CENVAT on services of ‘Construction and Maintenance of township' - when there are different views on very same issue, there is a convention that stay on pre deposits needs to be granted
CENVAT credit of more than Rs.9.6crores was denied to the assessed by the CCE, Vadodara and a penalty of more than Rs. 7.6 crores was imposed along with interest.
The reason - the appellant had allegedly availed ineligible CENVAT credit of the service tax paid on different services used in the construction and maintenance of the township.
Before the CESTAT the appellant submitted that construction of a residential township was inevitable as appellant's factory was situated in a remote area and in order to have continuous production, the appellant had accommodated required staff in the township; that the township construction & maintenance cost was included in the cost of production of the goods manufactured in accordance with the cost accounting standard CAS-4 and duty discharged thereon. Reliance is placed on the decisions in GTC Ltd. - (2008-TIOL-1634-CESTAT-MUM-LB), ITC - () in support. It is also submitted that they had already reversed an amount of Rs.2.80crores and were facing severe financial hardship.
The Revenue representative cited the High Court decision in Manikgarh Cement - () to justify the demand and also the Gujarat High Court decision in Cadila Healthcare () where it is laid down that if the cost of any expenses is included in the value it would not mean that credit of that service tax or the inputs services will be available. It is also submitted that the Bombay High Court had in case of Ultratech Cement - () on the issue concerning ‘catering service' held that only in respect of those services which are mandatory credit can be allowed and in the present case provision of residential colony is not mandatory or statutory. Inasmuch as the appellant should be directed to make further deposit for hearing and disposing the appeals.
The Bench observed -
"7. We have considered the submissions made at length by both sides and perused the record. We find that the issue involved in this case is debatable for more than one reason. Firstly, the duty of eligibility of CENVAT credit of the service tax paid on the services which are used in the residential complex, High Courts have taken different views, the facts of the case of ITC Ltd. where in High Court of Andhra Pradesh has upheld the order of the tribunal are more akin to the case in hand, at the same time, judgment of the Hon'ble High Court of Bombay in the case of Ultratech Cement and Hon'ble High Court of Gujarat are taking a different view in respect of specific services rendered at the residential complex. We find that the argument put forth for the ld. counsel that the residential complex is within factory is an argument which needs to be considered and was not put before High Court of Gujarat or Bombay for deeper consideration. Be that as it may, we are of the view that when there are different views on the very same issue, there is convention, that stay on pre deposits needs to be granted if facts are akin, we have already recorded that the facts in this case, are akin to the facts of the case wherein Hon'ble High Court of Andhra Pradesh has decided the issue."
The Bench also noted that the amount of deposit made by the appellant works out to 25% of the confirmed demand. Holding that the issue is an arguable one and there is a claim of financial hardship, the amount deposited was considered enough to hear and dispose of the appeal. In fine, stay was granted.