Cenvat credit admissibility on security services availed for factory premises.

PJ/Case Law /2016-17/3411

Case:-BHARAT HEAVY ELECTRICALS LTD. VERSUSC.C.E. & S.T., VISAKHAPATNAM

Citation:-2016 (45) S.T.R. 426 (TRI. - HYD.)
Brief facts:-The facts of these two appeals as put forth by the appellant are as follows.
Appellants are manufacturers of Heavy Machinery items and other items falling under various Chapters of the Central Excise Tariff Act, 1985 (hereinafter ‘CETA’). They are availing Cenvat credit on inputs, capital goods as well as input services under the Cenvat Credit Rules, 2004, and have subsequently utilized the same for the payment of Central Excise Duty. On verification of records, department took a view that during the period from March, 2007 to May, 2007 the appellants had wrongly availed of Cenvat credit on the following services :
a.     Township Security Service;
b.     Transportation Service for employees/guests;
c.     Canteen Service and
d.     Professional/Consultancy Service.
Appellants were issued with a show cause notice proposing inter alia recovery of credit amounting to Rs. 95,003/- along with applicable interest and imposition of penalty. Further, on the same issue, the appellants issued with another 14 show cause notices on a periodical basis, the details are as follows :

S. No.	Period involved	Central Excise Duty [Including Cess] (Rs.)
1.	1-6-2007 - 31-7-2007	4,62,623/-
2.	1-8-2007 - 31-8-2007	1,07,945/-
3.	1-9-2007 - 31-1-2008	4,18,515/-
4.	1-2-2008 - 30-4-2008	1,72,066/-
5.	1-5-2008 - 31-12-2009	3,41,995/-
6.	1-1-2009 - 31-8-2009	4,52,082/-
7.	1-9-2009 - 31-12-2009	1,87,969/-
8.	1-1-2010 - 30-4-2010	3,42,733/-
9.	1-1-2010 - 31-7-2010	4,63,327/-
10.	1-5-2010 - 30-11-2010	4,86,342/-
11.	1-8-2010 - 31-12-2010	3,36,477/-
12.	1-1-2011 - 31-3-2011	1,38,168/-
13.	1-12-2010 - 31-10-2011	4,54,452/-
14.	1-11-2011 - 30-4-2012	4,42,985/-

For the above-mentioned show cause notices, the Assistant Commissioner of Central Excise, (adjudicating authority), passed the Order-in-Original bearing No. 28/2012, dated 30-11-2012, wherein he ordered the following :

a.     Recovery of Rs. 49,02,682/- towards the credit availed on ineligible services during the period from March, 2007 to April, 2012 under Rule 14 of the CCR;
b.           Demand of interest on the amount;
c.     Imposition of penalty of Rs. 49,02,682/- under Rule 15 of the CCR.

On appeal, the Commissioner of Central Excise, Customs & Service Tax (Appeals), Visakhapatnam passed the impugned Order-in-Appeal, wherein he has allowed Cenvat credit on canteen service, transportation service for employees/guests and professional/consultancy service; but has denied the Cenvat credit availed on the security service on the ground that the said service does not fall within the ambit of ‘input service’ as defined under Rule 2(l) of the Cenvat Credit Rules (CCR). Commissioner (Appeals) however refrained from imposing penalty on the appellants under the provisions of Rule 15(1) of the CCR on the ground that no wilful mistake or suppression of facts could be attributed to the appellants in the instant case, apart from a major part of the demand being unsustainable. Hence this appeal.

Appellant’s contention:-During the hearing, the learned Advocate for the appellant, Shri G. Prahlad, made the following main submissions :

A perusal of both the definitions of the term ‘input service’ under Rule 2(l) of the CCR -, i.e., the one existing prior 1-4-2011 as well as the one existing with effect from 1-4-2011, makes it amply clear that any service which is utilized for ‘security’ purposes would be included within the ambit of Rule 2(l) of the CCR - thereby qualifying the same to be called as an ‘input service’.

The term ‘security’ has been explicitly mentioned under both the above-mentioned definitions, which makes it amply clear that the legislative intent is to qualify any service utilized in furtherance of the security of the concerned premises as an ‘input service’ on which the assessee would be entitled to claim Cenvat credit.

Cenvat credit on the impugned service was denied to them by the lower adjudicating authority on the ground that the said service had been provided to the residential colony of the appellants. They however submit that the impugned security service has been utilized by the appellants only with regard to the factory premises where manufacture take place, and not on residential premises for workers, as has been mentioned in the impugned order. The appellants further submit this clarification that the place of availment of the security service has been their factory premises and not the residential complex has been made by them on numerous occasions, particularly in the replies filed to the show cause notices issued to them as well as in the appeal filed against Order-in-Original dated 30-11-2012.

They rely upon the case of M/s. Wipro Ltd. v. Commissioner of Central Excise, Pondicherry - 2014-TIOL-2554-CESTAT-MAD which held, inter alia, security services to be ‘input services’ within the ambit of Rule 2(l) of the CCR and held that credit could be availed on the same. Similar definition was given by the Hon’ble CESTAT, Mumbai in the case of M/s. Kisan Irrigations Ltd. v. Commissioner of Central Excise, Raigad reported in 2013-TIOL-403-CESTAT-MUM.

Respondent’s contention:-On behalf of the department, the learned AR Shri Nagaraj Naik, vehemently opposed the application and contended that the security services in question were provided to their residential township which is not in or in relation to the manufacture of final products or clearance of final products and hence credit of such services will not fall within the definition of eligible input service for the purposes of Rule 2(l) of the Cenvat Credit Rules, 2004.

In response, learned Advocate contended that all through the adjudication process, including their replies to the notices and submissions during personal hearing, and similarly also in the proceedings before the Commissioner (Appeals), they have contended that the security service in question was in fact provided to their factory and not to their township. He drew attention to the bill BHPV/12/2008, dated 23-1-2009 of security service provider M/s. Jayendra Security Services which clearly indicated ‘security arrangements at BHPV factory premises’. He also submitted a letter dated 21-4-2008 from the said M/s. Jayendra Security Services wherein has been certified as follows :

“it is to state that we are providing our security services, for BHPV factory premises”.

Reasoning of judgment:-Heard both sides and have also gone through the facts and records of the case.

The documents produced by the appellants indicate that the security services were provided by the service provider M/s. Jayendra Security Services only to the factory premises. Neither in the adjudication order nor in the order-in-appeal has this contention of the appellant been controverted or disproved. Nor is it the case of the department that the said documents relied upon by the appellant are concocted or otherwise not genuine. This being the case, security services provided in factory premises, has to be considered as an eligible input service for the purpose of Rule 2(l) of the Cenvat Credit Rules, 2004.

It is further noted that ‘security’ is specifically listed in the said Rule 2(l) by way of inclusion.

In view of the discussions supra, the Tribunal was of the considered opinion that there cannot be any infirmity or legal bar in the appellant availing the disputed credit, and therefore, the impugned order was required to be set aside.

Decision:- Appeal allowed.
Comment:-The analogy of the case is that cenvat credit availed on security services used in factory premises is admissible. The credit was being denied by contending that the service has been used in residential premises. However, the assessee had proved the fact of availment of cenvat credit in the factory premises with documentary evidences and so it was concluded that there is no legal bar in assessee availing the credit and the impugned order was set aside in accordance with Rule 2(l) of Cenvat Credit Rules, 2004.

Prepared by:-Praniti Lalwani

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PJ/Case Law /2016-17/3411

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