Whether credit admissible on construction services of dormitory for stay of engineers ?

PJ/Case Law /2016-17/3228

Case:-BAJAJ HINDUSTHAN LTD VERSUS COMMISSIONER OF C. EX., OF ALLAHABAD

Citation:-2016 (41) S.T.R. 503 (Tri. - Del.)

Brief Facts:-The brief facts of the case are that appellant is the manufacturer of sugar and molasses. As the factory is located in the remote area and they need technicians/engineers for maintenance of their plant and machinery. Therefore, they constructed dormitory within the factory for stay of these technicians/engineers as same may be called as and when if there is a fault in the plant or machinery. For construction of this dormitory, the appellant took Cenvat credit on construction services which was sought to be denied by the Revenue on the premise that the same does not qualify as input service as per Rule 2(l) of the Cenvat Credit Rules, 2004. A show cause notice was issued and the same was adjudicated which was converted into the impugned order. Hence, the present appeal before this Tribunal.
Appellant’s Contention:-The ld. Counsel for the appellant submits that the dormitory is constructed within the factory premises for stay of technicians/engineers in their factory as same is located in a remote area and these technicians/engineers are required for repair of machinery and plant. In these circumstances, the requirement of these technicians/engineers is directly connected with the manufacturing activity of the appellants and for stay of these employees is related to an integral part of their manufacturing activity. In these circumstances, they are entitled to take Cenvat credit.
Respondent’s Contention:-The ld. AR opposes the contention of the ld. Counsel and submits that the dormitory is located outside the factory premises as alleged in the show cause notice. Further the decision of the Hon’ble High Court of Bombay in the case of Manikgarh Cement (supra) is applicable to the facts of the case. Therefore, appellant is not entitled to take Cenvat credit. He further submits that the construction service is not included in the inclusive part of the Rule 2(l) of Cenvat Credit Rules, 2004 and the construction services has no nexus with the manufacturing activity of the appellant.
Reasoning of Judgement:-On perusal of the record, Tribunal find that although it is alleged in the show cause notice that the dormitory is located outside factory premises but the appellant in reply to the show cause notice has clearly mentioned that this dormitory is constructed within factory premises and the said fact has not been contradicted by the Adjudicating Authority or the first appellate authority. In these circumstances, it is held that dormitory is located within the factory and same can be verified by the department on visiting the factory premises. As the dormitory is located within the factory and the use of the dormitory is for the technicians/engineers for their stay in the factory itself which is required for maintenance of plant and machinery and these technicians/engineers should be available immediately as the factory is located in a remote area. Therefore, Tribunal held that the construction of dormitory for this purpose of stay of technicians/engineers is integrally connected with the manufacturing activity of the appellant. In these circumstances, it was found that the decision of the Manikgarh Cement by Hon’ble High Court is not applicable to the facts of this case as in that case the residential colony was located outside factory premises. Therefore, the credit is available as that service has been availed in the business of manufacturing activity. In these circumstances, tribunal held that as construction of dormitory is an integral part of the manufacturing activity of the appellant, the appellant is entitled to take Cenvat credit on construction services.
Decision:-Appeal allowed.
Comment:-The ratio of the case is that cenvat credit is allowable on construction of dormitory for stay of engineers/technicians because said service is integrally connected with manufacturing activity and is squarely covered by the definition of input services. Since the factory of the assessee was located in remote location, it was essential to hire engineers/technicians for repair/maintenance of plant and machinery. Hence, construction services availed for construction of dormitory was covered within the ambit of input service.
Prepared by:-Akshit Bhandari

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PJ/Case Law /2016-17/3228

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