Internal Audit services eligible for CENVAT Credit

By | May 14, 2016

Held

In the case of DRP Malleables (P.) Ltd.  the Tribunal held that Chartered Accountant Service is specifically covered under the scope of input service and the assessee is eligible for availing credit. In my considered view, the Chartered Accountant Service related to day-to-day service cannot be reason for denial of CENVAT credit. So, the appellant is eligible to avail the CENVAT credit of Chartered Accountant Service.CESTAT, AHMEDABAD BENCH

Essar Oil Ltd.

v.

Commissioner of Central Excise, Customs & Service Tax, Rajkot

P.K. DAS, JUDICIAL MEMBER

ORDER NO.A/10039/2016
APPLICATION NO. E/MA (EXTN)/15598/2014
APPEAL NO. E/1588/2010

JANUARY  15, 2016

Ms. Dimple Gohil, Adv. for the Appellant. N. Satwani, AR for the Respondent.

ORDER

1. The relevant facts of the case, in brief, are that the appellants were engaged in the manufacture of various excisable goods. They were availing benefit of CENVAT credit under the CENVAT Credit Rules. Show Cause Notices were issued proposing to deny the CENVAT credit benefit. By the impugned order, the Commissioner of Central Excise denied the CENVAT credit of Rs. 6,65,733.00 along with interest and imposed penalty of Rs. 2,000.00 and also appropriated the amount of Rs. 74,622.00 and Rs. 5.00 as paid by them. The denial of CENVAT credit is for the period from January 2007 to May 2008.

2. After hearing both the sides and on perusal of the records, I find that the Adjudicating Authority denied the CENVAT credit on input services as under:—

(i) Chartered Accountant Service:—

There is a denial of CENVAT credit of Rs. 2,00,838.00 and Rs. 61,200.00 out of which, the appellant have already reversed of Rs. 30,600.00. The Learned Advocate submits that they are contesting the demand of the balance amount of Rs. 2,31,438.00. The Adjudicating Authority observed that this service has been utilised for LMC Approval & Audit Work, and Service tax charged on service rendered pertains to Internal Audit conducted on day-to-day operations cannot be said to be used in relation to setting up of the refinery and in relation to manufacture of final products. The Learned Advocate on behalf of the appellant submits that Chartered Accountant Service is included in the definition of input service itself. She further relied upon the decision of the Tribunal as under:—

(a) CCE v. DRP Malleables (P.) Ltd. [Final Order No. A/55433/2013-SM (BR), dated 30-1-2013]
(b) CCE v. Andhra Pradesh Paper Mills Ltd. 2010 (254) E.L.T. 354 (Tri.-Bang.)

In the case of DRP Malleables (P.) Ltd. (supra), the Tribunal held that Chartered Accountant Service is specifically covered under the scope of input service and the assessee is eligible for availing credit. In my considered view, the Chartered Accountant Service related to day-to-day service cannot be reason for denial of CENVAT credit. So, the appellant is eligible to avail the CENVAT credit of Chartered Accountant Service.

(ii) Security Service:—

The Adjudicating Authority denied the CENVAT credit of Rs. 4,19,751.00. The Adjudicating Authority observed that the appellant have availed services of various vendors, Security Service rendered at Township, Meera Hotal, Naghedi, the areas outside the refinery premises. The Learned Advocate relied upon the various decisions as under:—

(a) CCE v. ITC Ltd. [2013] 39 STT 654 (AP)
(b) CCE v. Seimens Healthcare Diagnostics Ltd. [Final Order No. A/10732/2013-WZB/AHD, dated 31-5-2013]
(c) GHCL Ltd. v. CCE [Final Order No. A/815/2009-WZB/AHD, dated 2-4-2009]

In the case of ITC Ltd. (supra), the Tribunal allowed input service credit on maintaining residential colony to its employees at the remote location. In the case of Seimens Healthcare Diagnostics Ltd. (supra) the Tribunal held that the input service on Rent, Security and maintenance services rendered beyond the place of manufacture is eligible. The Tribunal followed the decision of the Hon’ble Bombay High Court in the case of Deepak Fertilizers & Petrochemicals Corpn. Ltd. v. CCE[Central Excise Appeal No. 11 of 2013, dated 6-3-2013]. In the case of GHCL Ltd. (supra) the Tribunal held that input service credit on Security Agency Service provided for plant area, residential and mines area, hence covered under the category of input services under CENVAT Credit Rules, 2004.

On the other hand, the Learned Authorised Representative on behalf of the Revenue submits that the Hon’ble Gujarat High Court in the case of CCE&C v. Gujarat Heavy Chemicals Ltd. [2012] 34 STT 587 (Guj.) denied at input service credit on Security Service provided at residential quarters maintained for workers by the manufacturer. It is held that the act of providing residential quarters by manufacturer, voluntary in nature and has no connection between such service as having direct or indirect relation to manufacture and CENVAT credit would not be available. In the present case, I find that the issue is squarely covered by the decision of the Hon’ble Gujarat High Court in the case of Gujarat Heavy Chemicals Ltd. (supra) against the assessee. So, the appellant is not eligible input service credit on security service rendered at the Guest House and Hostels of the appellants.

(iii) Outdoor Catering Service:—

The Adjudicating Authority denied the CENVAT credit of Rs. 36,427.00 for the services rendered at Guest House for Contractors/Engineers etc. The Learned Advocate relied upon the following decisions as under:—

(a) CCE v. Ultratech Cement Ltd. [2010] 29 STT 244 (Bom.)
(b) CCE v. Stanzen Toyotetsu India (P.) Ltd. [2011] 32 STT 244 (Kar.)

In the case of Ultratech Cement Ltd. (supra) the Hon’ble Bombay High Court allowed the CENVAT credit on input service of Outdoor Catering Service subject to the service tax was borne by workers would be reversed. In the present case, the Adjudicating Authority observed that the catering service cannot be said to be utilised directly on indirectly, in or in relation to manufacture of final products. I find that, they have submitted that this service has been utilised for catering services for company Guest House at the Refinery. It is seen that, the Outdoor Catering Service was utilised at the Refinery is within manufacturing premises and therefore, they are eligible to availed credit.

(iv) Tour Operator and Rent a Cab Service:—

The Adjudicating Authority confirmed the CENVAT credit of Rs. 4,751.00 and Rs. 1,242.00. The Learned Advocate submits that the service was availed by the executives/persons concerned with setting up of refinery. The Learned Authorised Representative for the Revenue drew the attention of the Bench, findings of the Adjudicating Authority. The Adjudicating Authority denied the CENVAT credit on the ground that these services were rendered transportation for ferrying executives at Chennai, Mumbai and New Delhi, which are not related with their refinery. So, the appellant is not eligible for Cenvat credit.

(v) Advertisement Agency:—

The Adjudicating Authority denied the CENVAT credit of Rs. 5,508.00 on the ground that Hoarding Board was used outside by the factory. The Learned Advocate relied upon the decision of the Hon’ble Bombay High Court in the case of Coca cola (India) (P.) Ltd. v. CCE [2009] 22 STT 130. I find that the ‘Advertisement Service’ is included in the input service definition. So, the appellant is eligible of the CENVAT credit.

3. The Learned Advocate on behalf of the appellant submits that they are not disputing the denial of CENVAT credit on Authorised Service Station, Manpower Recruitment Service and Convention Service after considering the amount itself as Rs. 5.00, 74,620.00 and Rs. 1,989.00 respectively. The Learned Advocate submits that their own case, the Tribunal vide Final Order No. A/10396/2015, dated 24.02.2015 in the case of CCE&ST v Essar Oil Ltd. rejected the appeal of the Revenue in respect of input service credit on Outdoor Catering Service, Rent-a-Cab Service and Travel Agent Service.

4. In view of the above discussions, the impugned order is modified to the extent the denial of CENVAT credit on Chartered Accountant Service of Rs. 2,31,438.00 and Outdoor Catering Service of Rs. 36,427.00 (subject to reversal of the credit by the staff), Advertisement Service of Rs. 5,508 is set-aside. The denial of CENVAT credit on the other input services are upheld. Penalties are set-aside. The appeal filed by the appellant is disposed of in the above terms. The application for extension of stay order is dismissed as infructuous.

Leave a Reply