Page 182 - GSTL_23rd July 2020_Vol 38_Part 4

548 GST LAW TIMES [ Vol. 38
(i) Residential quarters of employees of Ordnance Factory
Bhandara & allied organisations, market area, places for
worship of God, gardens, parks, playgrounds, swimming
pool, footpaths, street lightings, factory school for children
of employees, hall for recreational activities :-
Services like maintenance, upkeep, repair, providing security,
garbage collection, sewage treatment, civil construction,
sweeping & cleaning etc. are procured in relation to the
aforementioned establishments. The specific transactions in
respect of which ruling on entitlement of input tax credit is
required is specified in the enclosed “Annexure A”. We wish
to submit that all such services are used by the employees of
the factory. The Ordnance Factory Board decided to develop
such residential facilities within the factory estate since the
factory is located at a remote area and employees from differ-
ent parts of the country are recruited to work over here in
Ordnance Factory Bhandara. The residential colony is an ‘in-
dustrial township’ and the appellant is responsible to provide
all types of municipal services in the colony. If the employees
are not provided a proper residential colony with all the
aforementioned facilities and establishments, there would be
no availability of proper staff and labor required for continu-
ous manufacturing activities. Thus, such services procured in
relation to such establishments are necessary for furtherance
of business of our organisation since these services help in
maintaining the basic living standard of the employees who
in turn are responsible for running the day-to-day business of
the factory. Cost of such services forms part of the cost of the
final products and thus forms part of the value of taxable
supply. Reliance is placed on the following judicial pro-
nouncements of various High Courts & Tribunals wherein it
was adjudged that Cenvat credit of Service Tax was allowa-
ble on expenditure related to services procured in relation to
residential colony for the employees : In the case of CCE v.
ITC Ltd. in the year 2012 [2013 (32) S.T.R. 288 (A.P.)], the Hon.
Andhra Pradesh High Court held that Cenvat credit of ser-
vice tax paid on the taxable services used in the residential
complex shall be available to the manufacturer. The relevant
paragraph of the said judgment is extracted hereinbelow.
“The Commissioner’s Order-in-Appeal dated 27-5-2008 re-
flects that he accepted that the efficiency of the employees of
an organization would be dependent on various factors, one
such being the provision of a housing colony. He further con-
ceded that these facilities would contribute to the enhance-
ment of the productivity of the organization. Having stated so,
the appellate authority surprisingly took the view that
maintenance of the residential colony by the respondent-
Company was only an obligatory activity owing to situational
exigencies and was not connected either directly or indirectly
to the manufacture of its final products. This inherent contra-
diction in the Order-in-Appeal was noted by the CESTAT,
which opined that if accommodation was not provided by the
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