2015 (7) TMI 510 - HC - Service Tax

Tribunal decision upheld: Cenvat credit on rent-a-cab services admissible for employee transport.

The Commissioner of Central Excise Versus M/s. Hyderabad Industries Ltd., The Customs, Excise and Service Tax Appellate Tribunal

The High Court upheld the Tribunal's decision, ruling that the Cenvat credit availed by the assessee on rent-a-cab services for transporting employees is ... Cenvat credit - input services - service tax paid on the services of tour operators/travels for transporting the staff working at their factory (pickup and drop) - Held that:- this Court dealt with the issue in a batch of appeals [2015 (3) TMI 736 - MADRAS HIGH COURT] held in favour of the assessee by following the decision of the Bombay High Court in the case of CCE - Vs - Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT], wherein all the contentions raised by the Revenue have been considered in extenso including the definition of 'input service' as defined in the case of Maruti Suzuki Ltd. - Vs - CCE [2009 (8) TMI 14 - SUPREME COURT]. The Bombay High Court, in Ultratech's case (supra) came to the conclusion that the decision of the Larger Bench of CESTAT in the case of CCE - Vs - GTC Industries Ltd. [2008 (9) TMI 56 - CESTAT MUMBAI] is correct law, however, with a rider that where the cost is borne by the worker, the manufacturer cannot take credit of that part of the service tax which is borne by the consumer. The cenvat credit availed by the assessee on rent-a-cab services is admissible and, therefore, no interference is called for with the order passed by the Tribunal. - Decided against the revenue. Issues Involved:1. Whether the first respondent can avail Cenvat credit of service tax paid on services of tour operators/travels for transporting staff to and from the factory as 'input service'.2. Whether the second respondent correctly applied the ratio of the decision in CCE, Chennai vs. Thirumalai Chemicals Ltd.Issue-wise Detailed Analysis:Issue 1: Availment of Cenvat Credit on Transport ServicesThe core issue is whether the assessee can utilize the Cenvat credit facilities for rent-a-cab services used for transporting employees to and from the place of work as an input service. The first respondent/assessee engaged tour operators for staff transportation and availed service tax credit of Rs. 53,407/- for the period June 2006 to March 2007. The Department contended that these services were not used in or in relation to the manufacture of excisable goods, issuing a show cause notice and demanding payment of Rs. 53,407/- along with interest and a penalty of Rs. 2,000/-. The Commissioner (Appeals) allowed the assessee's appeal, which the Department then contested before the Tribunal. The Tribunal dismissed the Department's appeal, referencing similar decisions in cases like CCE, Nasik vs. Cable Corporation of India Ltd. and CCE, Jaipur-II vs. Cement Works, stating that Cenvat credit is admissible on 'rent-a-cab services' as they relate to business. The Revenue then appealed to the High Court.Issue 2: Application of the Ratio in Thirumalai Chemicals Ltd.The second issue concerns the application of the ratio in the case of CCE, Chennai vs. Thirumalai Chemicals Ltd. The Tribunal had followed this decision, which was pending appeal before the Madras High Court. The High Court examined the definition of 'input service' and the inclusive nature of services covered under it, referencing the Bombay High Court's decision in CCE vs. Ultratech Cement Ltd., which held that services integrally connected with the business of manufacturing final products qualify as input services. The High Court also considered the Supreme Court's interpretation in Maruti Suzuki Ltd. vs. CCE, emphasizing that input services include those used in relation to the business of manufacturing final products.Judgment Analysis:The High Court found that the definition of 'input service' is broad, covering services used directly or indirectly in or in relation to the manufacture of final products, as well as those used in relation to the business of manufacturing final products. The Court noted that the expression 'activities in relation to business' includes services integrally connected with the business. The Court referenced the statutory requirement under the Factories Act for providing canteen facilities, which justified the inclusion of outdoor catering services as input services. The Court concurred with the Bombay High Court's decision in Ultratech Cement Ltd., affirming that credit of service tax on such services is allowable.The High Court also addressed the argument that the definition of input service is restricted to named services, rejecting it as the definition is intended to cover a wide range of services used in business. The Court concluded that the Tribunal's decision to allow Cenvat credit on rent-a-cab services was correct, as these services are integrally connected with the business of manufacturing.Conclusion:The High Court dismissed the Revenue's appeal, affirming the Tribunal's order and holding that the Cenvat credit availed by the assessee on rent-a-cab services is admissible. The Court directed the Excise Authorities to verify the reversed Cenvat credit. The appeal was dismissed with no order as to costs.