Case Law Details
CESTAT, NEW DELHI BENCH
Mahle Filters System (I) Ltd.
V/s.
Commissioner of Central Excise
STAY ORDER NO. 700 of 2012-EX
APPLICATION NO. E/STAY/3240 OF 2011
APPEAL NO. E/2483 OF 2011
APRIL 18, 2012
ORDER
Rakesh Kumar, Technical Member
The point of dispute in this case is as to whether the appellant, a manufacturer of filter and filter paper are eligible for Cenvat credit of service tax paid on outdoor catering facility availed by them for providing canteen facility to their workers. There is no dispute that the number of workers in the factory is less than 250 and as such there is no requirement for the appellant to provide canteen service to the workers in terms of the provisions of the Factories Act. The appellant’s plea is that providing canteen facility is necessary for improving the efficiency of their workers. The department however, did not accept this plea and disallowed the Cenvat credit in respect of the outdoor catering service and the jurisdictional Additional Commissioner vide order-in-original dated 22.02.2010 confirmed the Cenvat credit demand of Rs. 5,21,838 along with interest for 2004-2005 . April,. 2009 period under Rule 14 of the Cenvat Credit Rules, 2004 and imposed penalty of equal amount on the appellant under the provisions of Rule 15 ibid. On appeal to the Commissioner (Appeals), this order , of the Additional Commissioner was upheld vide order-in-original dated 25.7.2011 against which this appeal along with stay application has been filed.
2. Heard both sides in respect of stay petition.
3. Sh. Amit Jain, Advocate, the learned Counsel for the appellant while conceding that part of the cost of providing canteen facility is recovered from the workers, pleaded that providing of canteen facility is essential for improving the efficiency of the workers; that in view of the judgement of Larger Bench of the Tribunal in the case of CCE v. GTC Industries Ltd. [2008] 17 STT 63 (Mum. – CESTAT) the outdoor catering service is an “activity related to business” and is covered by the definition of “input service”;….. that in terms of Board’s instructions vide Circular No. 120/1/2010-ST dated 19.01.2010 providing of canteen service to the workers is covered by the definition of “input service”, and that substantial part of the demand is time barred as during the period of dispute, when the Cenvat credit in respect of this service had been availed there were conflicting decisions on this issue and, hence, longer limitation period cannot be invoked for recovery of allegedly wrongly availed credit. He, therefore, pleaded that the impugned order disallowing the Cenvat credit in respect of this service is not correct and that the appellant have a strong prima facie case in their favour and, hence, the requirement of pre-deposit of Cenvat credit demand, interest and penalty may be waived for hearing the appeal and recovery thereof be stayed till the disposal of the appeal.
4. Shri R.K. Verma, ld. Departmental Representative opposed the stay application and reiterating the findings of the Commissioner (Appeals) in the impugned order and pointing out the findings of the adjudicating authority in para 15 of the order-in-original, he pleaded that from the adjudicating authority’s findings in this para it is clear that the cost of providing canteen facility to the workers has been recovered from them, as is evident from the salary slips of the workers and, therefore, even on the basis of the judgment of the Larger Bench of the Tribunal in GTC Industries Ltd.’s case (supra) and the judgment of the Hon’ble Bombay High Court in CCE v. Ultratech Cement Ltd. [2010] 29 STT 244 the appellant would not be eligible for Cenvat credit in respect of this service. He also pleaded that since there was no requirement for providing canteen facility to the workers, this has to be treated as welfare activity and, hence, the same would not be covered by the term “activity related to business”. On limitation, he pleaded that since the appellant did not disclose to the Department, the availment of Cenvat credit in respect of this service, longer limitation period has been correctly invoked and penalty under Rule 15 of Cenvat Credit Rules has been correctly imposed. He, therefore, pleaded that this is not a case for waiver of pre-deposit.
5. We have considered the submissions from both the sides and perused the record. Even if it is accepted that the canteen service provided by the appellant is necessary for improving the efficiency of the worker and the same is eligible for cenvat credit in terms of Larger Bench decision in the case of GTC Industries Ltd. (supra), there is no dispute about the fact that part of the cost of providing canteen service has been recovered from the workers and to that extent the appellant would not be eligible for the Cenvat credit. Moreover, since the number of workers in the Appellant’s factory is admittedly less than 250 and there is no statutory requirement of providing canteen facility to workers, there is also a question to be considered as to whether this activity is a welfare activity, in which case, it would not be eligible for Cenvat credit or this activity is essential for increasing the productivity of the workers which would depend on the location of the factory, the number of shifts in which it works etc. these aspects can be considered only at the time of final hearing.
5.1 As regards limitation, though, the appellant pleads that the bulk of the demand is time-barred, question of limitation being a mixed question of fact and the same can be examined only at the time of final hearing.
6. In view of the above discussion, this is not a fit case for total waiver. The appellant therefore, directed to deposit 50 per cent of the Cenvat credit demand within a period of four weeks from the date of this order. Compliance to be reported on 21.5.2012. On deposit of this amount within the stipulated period, the requirement of pre-deposit of balance amount of Cenvat credit, interest and penalty shall stand waived and recovery thereof stayed till the disposal of the appeal.
The assessee is registered under service tax for 4 categories of services. Can service tax credit , which is eligible for taking credit under a category of service, be utilized for the payment of service tax under other category of service.