if outstanding dues are paid: Gauhati High Court. *  Multiple GST proceedings over same suppliers: Calcutta High Court directs dept. to share findings for adjudication. *  E-Governance portal services not OIDAR, fixed deposit interest not taxable: CESTAT. *  Rs. 500 Stamp duty required on authority letters for CAs, CMA and GST practitioners in Pune GST division.  *  Rs. 1.10 crore GST refund must be paid in cash after business closure: Allahabad High Court. *  Godown rent attracts 18% GST even when used exclusively for exempt agricultural warehousing: AAR. *  GST portal launches "Multi-State Registration" facility: one master TRN for registration applications across multiple States/UTs. *  RoDTEP scheme extended till 31st December, 2026.  *  Mere disagreement with order can’t override Rs. 20 lakh appeal limit: GSTAT. *  Customs interest can’t be backdated before confiscation liability is determined; nearly 8 year period excluded: Delhi High Court.
Subject News *  GST summons: anticipatory bail maintainable without arrest order, but relief denied in evasion case: Allahabad High Court. *  GST Appeal can’t be decided without hearing taxpayer’s objections to fresh evidence: Allahabad High Court. *  GST ITC can’t be reversed merely because supplier grants discount without reducing tax liability: GSTAT. *  Mere quoting of GST provision is not a valid charge: GSTAT quashes ITC denial. *  Personal hearing mandatory before adverse GST order, even without taxpayer’s request: Rajasthan High Court. *  Parallel bail pleas without full disclosure amount to abuse of process Rs. 43.08 crore GST case sent for fresh hearing: Supreme Court. *  GST refund based on unchallenged advance ruling can’t be recovered using later circular: GSTAT. *  Payment of GST alone doesn’t end interest and penalty liability when tax and interest remain unpaid beyond 30 days of notice: GSTAT. *  GST demand over builders’ 80% procurement rule requires reasoned adjudication: GSTAT. *  Eligible ITC doesn’t automatically entitle taxpayers to compensation cess refund on domestic sales: GSTAT. *  GST confiscation order passed before reply deadline invalid: GSTAT. *  GST interest can’t be retained after tax refund on delayed export receipts: Punjab & Haryana High Court. *  GST appeal can’t be dismissed over pre-deposit shortfall without opportunity To respond: Bombay High Court. *  DGGI SCN can’t be challenged before reply and adjudication:Chhattisgarh High Court. *  GST input tax credit can’t be denied solely due to supplier’s retrospective registration cancellation: GSTAT. *  GST notice must explain fraud allegations; merely repeating section 74 Is not enough:  Himachal Pradesh High Court. *  Audit detection alone can’t justify GST fraud penalty; specific suppression must be proved: GSTAT. *  GST order uploaded only under ‘Additional Notices’ tab without separate intimation set aside: Calcutta High Court. *  Service Tax appeal can’t be rejected for missing pre-deposit proof when payment is already recorded: CESTAT. *  SGST dept. can’t hear appeal against CGST order: Calcutta High Court. *  Mere dispatch of tax order can’t prove service or make appeal time-barred: CESTAT. *  Dealer incentives can’t be taxed merely on ledger entries: CESTAT. *  DGFT orders quashed for failure to supply DRI letter relied upon in SCN: Bombay High Court. *  GST penalty u/s 122(1A) can’t apply to Pre-2021 transactions; unregistered beneficiaries also covered: Delhi High Court. *  Expired E-way bill caused by wrong PIN code can’t justify GST penalty without intent to evade tax: GSTAT. *  Used railway rails can’t be taxed as track material without proof they are fit for reuse: CESTAT. *  Earlier DGGI notice doesn’t bar separate GST demand on different issue: Delhi High Court. *  ITC dispute involves no question of law: GSTAT directs appeal to Vice-President. *  Earlier DGGI notice doesn’t bar separate GST demand On different issue: Delhi High Court. *  No E-way bill required for interstate goods movement in november 2017: GSTAT quashes detention and penalty.  

Comments

Print   |    |  Comment

PJ/Case Law/2014-15/2240

Admissibility of credit of insurance services for vehicles of workers.
Case:-COMMISSIONER OF C.EX. & CUSTOMS V. ULTRATECH CEMENT LTD.

Citation:-2014(33) S.T.R. 501 (Guj.)

Brief Facts:-Respondent is a company and engaged in manufacturing of cement. The respondent has taken Cenvat credit in respect of duty paid input and capital goods used in manufacture of such final product. The revenue, however, denied Cenvat credit on certain services on which assessee was claiming cenvat credit. These services are insurance service of vehicles used in the residential colony of company’s workers. When this dispute has been reached before the Tribunal, the Tribunal allowed the appeal of respondent by rejecting the revenue’s contention that such services are not used directly or indirectly in the manufacturing of the final product. The Tribunal upheld the assessee’s contention that the phrase “activities relating to business” as appearing the inclusive part of the definition of input service is wide enough to cover such service. The Tribunal relied upon the decision of the Apex Court in case of Maruti Suzuki Ltd. [2009 TIOL-94-SC-CX]. The Tribunal also placed reliance on the decision of the Delhi Bench in case of M/s Triveni Engg. & Industrial Ltd. V CCE, Meerut, 2008(12)S.T.R. 330 (Tri. Del.). Aggrieved by the decision of Tribunal Revenue has filed appeal before High Court.

Appellant’s Contention:-The revenue submit that the services cannot stated to be utilized for manufacturing of final product. The revenue also pleaded 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.

Respondent’s Contention:-The respondent submit that the decision of Tribunal is correct and contending that no questing of law arises. The respondent also pleaded that revenue’s appeals may therefore be dismissed.

Reasoning of Judgment:-The High court heard both the parties and finds that both the sides brought their attention to the 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 service utilized for residential colony of the company. The Tribunal had accepted the assessee’s case. The department had thereupon approached the court by filing tax appeal. Such tax appeal was allowed by the above- mentioned decision. 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) S.T.R. 456(Bom.). He pointed out that the Tribunal in the impugned judgment has placed reliance on the decision of Bombay Tribunal in the case of Manikgarh Cement V. Commissioner of C.Ex. & customs, Nagpur reported in 2008(9) S.T.R. 554(Tri. Mumbai) Which was reversed by the Bombay High Court in the case of 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) E.L.T. 642(S.C.).
8. on the other hand, counsel for the respondent assessee contended that the definition of the term ‘input service’ contained in Section 2(I) 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. Ultratech Cement Ltd., 2010(20) S.T.R. 577 (Bom.) has examined the issue at length and held that outdoor catering service 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) S.T.R. 657 (Bom.) wherein the Bombay High Court was pleased to allow benefit of Cenvat Credit on Service Tax to 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) E.L.T. 321 (S.C.) 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 Rule 2(l) as under:-
“(I) “Input service” means any service-
(i)            Used by a provider of taxable service for providing an output service, or
(ii)           Used by the manufacturer, whether directly or indirectly in or in relation to the manufacture of final product 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 relating 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 mater 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(I) 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 quarter 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 manufacturer 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 quarter 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 Ultratech 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 service provided by the manufacturer to its workers would be covered within provisions of rule 2(I) 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 quarter 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(I) 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”

The High court further finds that there is difference in the nature of services involved in the present appeals, insofar as all material aspect 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 this High Court pertains to service tax credit on insurance of the vehicles. The High court 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 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), the High court held 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.
Decision:-Revenue’s appeal allowed.

Comment:- Following the decision of High Court in the case of Gujarat Heavy Chemicals Ltd. wherein it was held that if credit on services is not admissible if the said services are not related directly or indirectly to the manufacturing activity, the present appeal filed by the revenue was allowed. It was concluded that the credit of insurance services taken on the vehicles of workers situated in residential colonies is not admissible as it is not directly or indirectly related to the manufacturing activity.

Prepared by: Bharat Rathore
 
 
Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com