M/s. BASF India Ltd vs Commissioner Of Central Excise And Central Tax, Mangalore Commissionerate

The present appeal is directed against the impugned order dated 4.5.2020 passed by the Commissioner (A) whereby the Commissioner (A) has rejected the appeal of the appellant and confirmed the Order-in-Original.

Briefly the facts of the present case are that the appellants are engaged in the manufacture of excisable products viz., Synthetic Organic Dye Stuff, Synthetic Organic tanning substance, Acrylic-Polymer in primary forms and Synthetic Rubber, Factice in primary forms, etc., and are availing CENVAT credit on input and input services. CESTAT vide its Final Order dated 8.8.2013 ordered for de novo adjudication of show-cause notice dated 11.10.2010 issued to the appellant. In the de novo adjudication, the Joint Commissioner of Central Excise, Mangalore vide his Order-in-Original dated 24.7.2014 disallowed the CENVAT Credit of Rs.9,49,661/- along with interest and imposed equal penalty. Aggrieved by the said Order-in-Original, appellant filed appeal before the Commissioner (A) and the Commissioner (A) rejected the appeal vide his order dated 1.5.2015 on the ground of delay. Against the said order of the Commissioner (A) dated 1.5.2015, appellant filed appeal before the Hon'ble CESTAT. CESTAT, Bangalore vide its Final Order No.21455/2016 dated 22.12.2016 remanded the matter back for de novo adjudication.

Heard both the parties and perused the records.

Learned counsel for the appellant submitted that the impugned order denying CENVAT credit of service tax paid on input services relating to construction of road and storm water drain/civil work at tanker parking facility is not sustainable in law as the same has been denied by wrongly interpreting the definition of input service as provided under Rule 2(l) of CENVAT Credit Rules, 2004. She further submitted that the definition of input service employs the phrase "activity relating to business". The words "relating to" further widens the scope of the expression "activities relating to business" and hence, the usage of words "such as" after "activity relating to business" under the inclusive part of the definition supports the contention that the definition of the term 'input service' would not be restricted to services specified therein. In this regard, she relied upon the following decisions:

·         Ramala Sahkari Chini Mills Ltd.: 2016 (334) ELT 3 (SC)

·         Ramala Sahkari chini Mills Ltd.: 2010 (260) ELT 321 (SC)

4.1 She further submitted that in the present case, impugned services i.e., construction of road and storm water drain/civil work at tanker parking facility within the factory during the period in dispute are for the trucks and tankers which are arriving inside the factory premises which either bring the inputs/any other materials and for carrying the final products / any other outgoing materials from the factory and the storm water drain to drain excess rain and ground water from impervious surfaces such as sidewalks, campus, roofs and parking lots, etc. She also submitted that such construction work are integral part of the manufacturing activity and are relating to the business activities of the appellant inasmuch as without the same the appellant cannot commercially carry out the business and the manufacturing activity. She also submitted that any service received which is commercially required for the purpose of carrying on the business of manufacture or provider of output service is covered by the expression "activities relating to business". She further submitted that this issue has been considered by various decisions of the Tribunal and she relied upon the following decisions:

·         M/s. Coca Cola India Pvt. Ltd., Pune vs. CCE: 2009 (242) ELT 168 (Bom.)

·         Raymond UCO Denim Pvt. Ltd. vs. CCE, Nagpur: 2017 (7) GSTL 346 (Tri.-Mum.)

·         CC, CE & ST, Tirupathi vs. India Cements Ltd.: 2017 (3) GSTL 144 (Tri.-Hyd.)

·         Forge India Pvt. Ltd. vs. CCE, Indore: 2017 (48) STR 246 (Tri.-Del.)

·         CCE, Trichy vs. Madras Cement Ltd.: 2019 (370) ELT 568 (Tri.- Chennai)

4.2 Further submitted that in the impugned order, the learned Commissioner (A) has wrongly relied upon the Board Circular No.98/1/2008- ST dated 4.1.2008 as the definition of input service during the period in dispute i.e, prior to 1.4.2011 does not bar availment of CENVAT credit on all input services used in relation to manufacture of final products whether directly or indirectly. She also submitted that the decision in the case of M/s. Maruti Suzuki Ltd. relied upon in the impugned order is not applicable to the facts and circumstances of the present case as the same were delivered with respect to eligibility of CENVAT credit as inputs or for determining assessable value under Section 4 of the Central Excise Act, 1944 and were not with respect to CENVAT credit on input services.

4.3 She also submitted that the issue involved is interpretation of provisions of CENVAT Credit Rules, hence penalty under Rule 15(3) is not sustainable. For this submission, she relied upon the following decisions:

·         Transafe Services Ltd. vs. CCE, Haldia: 2017 (3) GSTL 445 (Tri.- Kolkata)(

·         Accenture Services Pvt. Ltd. vs. CST, Mumbai: 2015 (40) STR 719 (Tri.-Mumbai)

On the other hand, the learned AR defended the impugned order and submitted that the activity of construction of road and storm water drain/civil work at tanker parking facility does not fall under the definition of input service As defined under Rule 2(l) of CENVAT Credit Rules, 2004 as the same are not integral part of the manufacturing activity of the appellant.

After considering the submissions of both the parties and perusal of the material records, I find that the only question to be determined in the present case is about the eligibility of CENVAT credit on the disputed services viz., services relating to construction of road and storm water drain/civil work at tanker parking facility. Here it is pertinent to note that the period involved in the present case was prior to 1.4.2011 when the definition of input service had wide ambit as it included the words "activities relating to business". Further, I find that the words "activities relating to business" includes all the services which are commercially required for the purpose of carrying on business of manufacture or provider of output service because in the absence of these services it is difficult for the appellant to carry on his business activities. This issue has been considered by the Tribunal in the case of Raymond UCO Denim cited supra wherein the Tribunal in para 5 has observed that much water has flown after the amendment in the definition of input services with effect from 1.4.2011 and prior to 1.4.2011, construction of road and drainage system inside the factory premises was considered to be falling under the definition of input service and the assessee was entitled to CENVAT credit of the same. Further, I find that in Madras Cement Ltd. cited supra, the Tribunal has observed that the Tribunals as well as High Courts have held that all most all the activities relating to business would be covered by the definition of input service during the period prior to 1.4.2011. Hence, by following the ratio of the above said decision, I am of the view that the impugned order is not sustainable in law and therefore, I set aside the same by allowing the appeal of the appellant.

(Order was pronounced in Open Court on 24/03/2021.)