2014 (10) TMI 308 - AT - Service Tax

Appellate Tribunal: Cenvat Credit Decisions

The Appellate Tribunal CESTAT NEW DELHI partially allowed the Revenue's appeal. Cenvat credit for transportation of employees was disallowed, as it was ... Cenvat credit on input services - welfare measures and input service nexus - transportation of employees and relation to manufacture - mediclaim policy as employee welfare expense - interpretation of Rule 21 of Cenvat Credit RulesTransportation of employees and relation to manufacture - Cenvat credit on input services - interpretation of Rule 21 of Cenvat Credit Rules - Allowability of Cenvat credit claimed on service tax paid for transportation of employees to workplace - HELD THAT: - The appellate record did not establish that the transportation facility was provided to take workers to the factory or otherwise demonstrated a nexus between the transportation service and manufacture. The first appellate authority failed to reach any conclusion on evidence showing that transport was provided to workers to enable them to perform manufacturing activity. Given the absence of a relation to manufacture and having regard to the spirit of Rule 21 defining input service, the transportation service cannot be treated as an input service eligible for Cenvat credit. The Revenue's appeal on this point is therefore sustainable and the allowance of credit was erroneous. [Paras 1]Credit on transportation of employees disallowed; Revenue's appeal allowed on this count.Mediclaim policy as employee welfare expense - Cenvat credit on input services - Allowability of Cenvat credit claimed on service tax paid for mediclaim policy provided to employees - HELD THAT: - The material did not indicate that the mediclaim policy was granted to any person other than the workers. The mediclaim therefore constitutes a welfare measure for employees and, absent any cogent finding that the mediclaim related to persons not working in the factory, there is no basis to disallow the claimed credit. The Revenue's challenge on this point was unsustainable and the assessee is entitled to the relief claimed. [Paras 2]Credit on mediclaim policy upheld; Revenue's appeal rejected on this count.Final Conclusion: Revenue's appeal allowed in part: Cenvat credit on employee transportation disallowed for lack of nexus to manufacture; Cenvat credit on mediclaim policy allowed as a welfare measure to employees. The Appellate Tribunal CESTAT NEW DELHI allowed Revenue's appeal partly. Cenvat credit for transportation of employees disallowed as welfare measure not provided to workers for factory transport. Cenvat credit for mediclaim policy granted to workers upheld as welfare measure. No cogent finding that mediclaim relates to non-factory employees.