Whether Cenvat of services taken of manpower agency for maintaining a health centre in manufacturing unit allowed?

PJ/CASE LAW/2015-16/2652

Case:- BINANI CEMENT LTD. VERSUS COMMISSIONER OF C. EX. & S.T., JAIPUR-II

Citation:- 2015 (37) S.T.R. 1071 (Tri. - Del.)

Brief facts:- The appellant were manufacture of cement and clinker chargeable to Central Excise duty. The period of dispute in this appeal was from March 2010 to December 2010. The appellant’s factory was located at Sirohi and they have a project office at Udaipur and their corporate office at Mumbai. In their factory at Sirohi they were required to maintain a medical centre which according to them was the requirement of Rajasthan Factories Rule 1951, Rule 65T of which provides that in respect of any factory carrying on hazardous process or dangerous operations and employing more than 500 workers, shall provide and maintain in good order an occupational health centre with services and facilities as laid down in this Rule. The cement industry was listed as hazardous industry in 1st Schedule to the Factories Act, 1948. Accordingly for maintaining the occupational health centre, the appellant had sourced the trained persons from manpower supply agents for deployment at their Sirohi factory. In respect of their project office at Udaipur and corporate office at Mumbai, they also received some trained personnel for procurement of inputs through manpower supply agents. In respect of the service received from the manpower supply agents they availed Cenvat credit of Rs. 3,15,302/- of the Service Tax paid on the same by the service providers. The Department was of the view that these services had no nexus with the manufacture of final product and the appellant was not eligible for Cenvat credit. On this basis the Jurisdictional Assistant Commissioner, Central Excise, vide order-in-original dated 3-11-2008 confirmed the above-mentioned Cenvat credit demand along with interest and beside this, imposed penalty of Rs. 50,000/- on them under Rule 15 of the Cenvat Credit Rules, 2004. On appeal being filed to Commissioner (Appeals) against this order, the Commissioner (Appeals) vide order-in-appeal dated 3-12-12 upheld the Assistant Commissioner’s order. Against this order of the Commissioner (Appeals), this appeal has been filed.

Appellant’s contention:- Ms. Rinky Arora, Advocate, the learned Counsel for the appellant, pleaded that dispute is in respect of manpower supply service received in respect of the appellant’s Udaipur project office and corporate office at Mumbai, and in respect of medical centre being maintained at Sirohi factory, that for medical centre at the appellant’s factory at Sirohi, which is the requirement of Rule 65T of the Rajasthan Factories Rule, they had received trained personnel through manpower supply agents, that since maintenance of occupational health centre/medical centre at the factory manned by trained personnel was the requirement of Rajasthan Factories Rule, the services of receiving trained personnel for manning the health centre through manpower supply agents had to be treated as service in or in relation to the manufacture of the final product, as without maintenance of the health centre, the appellant would not be allowed to carry on their manufacturing activity, that as regards the manpower supply service in respect of Udaipur office and corporate office at Mumbai, as held by Assistant Commissioner in his order dated 3-1-2008 for the previous period, the service received is in relation to business of the assessee and eligible for Cenvat credit, that this portion of the Assistant Commissioner’s order had not been challenged by the Department, that when the Assistant Commissioner himself gave his finding that the services of manpower supply agency received at Udaipur office and corporate office at Mumbai was in relation to the business of the assessee, the same would be covered by the term “activity relating to business” in the definition of ‘input service’ and, hence, Cenvat credit in respect of these services would be available. With regard to the service received from manpower supply agency of receiving trained personnel for manning the occupational health centre at Sirohi factory, she pleaded that though Cenvat credit in respect of this service had earlier been disallowed by the Assistant Commissioner vide order-in-original dated 3-11-2008 and this order had been upheld by the Commissioner (Appeals), but the Commissioner (Appeals)’s order had been set aside by the Tribunal vide final order No. 1587/2012 - SM (BR) dated 16-11-2012. She, therefore, submitted in view of the above submissions, the impugned order was not correct.

Respondent’s contention:- Shri Yashpal Sharma, the learned DR, defended the impugned order by reiterating the findings of the Commissioner (Appeals).

Reasoning of judgment:- The commissioner considered the submissions from both the sides and perused the records. As regards the service of receiving trained personnel for manning the occupational health centre at Sirohi factory, it was seen that the appellant in terms of Rule 65T of the Rajasthan Factories Rules are required to maintain an occupational health centre as their employees are more than 500 and they carry out hazardous operations. Unless the appellant comply with this provision of the Rajasthan Factories Rules, they would not be allowed to carry on their manufacturing activity. Therefore, he held that the service of receiving trained medical personnel through manpower supply agency for maintaining the occupational health centre had to be treated as in or in relation to manufacture of final product and would be eligible for Cenvat credit as input service.

As regards the services of supply of trained manpower received through manpower supply agents at project office at Udaipur and corporate office at Mumbai, the Jurisdictional Assistant Commissioner in his order dated 3-11-2008 for the previous period had given a finding that these personnel recruited through manpower supply agents are used in connection with activities relating to business and, therefore, this service also has to be treated as covered by the definition of input service.

In view of the above discussion, the impugned order was not sustainable. The same is set aside. The appeal is allowed.

Decision:- Appeal allowed.

Comment:- The gist of this case is that as the assessee was statutorily required to maintain a health centre in their premises as per Rajasthan Factories Rules, the cenvat credit of service tax paid with respect to services availed for maintaining the said health centre will be admissible. Therefore, the service received of manpower (trained personnel) for maintaining health centre was held to be in relation to the manufacture of final product because it was necessary for carrying out manufacturing activities and hence credit is admissible.

Prepared by: Prayushi Jain

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PJ/CASE LAW/2015-16/2652

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