2013 (1) TMI 347 - HC - Service Tax

Manufacturer's Cenvat credit for staff transportation services upheld as eligible input services

The Tribunal allowed the manufacturer to avail Cenvat credit on Rent-a-Cab service. The High Court upheld this decision, emphasizing that transportation ... Cenvat Credit of service tax on catering, pick up service and mobile telephone services - in relation to manufacturing activity - held that:- The identical questions of law came up for consideration before this Court in the case of CCE v. Stanzen Toyotetsu India (P.) Ltd. [2011 (4) TMI 201 - KARNATAKA HIGH COURT]. This Court held that the transportation/Rent-a-Cab service is provided by the assessee to their employees in order to reach their factory premises in time which has a direct bearing on manufacturing activity. In fact, the employee is also entitled to conveyance allowance which would form part of his condition service. Therefore, by no stretch of imagination it can be construed as welfare measure by denying the availment of Cenvat credit to the assessee for providing transportation facilities as a basic necessity which has a direct bearing on the manufacturing activity. While so holding the Court was of the view that if the credit is availed by manufacturer then the question is what are the ingredients that are to be satisfied for availing such a credit. That the said service should have been utilized by the manufacturer directly or indirectly in or in relation to the manufacture of final products or used in relation to activities relating to business. If any of the test is satisfied then the service falls under input service and the manufacturer is eligible to avail Cenvat credit and the Service tax paid on such credit. In favor of assessee. Issues:1. Availment of Cenvat credit on ineligible services.2. Eligibility for Cenvat credit on transportation services for staff.3. Interpretation of input service in relation to manufacturing activity.Analysis:1. The case involved the manufacturer and clearance of excisable goods who availed credit of service tax on catering, pick up service, and mobile telephone services. The assessing officer issued a show cause notice demanding recovery of an amount for irregular Cenvat credit availed on ineligible services. The Commissioner modified the order, allowing the appeal partially. The Tribunal, relying on a previous judgment, held that the assessee was entitled to credit on Rent-a-Cab service. The question was whether transportation services for staff were considered input service for manufacturing activity.2. The High Court referred to a previous case where it was held that transportation/Rent-a-Cab service provided to employees for reaching the factory premises in time directly related to manufacturing activity. Denying Cenvat credit for providing transportation facilities, seen as a basic necessity impacting manufacturing, was not justified. The Court emphasized that for availing such credit, the service should be utilized directly or indirectly in relation to manufacturing final products or business activities. The judgment in the previous case was applied to dismiss the appeal in this case, as the issue had already been addressed and answered.3. In conclusion, the High Court dismissed the appeal based on the precedent set in a previous judgment, which clarified the eligibility criteria for availing Cenvat credit on transportation services related to manufacturing activities. The decision highlighted the importance of considering the direct or indirect impact of services on manufacturing processes when determining eligibility for Cenvat credit, emphasizing the need for services to be utilized in or in relation to manufacturing activities for credit availment.