Credit availed in respect of garden maintained under statutory obligation and credit related to construction of compound wall of factory admissible.

PJ/Case law/2013-14/1636

Case:-M/s NIRMA LTD Vs COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, VADODARA-I

Citation:- 2013-TIOL-945-CESTAT-AHM

Brief Facts:- The issue involved in this appeal is admissibility of cenvat credit taken by the appellant on Pest Control services, man-power supply services required for maintaining a garden in the factory premises and credit taken on the construction services utilized for making the compound wall of the factory.

Appellant’s Contention:- The appellant argued that as per permission dated 3/08/2007 given by the Government of India, Ministry of Environment and Forest, in para-4 (vii has conditioned the appellant to develop 33% of the factory area to mitigate the effects of emissions all around the plant. To maintain the green cover around the plant they have to avail services for maintenance and garden development and man-power supply for such garden maintenance. He relied upon their own case law of CCE, Bhavnagar vs. Nirma Ltd. [2010 (20) STR 346 (Tri.-Ahmd.)]. So far as admissibility of credit on construction services for compound wall around the factory is concerned, he relied upon the judgment of CCE, Pune-II vs. Raymond Zambaiti Pvt. Ltd.

Respondent’s Contention:- The Respondent contended that the reasoning given by Commissioner(A) is proper and emphasized that the credit has been correctly rejected.

Reasoning of Judgment:- After hearing both sides and perusal of the records, as it is a covered matter, the appeal itself is taken for disposal after allowing stay. It is observed that the appellant is under obligation to maintain 33% of the factory area to mitigate the effects of emissions all around the plant as per permission dated 3/08/2007 given by Government of India, Ministry of Environment and Forest. Accordingly, services in relation to development and maintenance of garden around the factory premises has to be eligible for availing cenvat credit to fulfill a statutory condition of controlling environmental pollution. Similarly, manpower engaged for maintaining such landscape will also be eligible as input credit services. This has also been held so in their own case decided by CESTAT, WZB, Ahmedabad, in the case reported as [2010 (20) STR 346 (Tri.-Ahmd.)] So far as admissibility of cenvat credit on construction services utilized for construction of compound wall around the factory is concerned, it is observed that during the relevant period, construction services utilized for establishing the factory were eligible for cenvat credit. A compound wall around the factory is essential to demarcate the registered factory premises and also to save the manufactured goods from pilferage and potential clandestine removal. Such a compound wall has to be considered as essential element for the completion of factory and an activity in relation to manufacture of excisable goods. Accordingly, services utilized for construction of such compound wall will be eligible for cenvat credit as input services under Rule-2(l) of the Cenvat Credit Rules. This view is also supported by the judgment of CESTAT, Mumbai in the case of CCE, Pune-II vs. Raymond Zambaiti Pvt. Ltd. (supra), relied upon by the appellant. Based on the above observations, appeal filed by the appellant is allowed.

Decision:-Appeal allowed.

Comment:- It can be concluded from this case that credit will be allowed with respect to every service that is availed on account of statutory obligation on the part of the manufacturer. Moreover, the credit is also allowed for the construction services availed for establishing the compound wall of the factory as it is essential to demarcate the registered premises of the factory to avoid pilferage and clandestine removal of goods.

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PJ/Case law/2013-14/1636

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