Decided on March 18,2015

Gateway Terminals (I) Pvt. Ltd. Appellant
Commissioner Of C. Ex., Raigad Respondents


ANIL CHOUDHARY,MEMBER (J) - (1.)THE present appeals are filed against the order -in appeals passed by the Commissioner of Central Excise (Appeals), Belapur. The details are as follow:
The issue in the present case is on availment of credit of Service Tax paid on input services viz. Garden Maintenance services, Event Management Services, Outdoor catering Services (canteen) services, Telephone Services & Brokerage Charges.

(2.)The brief facts of case are the appellant, inter alia, is engaged in the business of providing 'Port' services. They are, accordingly, registered with the service tax department. The appellant uses various input services for providing the taxable output services and in turn are availing and utilizing credit of service tax paid on input services as per Rule 3(1) read with Rule 3(4) of the CENVAT Credit Rules, 2004.
Show -cause notices were issued to the appellant denying credit of Service tax paid on input services as mentioned above in the table, alleging that the aforesaid services do not qualify as "Input Services" inasmuch as there is no nexus between the input services and the output services provided by the appellants and the said expenses are in nature of a welfare activity. The said show cause notices were dropped in part by the adjudicating authority except for demand pertaining to credit availed on outdoor catering services for period post April, 2011, vide order -in -original dated 31 -1 -2013. Appellant being aggrieved, had filed appeals along with cross objection to Revenue's appeal before the Commissioner (Appeals) - against dropping of the demands. The Commissioner (Appeals) had upheld the order passed by the Additional Commissioner. Being aggrieved by the same, the appellant is before this Tribunal praying for: -

(i) Allowance of Cenvat credit of Rs. 36,80,947/ - for period October, 2004 to March, 2010.

(ii) Penalty of Rs. (2,379,222 & 50,000) in respect of show cause notice dated 20th April, 2010 & 27th September, 2010 respectively to be set aside.

(iii) Interest to be recovered (as per provision of Rule 14 of Cenvat Credit Rules read with Section 75 of Act) be set aside.

(3.)THE learned Counsel for the appellant have made following submissions before this Tribunal.
3.1 Learned Counsel states that the object of the legislature for introducing Cenvat Credit Rules was to allow credit of Service Tax paid on taxable services that form part of assessable value of final product, which is very clear from the speech of Finance Minister in his budget speech, 2004 -2005 pursuant to which draft Cenvat Credit Rules were circulated by Ministry of Finance inviting comments from the trade and industry. Therefore, a Press Note dated August 12, 2004 was also issued along with the draft rules highlighting the salient features of Cenvat Credit Rules. Draft Rules were taken judicial notice in, 2004 (170) E.L.T. T -19, in paras (iii) & (iv). The relevant extract thereof is as under:

"(iii) In principle, credit of tax on those taxable services would be allowed that go to form a part of the assessable value on which excise duty is charged. This would include certain services which are received prior to commencement of manufacture but the value of which gets absorbed in the value of goods. As regards services received after the clearance of the goods from the factory, the credit would be extended on services received upto the stage of place of removal (as per Section 4 of Central Excise Act.) In addition to this, services like advertising, market research etc. which are not directly related to manufacture but are related to the sale of manufactured goods would also be permitted for credit.

(iv) Full credit of Service tax on services (such as telephone, security, construction, advertising service, market research etc.) which are received in relation to the offices pertaining to a manufacturer or service provider would also be allowed."

3.2 Learned Counsel further states that the rules as introduced with effect from 10 -9 -2004 have wide connotation than the draft definition as under the draft Cenvat Credit Rules. The term "used in relation to setting up a factory," was contemplated, it was widened to read as "used in relation to setting up, modernization, renovation or repairs of a factory or office relating to such factory". The Cenvat Credit Rules expanded the said term to read as 'activities relating to business', which was expanded and illustrated further with the addition of 'services' such as coaching and training, share registry, credit rating, etc. which pertain to various aspects of the activities relating to business. Hence, the manifest intention of the Legislature is to allow credit on all services which are activities relating to business of the assessee.

3.3 Learned Counsel clarifies that as the issue involved in present case is one of interpretation, the issue is purely legal in nature. The definition of "input service" has been subject to constant litigation.

The definition of the term 'Input service' as defined under Rule 2(1) of the Cenvat Credit Rules, 2004 has two parts 'means' & 'inclusive' which should be read harmoniously as definition is one of very wide connotation. It covers within its ambit all services received by the service provider or manufacture, as long as they are related to the service business of the assessee. A service would qualify as 'input service' even if not covered by the 'means' portion, if it satisfies the 'includes' portion of the definition. In other words, in order to qualify as an input service, a service has to fall either within the 'means' part or 'includes' part of the said definition. Term 'includes' infact enhances the scope of the definition as it is inclusive in nature. Therefore, the definition cannot be taken one of restrictive approach. As per Hon'ble Apex Court judgment in the case of Regional Director v. High Land Coffee Works - : (1991) 3 SCC 617, wherein held that:

"The word "include" in the statutory definition is generally used to enlarge the meaning of the preceding words and it is by way of extension, and not with restriction. The word 'include' is generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used, these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import but also those things which the interpretation clause declares that they shall include. [See (i) Stroud's Judicial Dictionary, 5th edn. Vol. 3, p. 1263 and (ii) C.I.T. v. Taj Mahal Hotel, (iii) State of Bombay v. Hospital Mazdoor Sabha".

Further the term 'such as' in a definition is purely illustrative but not exhaustive. It establishes that whatever activities are enumerated in the Rule are only illustrations of service that relate to the business and are not exhaustive in nature. The same was reiterated in the case of Royal Hatcheries (P) Ltd. v. State of A.P. - : 1994 Supp (1) SCC 429. Hence any activity, relating to business of assessee would be covered as an input service; business is an integrated/continuous activity and is not only confined/restricted to mere provision of input services or manufacture of the product. Therefore, activities in relation to business cover all the activities that are related to the functioning of a business.

3.4 Learned Counsel further submits that, various limits of definition of input service are independent/diverse/concession/exemption. If an assessee can satisfy any one of the limbs of the definition of input service which is effectively divided into four categories as below, then credit would be available:

(a) Any service used by the service provider for providing output service;

(b) Services used in relation to setting up, modernization, renovation or repairs of a factory, or an office relating to such factory,

(c) Services used in relation to advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs,

(d) Services used in relation to activities relating to business and outward transportation upto the place of removal;"

As per Kerala State Co -operative Marketing Federation Ltd. and Ors. v. Commissioner of Income tax - : 1998 (5) SCC 48, the Supreme Court, inter alia, held as under:

"We may notice that the provision is introduced with a view to encouraging and promoting growth of co -operative sector in the economic life of the country and in pursuance of the declared policy of the Government. The correct way of reading the different heads of exemption enumerated in the section would be to treat each as a separate and distinct head of exemption. Whenever a question arises as to whether any particular category of an income of a co -operative society is exempt from tax what has to be seen is whether income fell within any of the several heads of exemption. If it fell within any one head of exemption, it would be free from tax notwithstanding that the conditions of another head of exemption are not satisfied and such income is not free from tax under that head of exemption."

3.5 It is further urged that the demand raised is time -barred; and the extended period cannot be invoked. The allegation raised on appellant that they did not produce any evidence and they should have intimated department of the availment of credit on aforesaid services is not correct; as appellant is registered with department & filing periodical ST -3 returns which dully reflect the Cenvat credit availed by the appellant. Relying on Hon'ble Supreme Court judgment in the case of Pahwa Chemicals Pvt. Ltd. -, 2005 (189) E.L.T. 257 (S.C.), wherein Hon'ble Supreme Court held that once the RT -12 returns have been filed regularly & there is no positive Act on part of assessee to establish useful mis -declaration, no suppression can be alleged.

3.6 Further the department has clearly misread & mis -construed the provision in demand raised for period post April, 2011, as the credit of Service Tax paid on outdoor catering services post April 2011, has been used for providing out put service. The appellant are regulated by dock workers (safely, health & welfare) Regulation, 1990 as the employees are more than 250 workers, appellant is under statutory obligation to provide and maintain adequate canteen facilities under the said Regulations. Hence as the catering services are provided by the appellant as a part of its business need & obligation to the employees who are the essential hands of the business. Without the said workers/employees, the appellant would not be in position to provide the output service. Hence, it is evident that it has a direct bearing on output services.

Further the exclusion (C) clause of the definition of "Input service" post April, 2011 i.e.

"(C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation and such as leave or home travel: concession, when such services are used primarily for personal use or consumption of any employee."

will not apply in the facts of present case, as the said clause would only apply in case when such services are used primarily for personal use or consumption of an employee. The learned Counsel has cited the Hon'ble Supreme Court judgment in the case of Union of India v. Hansoli Devi - : (2002) 7 SCC 273, wherein it has observed that "the legislature never waste its words or say anything in vain and a construction which attributes redundancy to legislation will not be accepted except for compelling reasons".


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