Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

Comments

Print   |    |  Comment

PJ/Case Law/2018-2019/3462

The issue involved herein is the admissibility of input service credit in respect of security services deployed at the residential colony situated outside/adjacent to the factory under Rule 2(l) of the Cenvat Credit Rule 2004.
Case:  ULTRATECH CEMENT LTD. Versus CCE & ST, JAIPUR-II
Citation:2018(13)G.S.T.L.160(TRI.-Del.)
Issue:The issue involved herein is the admissibility of input service credit in respect of security services deployed at the residential colony situated outside/adjacent to the factory under Rule 2(l) of the Cenvat Credit Rule  2004.
 
Brief facts: The brief facts as per show cause notice dated 13-12-2010 for the period December, 2009 to August, 2010 that the appellant had taken and utilized Cenvat credit of Rs. 74,170/- of service tax paid on security services used at residential colony even though not covered under the definition of input services and in contravention of the Cenvat Credit Rules, 2004. As it appeared to Revenue that there is lack of co-relation with the manufacturing/business activity of the appellant, the said Cenvat credit is not allowable under Rule 2(l) of Cenvat Credit Rules, 2004 and accordingly it was proposed to disallow the same under Rule 14 read with Section 11A(1) and 11AB of the Act. Further, penalty was also proposed.
In reply to  the show cause notice, the appellant stated that they have entered into contract with APEC security service for protection and safeguard of the colony as such by providing security as persons as residence therein. It was categorically stated that the factory is located at the remote place, far away from any established locality (town), and therefore they have to provide proper residential accommodation for the housing of their staff as well as their officers working in the factory. It was also submitted that the employees and staff of the company have been purposefully given residence in their colony, located near the factory, so that uninterrupted working of the factory is carried out, round the clock. It was further argued that providing of proper security to the colony, property, as well as persons residing in the colony is absolutely essential.
The show cause  notice was adjudicated vide order-in-original dated 17th January, 2011 and the proposed demand was confirmed by disallowing the Cenvat credit availed along with penalty of Rs. 5,000/- under Rule 15(2) read with Section 11AC of the Act observing that service tax paid on security provided to plant is admissible, the security service provided to residential colony, whether admissible is arguable. The security of residential colony is only obligatory and no way concerned directly or indirectly with the manufacture of final product. Further observed, as it is situated away from manufacturing area, has no relationship with the manufacture of goods, so under Rule 2(l) of Cenvat Credit Rules, 2004, the credit was held to be inadmissible.
Appellant  preferred appeal before Learned Commissioner (Appeals) who was pleased to reject the appeal upholding the order-in-original. The appellant has directed that the earlier orders of this Tribunal in other appeal has filed the certificate of cost accounting, NL bill and company stating that the value of security sought expenses incurred on security services deployed at the residential colony for the period, in question, is forming part of cost of the final product manufactured by the appellant and consequently parts of their assessable value for discharging of excise duty under the Central Excise Act.
 
Appellant’s contention: The Learned  Counsel for the appellant submits that the residential colony is situated outside the factory area but the colony is located near to the factory. It is further submitted that the factory is located at a remote area and the residential colony is constructed and maintained by them for the use of employees of the appellant for their residential purposes, who are engaged and required for manufacture of dutiable final product. It is further stated that the factory works round the clock and shift be change at odd hours, unless the person is available near to the factory, the final dutiable goods cannot be manufactured. Accordingly, there is an indirect nexus for manufacture of dutiable final products and, as such, as defined under the provision of Rule 2(l) of Cenvat Credit Rules, 2004, the Cenvat credit is available. The Learned Counsel also placed reliance on the ruling of Hon’ble Andhra Pradesh High Court in CCE, Hyderabad-III v. ITC Limited - 2013 (32) S.T.R. 288(A.P.). The Learned Counsel also points out that the ruling of Hon’ble Andhra Pradesh High Court was followed and their appeal allowed with respect to similar dispute, being Final Order No. 50344/2015-EX(SM), dated 6-2-2015 reported at 2015 (2) TMI 1185-CESTAT, NEW DELHI.
 
Respondent’s contention: The Learned AR  for Revenue relying on the impugned order, places reliance in the case of CCE & CUS v. Gujarat Heavy Chemicals Ltd. - 2011 (22) S.T.R. 610(Guj.), wherein the question before the Hon’ble High Court was whether in the circumstances this Tribunal is correct in holding that service tax credit on security services utilized for the residential colony of the assessee is admissible when such services are not related to manufacture directly or indirectly, in or in relation to the manufacture of final products and especially when service of security in colony of the factory are not covered in the definition of input service defined under Rule 2(l). Hon’ble High Court held that there is no connection between such service directly or indirectly with manufacture following the ruling of Hon’ble Apex court in Maruti Suzuki Ltd. v. Commissioner - 2009 (240) E.L.T. 641(S.C.). Further reliance is placed on the ruling of Hon’ble Bombay High court in the case of CCE, Nagpur v. Manikgarh Cement - 2010 (20) S.T.R. 456(Bom.), wherein the assessee was engaged in the manufacture of cement and the credit of service tax paid on account of repairs, maintenance civil construction etc. used in the residential colony of the assessee was disallowed on the ground that such service is not covered under the definition of input service. The Hon’ble High Court observed that residential colony established for the employees, and receiving taxable services in that residential colony may be a welfare activity undertaken, while carrying on the business and such expenditure may be allowable under the Income Tax Act. However, to qualify as an input service, the activity must have nexus with the business of the assessee. The expression 'relating to business’ in Rule 2(l) of Cenvat Credit Rules, 2004 refers to activities which are integrally related to the business activity of the assessee and not welfare activities undertaken by the assessee.
 
Judgment:Having considered the rival submissions and case laws and the facts on record, the finding of the Adjudicating Authority that “The colony is located away from manufacturing area and has no relationship with the manufacture of goods” is vague and not based on the facts on record. The appellant had categorically stated that the colony is located outside the manufacturing area but near to the factory, to ensure availability of competent Workers to run their factory round the clock, which was found correct. It was further categorically stated that the factory is located at the remote place where there is no township in the sense of municipality or municipal corporation available to provide the municipal services, where residential colony is situated. Thus, such residential is Industrial Township; it is the onus of the concerned industry to maintain the civil/municipal services. Moreover, the concept of Industrial Township was not considered. Further, there is mistake of fact in the order of court below in observing that the colony is located away from the manufacturing area. In this view of the matter that the appellant requires the residential colony for availability of the workers for manufacture of dutiable goods and, as such, security services is essential in order to maintain the residential/industrial colony of the appellant. Accordingly, the appellant is entitled to the Cenvat credit under dispute. The appeal is allowed with consequential relief in accordance with law. The impugned order is set aside.
 
Decision: Appeal allowed
Comment:The kernel of the case is that the factory is located in the remote area and colony is near the factory but away from the manufacturing area, this does not mean that there is no relation with the manufacturing of goods and input service credit in respect of security services deployed at the residential colony is not admissible. Moreover, the colony provides with the availability of competent Workers to run the factory round the clock and thus this is an indirect nexus for manufacture of dutiable final products.
Prepared by: ARUNDHATI BAJPAI
 
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