Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *   CBIC issues draft rules for Customs valuation *  Top Headlines: Threshold for Benami deals, green bond investors, and more *  Govt aims 1-hour clearance for goods at all ports *  Exporters Allowed To Use RoDTEP, RoSCTL Scrips To Pay Customs Duty, Transfer Them; Rules Amended *  Millions of labourers to be affected by brick producers’ strike over hike in GST, coal rates *  Inauguration of ‘kendriya GST parisar’ *  Transporter can seek Release of Conveyance alone, not Goods under GST Act: Madras HC *  GST: Quoting of DIN Mandatory for Responding to Notice, Govt Modifies Portal *  Firms can soon file claims for GST credits of ?400 cr *  CBIC issues modalities for filing transitional credit under GST. *  Mumbai: Man creates 36 fake GST firms, arrested for input tax credit fraud of Rs 23 cr *  Report to restructure Commerce Ministry under study; idea is to set up trade promotion body: Goyal *  Firms can soon file claims for GST credits of ?400 cr *  Gambling Alert! Govt May Levy Up To 28% GST; UP, Bengal Back Move *  EPFO backs raising retirement age to ease pressure on pension funds *  India Moving Up Power Scale, Set to Become Third Largest Economy By 2030 *  Airfares Get Expensive: What Changes for Flyers From Today? *  IRCTC Latest News: Passengers to Pay More For Cancelling Confirmed Rail Tickets Soon. *  IBC prevails over Customs Act, says Supreme Court. *  As GST enters sixth year, a time for evaluation and reassessment *  There’s GST on daily essentials as Centre needs money to buy MLAs: Arvind Kejriwal *  Now, GST on cancellation of confirmed train tickets, hotel bookings *  GST kitty for top States could rise 20% in FY23, says Crisil *  French customs officials seize another cargo vessel over Russia sanctions *  TradeLens builds on Asia momentum with Pakistan Customs deal *  Hike tax on tobacco, reduce affordability & increase revenue: Civil society organizations to GST council *  Bihar: ?10 crore tax evasion on tobacco products detected in raids *  Centre failed on GST, COVID; would it be anti-national? Rajan on Infosys row *  Service Tax not Chargeable on Income Tax TDS portion paid by recipient: CESTAT grants relief to TVS *  Foreign portfolio investors make net investment of Rs 7575cr in Sep so far
Subject News *  Run-up to Budget: Monetary threshold for GST offences may rise to Rs 25 cr *   GST (Tax) E-invoice Must For Businesses With Over Rs 5 Crore Annual Turnover *   Both Central GST and excise duty can be imposed on tobacco, rules Karnataka high court *   CBIC Issues Clarification On Extended Timelines For GST Compliance *   CBIC Issues Clarification On Extended Timelines For GST Compliance *  Budget 2023- 9.6 crore gas connections *  GST: Tamil Nadu Issues Instructions for Assessment and Adjudication Proceedings *  GST: CBIC Extends Last Date for filing of ITC *  GST collection in September surpasses Rs 1.4 lakh crore for straight seventh time *  Dollar smuggling case: Customs chargesheet names M Sivasankar as key conspirator. *  Hike in GST rates fuels inflation *  Assam: CBI arrests GST commissioner in Guwahati *  GST fraud worth ?824cr by 15 insurance Cos detected *  India proposes 15% customs duties on 22 items imported from UK *  Decriminalising certain offences under GST on cards *  Surge in GST collections more due to higher inflation: India Ratings *  MNRE Notifies BCD and Hike in GST Rates as ‘Change in Law’ Events But With a Condition | Mercom India *   Solar projects awarded before customs duty change allowed cost pass-through *  Rajasthan High Court Dismisses Writ Petitions Challenging Levy Of GST On Royalty *   GST revenue in September likely at Rs 1.45 lakh crore *  Govt working on decriminalising certain offences under GST, lower compounding charge *  Building an institution like GST Council takes time, trashing is easy: Sitharaman *  GST collections in Sept may touch ?1.5 lakh crore *  KTR asks Centre to withdraw GST on handlooms *  After Gameskraft, More Online Gaming Startups To Receive GST Tax Claims *  Madras HC: AAR Application Filed Under VAT Does Not Survive After GST Enactment *  Threshold for criminal offences under GST law may be raised *  Bengaluru: Gaming company faces biggest GST notice of Rs 21,000 crore *  CBIC clarifies Classification of Cranes for GST, Customs Duty *  Customs seize gold hidden in bicycle in Kerala airport  

Comments

Print   |    |  Comment

PJ/CASE LAW/13-14/2070

Eligibility of credit on services used in construction and maintenance of township for employees.

Case:-M/s ESSAR STEEL INDIA LTD Vs COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX VADODARA-I
 
Citation:-2013-TIOL-1128-CESTAT-AHM

Brief facts:-These stay petitions are filed by the appellant for waiver of pre-deposit of the following amounts:
 

Appeal No. Cenvat Credit Penalty Interest
E/11309/13 Rs.6,82,37,234/- Rs.6,82,37,234/- Appropriate rate
E/11308/13 Rs.2,80,11,899/- Rs.75,00,000/- Appropriate rate
 

 
The above said stay petitions being in respect of the same assessee and also has identical issue, for two different periods, are being disposed of by a common order. The Adjudicating Authority has confirmed the demands on the ground that the appellant had availed ineligible cenvat credit of the service tax paid on different services used in the construction and maintenance of the township.
 
Appellant contention:- Learned Counsel at the outset would submit that the service tax paid on the different services which are used in the construction and maintenance of their township which is situated within the factory premises. It is his submission that the said residential township was inevitable as appellant's factory was situated in a remote area and in order to have continuous production, the appellant had accommodated required staff in the township. It is his further submission that the appellant had included the cost of such township in the cost of the products manufactured and cleared by them to their sister concerns. It is his submission that the inclusion of the cost of the township in the cost of production was in accordance with the cost accounting standard CAS-4. He would draw our attention to the specific guidance note and submit that cost of overheads includes Security, dispensary, canteen, staff welfare and other overheads; it would in turn get covered under indirect employees cost connected with production activities. It is his submission that when the appellant manufactured and cleared the intermediate products to their sister concern they included the cost of the township and discharged the Central Excise duty as per Rule 8 of Cenvat Excise Valuation Rules, hence cost of township would remain included in their final product, which according to him is as per the law laid down by the Larger Bench of this Tribunal in the case of GTC Ltd. It his submission that the Hon'ble High Court of Bombay (2010 (20) STR 456 ( Bom .)) = (2010-TIOL-720-HC-MUM-ST) in has the case of Manikgarh Cement had taken a view that services of repair maintenance and Civil Construction used in residential colony will not be eligible to cenvat credit. It is his submission that though this judgment of Hon'ble high Court of Bombay is against them, there is another judgment of Hon'ble Court of Andhra Pradesh in the case of ITC - 2012-TIOL-199-HC-AP-ST, which according to him has held that if the staff colony is in vicinity of factory which is located in remote and scheduled area, credit of the service tax paid on services received for township should not be denied. It is his submission that there being two different views expressed by the different high Court on an identical issue, stay petitions filed for waiver of dispensations of pre deposit should be allowed. It is also his submission that the appellant has reversed an amount of Rs. 2.80 crores and is facing severe financial hardship, as is clear from the balance sheet for the year ending 31.3.2013. He would produce copy of the profit and loss account and submit that there is huge loss, and if any further amount is directed to be deposited, it would result in severe financial hardship.
 
Further he would submit that the CBEC circular No. 943/4/2011-CE. dated 25.04.2011 (sic), is also in an akin issue, wherein board has said goods brought in the factory like furniture and stationary used in an office within the factory, are goods used in the factory and are used in relation to the manufacturing business and hence credit of duty paid can be allowed; it is his submission that the case of the appellant is on more stronger footing as the residential township is accommodating those employees who are required for the smooth functioning of the appellant's factory.
 
Respondent contention:- Respondent submit that the appellant has already stated the case laws which are in favour of the revenue and submits that said judgment clearly indicate that the credit service tax paid on the services rendered at residential colony are ineligible for availment of cenvat credit as it is to be ascertained whether the said services are used in or in relation to the manufacture of final product or not. It is his submission that functional utility would constitute the relevant consideration for availment of cenvat credit. It is his submission that the judgment of the Hon'ble high Court of Gujarat in the case of Cadila Health care also laid down principal that if the cost of any expenses is included in the value would not mean that credit of that service tax or the inputs services will be available. It is his submission that the judgment of Hon'ble High Court of Bombay in the case of Ultratech Cement Ltd also talks about eligibility to service tax has clearly held that canteen facility being mandatory credit of service tax paid on such services on eligible which is mean that any services which are mandatory, this credit should be allowed and it is his submission that provision of residential colony is not mandatory or statutory. It is his submission that the appellant should be directed to deposit further amount for hearing and disposing the appeals.

 Reasoning of Judgement:- The issue involved in this case is debatable for more than one reason. Firstly, the duty of eligibility of cenvat credit of the service tax paid on the services which are used in the residential complex, High Courts have taken different views, the facts of the case of ITC Ltd. where in High Court of Andhra Pradesh has upheld the order of the tribunal are more akin to the case in hand, at the same time, judgment of the Hon'ble High Court of Bombay in the case of Ultratech Cement and Hon'ble High Court of Gujarat are taking a different view in respect of specific services rendered at the residential complex. We find that the argument put forth for the ld. counsel that the residential complex is within factory is an argument which needs to be considered and was not put before High Court of Gujarat or Bombay for deeper consideration. Be that as it may, we are of the view that when there are different views on the very same issue, there is convention that stay on pre deposits needs to be granted if facts are akin.
 
Further some consideration needs to be given to the argument raised by the ld. counsel that the indirect cost of the employees includes the cost of maintenance and construction of the residential complex within the factory premises and discharge of duty liability thereof, is an issue which was not put forth before any judicial forum and was not decided. This argument of the ld. counsel needs deeper consideration.
 
In view of the above findings, the stay application filed by the appellant is allowed unconditionally.
 
Decision:-Stay granted.

Comment:-The analogy that is drawn from this case is that the fact that township is constructed and maintained because factory is situated at remote area and the cost of development of the township is included in the assessable value for the purpose of discharging excise duty, the stay application may be allowed as the grounds are genuine and valid that are to be considered at the time of final hearing. 

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