In a recent case, the Allahabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT)upheld the denial of cenvat credit against pepsico as manpower supply services and anti termite or pesticide treatment services used for construction activities.
Pepsico India Holdings Pvt. Ltd., the order of the Commissioner Central Excise Customs & Service Tax Lucknow. By the impugned order, the officer disallowed the cenvat credit in total amounting to Rs. 85,98,001.00 ( Rupees Eighty five lakhs ninety eight thousands and one only) taken by the party on various ineligible input and input services and order for recovery of the same under the provisions of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11 (A) (1) of Central Excise, Act, 1944.
The appropriate amount of Rs 81,44,372.00 (Rupees Eighty one lakhs forty four thousands three hundred seventy two only) already reversed by the party towards demand being confirmed at (1) above. Further imposed a penalty of Rs 10,00,000.00 (Rupees Ten lakhs only) on M/s Pepsico India Holdings Private Limited, A-36, UPSIDC, Sathariya Industrial Area, Jaunpur-222202 under Rule 15 (1) of Cenvat Credit Rules, 2004.”
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The Appellant is engaged in manufacturing of branded Aerated Water falling under Chapter heading 22021010 of Central Excise Tariff Act,1985, They are availing Cenvat credit on input/ capital goods and input services used in or in relation to manufacture of their final products.
The Officers of Anti- Evasion branch of Central Excise Commissionerate, Allahabad visited the premises of the party on 21.09.2012 and checked the Cenvat Credit records / documents related to Cenvat credit availed by the party on Inputs, Capital goods and Input services. The Finance Manager of the firm informed that the unit had commenced production only in the month of March’ 12.
On scrutiny of Cenvat credit records of the party in respect of inputs, it was found that input credit of Rs.7,67,657/- has been taken on chemicals used on flooring during construction. Such chemicals are neither capital goods nor input. As regards its use, the party stated that these chemicals have been used on floors of the plant area during construction.
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On pointing out non admissibility on such chemicals the Finance Manager of M/s Pepsico India Holdings (P) Ltd. stated that would be reversed, these chemicals were admittedly used in coating of floor area which squarely fell under category of construction service. Hence credit taken on such chemicals appeared to be not admissible and the same appeared liable to be recovered from the party.
From the definition of input service it is evident that setting up of factory has been excluded w.e.f 01.04.2011 from the list of specified services U/R 2(l) of CCR, 2004 . The Project Management Team(PMT) has undertaken various work mainly related to setting up of the factory including Civil Works inside the factory. Before the initiation of the work on the project site, the Project Management Team (PMT) undertakes survey, inspection and establishes marking on the proposed area. The PMT also monitor daily preparation activities and verify compliance with the “clients” specification.
It was observed that as per facts of the case the party have taken input service credit of Rs. 71,509.39 on termi-seal service and antitermite treatment at the plant and warehouse. In applying rule of plain meaning any hardship and inconvenience cannot be the basis to alter the meaning to the language employed by the legislation. This is especially so in fiscal statutes and penal statutes.
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In absence of any evidence we are not in position to agree with the claim made by the appellant to effect that these activities were in relation to renovation, modernization or repair of ongoing factory. In respect of remaining services i.e. Manpower Supply Services, and Anti termite/ Pesticide Treatment Services, the credit has been sought to be denied for the reason that these services were used by the appellant in relation to the construction activities of setting up of the manufacturing unit. In absence of any evidence to the contrary being made available we are not in position to hold a contrary view. Interestingly from the ER-1 returns filed by the appellant we tabulate the production and clearance month wise as per the returns filed:
A two member bench of P.K. Choudhary, Member (Judicial) and Sanjiv Srivastava, Member (Technical) viewed that the appellant had even prior to issue of the show cause notice debited the entire amount of inadmissible credit which has been admitted by the adjudicating authority.
The bench viewed that it was a fit case where the proceedings should have been closed following the dictum of sub-section (2) of Section 11A of Central Excise Act, 1944 and upheld the penalty imposed on the appellant under Rule 15 (1) of the CENVAT Credit Rules, 2004.
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