1. The revenue as well as the assessee have preferred the appeal against the order passed by the Tribunal.

2. The assessee availed input service tax credit among other things for the function arranged for Kannada Rajyostava Day and colour photography expenses in respect of the inaugural function of Kengeri Police Station. The expenses incurred in respect of Catering service and Mediclaim Insurance for the said function has been accepted. But they have rejected the input service tax credit on Shamiyana services and photography services.

3. The assessee contends that any input service used directly or in relation to manufacturing activity is eligible for input service tax credit. The term ‘activities relating to business’ has been amplified with the word “such as” auditing, accounting, financing, recruitment, and quality control, coaching and training, computer networking, credit rating share registry and security etc., It is not exhaustive and therefore expenses such as providing Shamiyana services, furniture at the time of celebration of Kannada Rajyostava, spending money for colour photography and expenses incurred for inaugural function of kengeri police Station would come within meaning of the activities of business and therefore they were eligible to avail input tax credit for these two items and there was no intention to evade duty as it has already been held in terms of the several Judgments of the Apex Court that such expenses do come within the meaning of business expenses. Therefore they sent a reply to the show cause notice justifying the action. However, the assessing authority did not accept the said contention. He issued the demand for a sum of Rs.54,216/- towards the bill of Shimiyana and photography services and claimed an equal amount of penalty and interest. Aggrieved by the said order the assessee preferred an appeal which came to be dismissed. The Tribunal upheld the findings of the lower authorities by observing that on the said duty paid, the assessee is not entitled to CENVAT credit as it would not fall within the word activities relating to business. However, it held that there is no willful suppression or intention to evade duty and therefore is no willful suppression or intention to evade duty and therefore the claim made is barred by time and set aside the demand. Aggrieved by that portion of the order which is against their interest both of them have preferred these appeals.

4. At the time of admitting the appeal filed by the revenue in CEA No.100/2009 the following substantial questions of law were framed for consideration on 7-1-2009.

“1) Whether the Tribunal is right in considering the bonafide of the assessee as a valid ground to set aside the allegation of intention to evade duty and willful suppression given in the facts and circumstances of the case to attract proviso to Section 11A of the Central Excise Act, 1944?

2) Whether the Tribunal is right in concluding that the allegation of “intention to evade duty and willful suppression of facts” had not been brought out in the show cause notice when the show cause notice alleged the said suppression of facts in the light of Hon’ble Apex court judgment in the case of Continental Foundation Joint Venture Vs. Commissioner of Central Excise, Chandigarh-I ?”

CEA-47/2009 filed by the assessee was admitted on 30-6-2009.

5. The learned counsel appearing for the assessee submitted that in the State of Karnataka, November 1st is celebrated as a Karnataka Rajyotava day. That is the day on which the present State of Karnataka was formed integrating the five regions where Kannada speaking people are in a majority. It is treated as a Stated Festival and a holiday is declared. Most of the employees working in the assessee’s factory are Kannada speaking people. It is in this context as a welfare measure in order to protect and preserve the culture of the State of Karnataka and also to maintain industrial peace, they have been taking effective steps to