CENVAT Credit Admissible on Services Used for Setting up and Administering First Aid in Factory: CESTAT [Read Order]

The Kolkata Bench of the Customs, Excise, andService Tax Appellate Tribunal (CESTAT) ruled that CENVAT credit can be availed on services used for setting up and administering mandatory first aid facilities in a factory.

Usha International Ltd., the appellant, had during 2011-12 availed CENVAT credit of Rs. 8,996 on services connected with establishing and administering first aid in its factory. The department denied the credit on the ground that such services were not covered under the definition of input service under the CENVAT Credit Rules, 2004.

The adjudicating authority disallowed the credit, and the Commissioner (Appeals) upheld the denial. Aggrieved by this order, the appellant approached the CESTAT.

The appellant’s counsel argued that under Section 45 of the Factories Act, 1948, every factory is required to provide and maintain first aid facilities. They argued that services used for setting up and administering first aid were part of statutory compliance and were directly connected with the manufacturing activity. Such services fell within the definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004, and the credit was rightfully taken.

The revenue counsel supported the findings of the lower authority and maintained that the services used for setting up first aid facilities were not directly connected with manufacture and hence did not qualify for CENVAT credit.

The single-member bench comprising K. Anpazhakan (Technical Member) agreed with the appellant’s arguments. The tribunal observed that setting up and maintaining first aid was a legal obligation under Section 45 of the Factories Act, 1948, and was inseparable from the manufacturing process.

The tribunal pointed out that Rule 2(l) of the CENVAT Credit Rules covers all services used directly or indirectly in or in relation to the manufacture of final products. The tribunal explained that since the first aid facility was mandatory for operating the factory, the services used for it qualified as input services. The impugned order was set aside.

The appellant’s appeal was allowed, and the credit was held admissible. As the demand itself was not sustainable, interest and penalties did not arise.

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