Whetherservice tax credit for the charges paid for accommodation of employees at the Guest House at Gurgaon managed by their Head Office is permissible ?

PJ/Case Law /2016-17/3303

Case:- CASTEX TECHNOLOGIES LTD. Versus COMMISSIONER OF C. EX. & S.T., ALWAR

Citation:- 2016 (44) S.T.R. 477 (Tri. - Del.)

Issue:- Whetherservice tax credit for the charges paid for accommodation of employees at the Guest House at Gurgaon managed by their Head Office is permissible ?

Brief Facts:-The appeal is against order dated 13-1-2016 of Commissioner (Appeals), Central Excise, Jaipur. The appellants were engaged in the manufacture of casting of Iron and Steel liable to Central Excise duty. The manufacturing unit is located in Bhiwadi, Rajasthan. The employees of the appellant’s unit availed guest room facilities available at the Guest House managed by Head Office at Gurgaon. For the said services, the appellant paid consideration alongwith service tax and availed the credit of such tax under the provisions of Cenvat Credit Rules, 2004. The Revenue objected to the said credit on two grounds, - (a) no tax is payable on such guest house services and hence, amount paid cannot be a tax for credit and (b) such services do not qualify under “input services” for credit purposes. The Original Authority denied the credit which was upheld by the impugned order. Aggrieved with the impugned order, the appellant was in appeal.

Appellant’s Contention:-Ld. Counsel for the appellant submitted that the taxability or classification of the services was not within the purview of the jurisdictional authority where the appellant is availing credit. The fact was that the appellant discharged service tax and claimed credit on the same. The correctness of leviability or the classification was not in their control. She relied on the various decided cases to reiterate that the taxability or classification of services cannot be questioned by the officers at the recipient’s end. On the second issue - the service tax paid on such accommodation cannot be claimed as a credit, ld. Counsel submitted that marketing, engineering and administrative staff of the appellant’s unit directly associated with the activities of the unit, availed lodging facility in Guest House in Gurgaon. The activities were relating to their business of manufacture and sale of excisable goods and as such, the credit had been rightly availed by them.

Respondent’s Contention:-Ld. AR supporting the findings of the lower authorities submitted that the service on which the credit is taken was taxable only w.e.f. 1-5-2011 under the category of “short term accommodation”. Any credit prior to that period was not admissible as the amount paid was not relatable to service tax legally payable. Regarding eligibility of the credit, ld. AR submitted that the employees staying in Gurgaon Guest House on charges had no nexus to the manufacturing activity of the appellant’s unit at Bhiwadi. Further, he also stated that the nature of tour and stay had not been elaborated with evidence. Hence, the credit was rightly disallowed to the appellant.

Reasoning Of Judgment: it was found thatthe only point for decision was availability of service tax credit for the appellant on the charges paid by them for accommodation of their employees at the Guest House at Gurgaon managed by their Head Office. On the first issue regarding correct classification and taxability of the activities, it was seen that the Authorities at the recipient’s end had no jurisdiction to determine either the correct classification or the tax liability itself. As held by the Hon’ble Supreme Court in CCE v. MDS Switchgear Ltd. - 2008 (299)E.L.T.485 (S.C.), the benefit of credit at the respondent’s side cannot be varied by questioning the quantum at the manufacturer’s end. In India Vision Satelite Communications Ltd. v. CCE - 2015 (39)S.T.R.684 (Tribunal-Bang.), it was held that denial of credit at the recipient’s end was not legally tenable by questioning the taxability of the input services. The Tribunal in Ultratech Cement Ltd. v. CCE - 2011 (22)S.T.R.289 (Tribunal-Mumbai) held that the taxability of input service had to be considered by the officers having jurisdiction over service providers. Considering the above settled position, higher authority found no justification in the findings of the lower authorities for denial of credit on the ground of non-taxability of “input service” during the material time. On the second issue, regarding eligibility of Guest House services for credit, it was seen that the employees of the appellant stayed in the Guest House at Gurgaon, for which the appellant paid the consideration along with applicable service tax and the expenditure, was in relation to their business activity of manufacture and selling of excisable goods. They did not find any material to support the plea that accommodation was for regular residential stay by the employees. The appellants had categorically asserted that their staff and executives associated with Bhiwadi Unit availed the room facilities at Gurgaon. These accommodation facilities were for official stay billed and paid by the appellant and forming part of their business expenditure. These were not for personal use of employees. Considering the above factual position, it was held that the objection of the Revenue, on the second ground also was untenable.

Decision:-Appeal allowed.

Comment:- The gist of the case was thatthe credit of tax paid on charges for guest house was admissible. As per Rule 3 of Cenvat Credit Rules, 2004 services used in relation to business activity of manufacture and selling of excisable goods are input services and credit of those services can be taken by the assessee. The taxability or classification of the services is not within the purview of the jurisdictional authority where the appellant is availing credit.

Prepared By: - Akshit Bhandari

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PJ/Case Law /2016-17/3303

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