Case Law Details
ACG Associated Capsules P. Ltd. Vs CCE (Bombay High Court)
We notice that the term ‘input service’ contained in CENVAT Credit Rules 2004, contains certain exclusion clause. Clause (C), inter alia, excludes travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily, for personal use or consumption of any employee. Accordingly, if the guest houses were utilized by the Assessee for extending benefit to the employees, for the personal use or consumption, the Assessee was not entitled to avail CENVAT credit thereof. This, even Assessee does not dispute. The case of the Assessee, however, is that, none of the guest houses were used for the personal use or consumption of the employees. In order to test this premise, Tribunal itself formulated the test that those guest houses which are situated next to the manufacturing unit of the Assessee, would qualify for the benefits. The rest would not. This, may appear to provide a rough and ready formula, in our opinion, the same is not entirely satisfactorily.
6. Even in relation to a guest house which may not have been situated close to the manufacturing unit of the Assessee, if it is pointed out that the use thereof was not for the personal use or consumption of the employees, exclusion clause in the definition of input service, may not apply. In the circumstances, while the Tribunal has already remanded the issue for fresh consideration, we do not interfere with the remand order. However, the tests laid down by the Tribunal in the impugned judgment, would not apply. In light of the observations made above, it would be open for the Assessee to attempt to persuade the Assessing Officer that the guest houses in question were not used for the personal use or consumption of the employees.
FULL TEXT OF THE HIGH COURT ORDER / JUDGEMENT
With the consent of the learned Counsel for the parties, this Appeal is taken up for final hearing.
2. Appellant-Assessee has challenged the judgment of CESTAT dated 29th November, 2017. Following questions are presented for our consideration:
“(a) Whether CESTAT was correct in remanding the Appeal to the Original adjudicating authority in respect of the issue which was not raised in the show cause notice?
(b) Whether the CESTAT was correct in holding that credit of guest houses located next to the factory premises is allowed and credit in respect of guest houses located away from the factory premises is disallowed when the nature of input service is same?
(c) Whether CESTAT was correct in traversing beyond the scope of show cause notice and decide issue which is not part of the show cause notice i.e. guest house next to the factory premises or located away from the factory premises?
(d) Whether the CESTAT was right in not recording any findings with regard to the issue of the usage of the guest houses by the employees for their official work and not for personal use for the purpose of the eligibility of input services?”
Briefly stated, the facts are as under:
3. Appellant-Asssessee is a Private Limited Company and is engaged in manufacturing of Empty hard gelatin Capsules and other Capsules. The Assessee has its manufacturing units located at three places namely Kandivali, Dhanu and Shirwal. The Department noticed that Assessee had claimed input credit of services related to guest houses maintained by the Assessee. It was further noticed that, these guest houses were situated at various places such as Andheri, Malad, Kandivali, Lonawala, Pune, Alibaug, Dhanu, Shriwal, Hyderabad and Chennai. According to the Department, these guest houses were not utilized for the purpose of Assessee’s manufacturing activity and the Assessee, therefore, could not have availed input credit in relation to such services. A show cause notice, therefore, came to be issued on 27th April, 2016, calling upon the Assessee to show cause why the CENVAT credit availed should not be reversed with interest.
4. Assessee replied to the said show cause notice and opposed the demand, inter alia, on the ground of limitation. The Assessing Officer, however, confirmed the demand upon which the issue reached the Tribunal. The Tribunal, by the impugned judgment, remanded the proceeding before the Assessing Officer, after holding that some of the guest houses were intended for personal use of the employees while others which were located next to the factory premises, may be for the use other than personal use of the employees. Tribunal, therefore, in the concluding portion passed following order:‑
“ Relying on the said decision, the credit of guest houses located next to the factory premises is allowed and the credit in respect of guest houses located away from the factory premises is allowed. The matter is remanded to the original adjudicating authority to determine the guest house which are located next to the factory and those which are not located next to the factory and determine the liability. Accordingly, the appeal is allowed by way of remand to the original adjudicating authority.”
5. Having heard the learned Counsel for the parties and having perused the documents on record, we notice that the term ‘input service’ contained in CENVAT Credit Rules 2004, contains certain exclusion clause. Clause (C), inter alia, excludes travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily, for personal use or consumption of any employee. Accordingly, if the guest houses were utilized by the Assessee for extending benefit to the employees, for the personal use or consumption, the Assessee was not entitled to avail CENVAT credit thereof. This, even Assessee does not dispute. The case of the Assessee, however, is that, none of the guest houses were used for the personal use or consumption of the employees. In order to test this premise, Tribunal itself formulated the test that those guest houses which are situated next to the manufacturing unit of the Assessee, would qualify for the benefits. The rest would not. This, may appear to provide a rough and ready formula, in our opinion, the same is not entirely satisfactorily.
6. Even in relation to a guest house which may not have been situated close to the manufacturing unit of the Assessee, if it is pointed out that the use thereof was not for the personal use or consumption of the employees, exclusion clause in the definition of input service, may not apply. In the circumstances, while the Tribunal has already remanded the issue for fresh consideration, we do not interfere with the remand order. However, the tests laid down by the Tribunal in the impugned judgment, would not apply. In light of the observations made above, it would be open for the Assessee to attempt to persuade the Assessing Officer that the guest houses in question were not used for the personal use or consumption of the employees.
7. All contentions of both the sides are kept open.
8. Accordingly, Appeal disposed of. No order as to costs.
