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ITC Ltd V/S Commissioner of Central Excise, Kolkata-VI


Company & Directors' Information:- ITC LIMITED [Active] CIN = L16005WB1910PLC001985

    Final Order No. 75062/KOL/2018 in Appeal No. E/76021/2014-SM

    Decided On, 16 January 2018

    At, Customs Excise Service Tax Appellate Tribunal East Zonal Bench, Bench Kolkata

    By, THE HONORABLE JUSTICE: S.K. MOHANTY
    By, MEMBER

    For Petitioner: K.S. Ravi Shankar and N. Anand, Advocates And For Respondents: A. Roy, Supdt. (A.R.)



Judgment Text


1. This appeal is directed against the impugned Order-in-Original No. 01/CE/Commr./Ko.VI/2013-2014, dated 31-3-2014 passed by Commr. of Central Excise, Kolkata. Denial of Cenvat credit of Service Tax paid on the taxable services, namely, Club or Association Service, Health and Fitness Service is the subject matter of present dispute. The Adjudicating Authority has denied the Cenvat credit on the ground that these services are not conforming to the definition of "input service" contained in Rule 2(1) of the Cenvat Credit Rules, 2004.

2. The Ld. Counsel appearing for the appellant submits that the Service Tax paid on disputed services, were used/utilized by the appellant for accomplishing its business objectives and since the Phrase "activity relating to business" is specifically finding place in the definition of input service, the benefit of Cenvat credit should be available to the appellant. In support of his said stand, the Ld. Counsel has relied upon the decision of the Bangalore Bench of this Tribunal in the appellant's own case, wherein the benefit of Cenvat credit has been extended on the disputed services.

3. On the other hand, the D.R. appearing for the Revenue reiterates the findings recorded in the impugned order and further submits that since the disputed services have no nexus with the manufacture of final product, Cenvat benefit should not be available to the appellant. The Ld. D.R. has relied on the decisions of the Tribunal in the cases of BCH Electric Ltd. v. CCEx., Delhi-IV: 2013 (31) S.T.R. 68 (Tri.-Del.) and Maruti Suzuki India Ltd. v. CCEx., Delhi-III : 2017 (47) S.T.R. 273 (Tri.-Chan.) to state that the disputed services are not confirming to the definition of input service and therefore, the appellant will not be eligible to take Cenvat credit on those services.

4. Heard both sides and examined the case records. On perusal of the case records, I find that the submissions of the appellant before the Adjudicating Authority were recorded in the impugned order regarding the use of the disputed services for the intended purpose. Relevant Paragraphs in the impugned Order are extracted herein below:

Membership of Clubs or Association : "For the purpose of effectively carrying out their manufacturing and selling operations, they take membership of different industry and business associations. Further, they also pay the club membership subscription for their employees as such membership brings them in contact with people of standing and facilitates their business operations. Credit taken under this head also pertains to expenses including hall hire charges incurred for various business meetings/training workshops and marketing and promotional activities."

Health & Fitness Service : "Training is provided to the employees for their overall development which not only includes development of their skill, talent and knowledge but also towards their health and fitness. In a business environment, to keep the business going, functioning and flourishing properly, the employees are regarded as a great asset to the company. Therefore, these services are provided to them with the intention of promoting business and having fresh and healthy employees conducting the company's business."

5. On perusal of the above submissions made by the appellant before the Adjudicating Authority, it transpires that the disputed services were used and utilized by the appellant for accomplishing its business purpose. Since the period involved in this case is prior to March, 2011, benefit of Cenvat credit under the unamended definition of "input service", should be available to the appellant in respect of the disputed services, inasmuch as, the Phrase i.e. "activities relating to business" was finding place in the inclusive part of such definition.

6. Further, I also find that in respect of appellant's Bangalore Unit, the Assistant Commissioner of Central Excise, Bangalore, while adjudicating the matter, has held that the appellant had considered the element of service and Service Tax component thereon in determination of the cost of production and discharged the Central Excise duty liability on removal of the final product. Therefore, by relying on the decision of this Tribunal in the case of the appellant (Final Order Nos. 20475-20476/2017, dated 31-3-2017, the Adjudicating Authority has dropped the show cause proceedings initiated against the appellant. Since the appellant adopts the same practice and procedure for maintaining the books of accounts in respect of its different units, contrary stand in this case cannot be taken for disallowing the Cenvat credit. Therefore, in my considered opinion, the Cenvat benefit should be available to the appellant. The decisions relied upon by the Ld. DR for the Revenue are distinguishable from the facts of the present case inasmuch as payment of insurance premium was in relation to family members of the employees and that membership of the Club was taken for the benefit of the Director. In this case, since the facts are not under dispute that the Club Membership was obtained by the appellant from various Chamber of Commerce/different Industry Bodies for facilitating smooth business of the appellant, the benefit of Cenvat credit

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should be available. Further, the facts are not under dispute that health centre and fitness centre, in this case, were exclusively opened by the appellant within its premises for the benefit of its employees, who promotes the business of the appellant. Thus, such payment of health centre should be considered as input service for the purpose of availment of Cenvat benefit. In view of the above, I do not find any merit in the impugned order and accordingly, after setting aside the same, I allow the appeal in favour of the appellant. (Dictated and pronounced in the open Court)
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