Vasu Logistics Limited Vs Commissioner of Central Excise & CGST (CESTAT Delhi)
CESTAT Delhi allowed the appeal filed by Vasu Logistics Limited against denial of CENVAT credit on rented residential premises provided to employees/staff recruited from outside the city. The appellant, a supplier of clearing and forwarding agency and transportation of goods services, had taken houses on rent as residences for employees who were working from home. The Revenue issued a show cause notice dated 03.09.2019 for April 2016 to June 2017, proposing denial of credit on renting of property service.
The demand was adjudicated with interest and penalty. The appellant submitted that the premises were provided to employees hired for official purposes and working from home, making the service eligible for credit. The departmental representative relied on the exclusion clause in Rule 2(l) of the CENVAT Credit Rules, 2004 concerning residential premises used personally by employees, citing C.E. Nagpur vs. Manikhgarh Cement and Commissioner of Central Excise vs. Gujarat Heavy Chemical Limited.
CESTAT observed that the cited decisions required a nexus between availment and usage of the service. It found that the premises were used for employees working from home and had been taken by the appellant for business purposes. The proceedings were therefore held unsustainable. The demand for denial of CENVAT credit was set aside, consequently no penalty was recognizable, and the appeal was allowed.
FULL TEXT OF THE CESTAT DELHI ORDER
1. The appellant is in appeal against the impugned order wherein CENVAT credit availed by the appellant on account of premises acquired on rent which was used for the purpose of residence by the employees/staff. The facts of the case are that the appellant is supplier of services, namely, ‘clearing and forwarding agency service and transportation of goods’.
2. The appellant has taken various houses on rent for use as residence for the employees of the company who are recruited from outside the city. The appellant provided this premises to their employees/staff and allowed them to work from Appellant is taking CENVAT credit of the said rent paid by the appllent for the residence of employees. The revenue is of the view that the appellant is not entitled to take CENVAT credit on the said service, therefore, a show cause notice dated 03.09.2019 was issued to the appellant for the period from April 2016 to June 2017 to deny CENVAT credit on renting of property service availed by them for residence of their employees/staff. The matter was adjudicated. CENVAT credit was denied. Consequently demand was confirmed with interest, penalty was also imposed.
3. Against the said order appellant is before me.
4. The learned counsel for the appellant submits that the said service was availed by the appellant for residence of their employees who are located outside but have been hired by the appellant for their official purpose and provided these residential houses to the employees who are working from home. In that circumstances, they are entitled to take CENVAT credit of the said services.
5. On the other hand, learned departmental representative sought to deny the CENVAT credit stating that there is an exclusion clause in rule 2(l) of CENVAT Credit Rules 2004 wherein they are not entitled to take CENVAT credit on the residential premises which were used by their employees for personal use. To support this contention, they relied on the decisions of the Hon’ble Bombay High Court in the case of C.E. Nagpur vs. Manikhgarh Cement (2010 STR 456 Bombay) and Commissioner of Central Excise vs. Gujarat Heavy Chemical Limited (2011 TIOL 383 High Court Ahmedabad ST).
6. Heard the parties and considered submissions.
7. I find that the learned authorised representative relied heavily on exclusion clause (c) of rule 2(l) of CENVAT Credit Rules, 2004 to say that the residential houses have been personally used by the employees, therefore, they are not entitled to take the CENVAT credit and also took support of the decisions referred by the learned authorised representative during the argument.
8. I have gone through the decisions cited by the learned authorised representative which shows that there should be a nexus between the availment of service and usage thereof. Admittedly, this service have been used by the appellant for residential purposes of their employees who are working from home, which means that the said premises have been taken by the appellant for their business In these circumstances, I hold that impugned proceedings are not sustainable against the appellant and the appellant is entitled to take CENVAT credit. Therefore, demand on denial of CENVAT credit is set aside. Consequently, no penalty is recognizable on the appellant.
9. In view of this appeal is, accordingly, allowed.
(Order pronounced and dictated in open court)
