Tribunal grants Cenvat credit for worker transport costs, overturning prior decision.

The Tribunal ruled in favor of the appellant, a manufacturer, allowing Cenvat credit on transportation expenses for workers supplied by a Manpower Service Provider. The Tribunal determined that the transport charges were directly related to the conveyance of workers and were considered incidental to the manpower service provided. As a result, the appellant was granted the Cenvat credit on transportation expenses, overturning the earlier decision that disallowed the service tax on transport expenses.

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Issues:
1. Denial of Cenvat credit on transportation expenses of employees/workers engaged through a manpower service provider.

Analysis:
The appellant, a manufacturer of various parts, entered into an agreement with a Manpower Service Provider for the supply of labor required for manufacturing work. The agreement specified that the service provider would supply different types of labor as needed, and the labor charges would be paid as per mutual consent and in accordance with government regulations. Bills for manpower supply and transportation expenses were raised separately, with the service tax charged accordingly. The contractor was entitled to a commission on both labor disbursement and transportation expenses. A show-cause notice was issued regarding the denial of input service credit related to Rent-A-Cab Service for a specific period.

The appeal was rejected by the Learned Commissioner (Appeals), leading the appellant to approach the Tribunal. The appellant argued that the transport charges were incidental to the manpower service provided by the service provider. They emphasized that separate bills were raised for wages and transport charges for the workers, with the transport expenses being a part of the overall service. The appellant also cited guidance notes from CBEC regarding the classification of services where the main or major service should be considered for classification, not the minor or incidental services.

After considering the arguments, the Tribunal found that the transport charges for manpower service were directly related to the conveyance expenses of the workers provided to the manufacturer. These transport expenses were deemed incidental to the manpower service, making the appellant eligible for Cenvat credit on transportation of manpower. Consequently, the appeal was allowed, and the earlier order disallowing service tax on transport expenses for the supply of manpower was set aside. The appellant was granted consequential benefits as per the law.

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