2022 (10) TMI 286 - AT - Service Tax

Hotel Accommodation Service Qualifies as Allowable Input Service

M/s Bharat Heavy Electricals Ltd Versus Commissioner, Central Excise & CGST-Dehradun

The Tribunal held that hotel accommodation service qualifies as an allowable input service under Rule 2(l) of CCR for the output service of 'Erection, ... CENVAT Credit - input services - Hotel Accommodation Service received by the appellant for rendering the output service of Erection, Commissioning and Installation - HELD THAT:- The appellant have submitted various documents in support of their claim. It is further observed that one to one co-relation is not possible so as to ascertain the correct amount of inadmissible credit. Further, the learned Commissioner (Appeals) while rejecting the appeal have observed that there is no direct or apparent relationship between accommodation service and manufacturing of bus duct. It is further observed that appellant have failed to submit documents/records to the satisfaction of the Audit officers. For rendering the taxable output service of ‘Erection, Commissioning and Installation’ appellant has to send their employees to the site for rendering the service. For rendering such service at the site, the staff of the appellant need to be necessary accommodated at hotels situated nearby. Thus, without such accommodation or any alternate accommodation provided to the staff, the taxable output service cannot be rendered - the Hotel accommodation service received by the appellant is an eligible input service under Rule 2(l) of CCR. Appeal allowed - decided in favor of appellant. Issues involved:Whether 'Hotel Accommodation Service' qualifies as an allowable input service under Rule 2(l) of CCR for the output service of 'Erection, Commissioning and Installation.'Detailed Analysis:1. Background and Registration: The appellant, a manufacturer of busducts, was registered with the Central Excise department and under the Service Tax Rules for providing the output service of 'Erection, Commissioning and Installation' of busducts at outstation sites.2. Cenvat Credit: The appellant availed cenvat credit of duty paid on inputs, capital goods, and service tax paid on input services for providing taxable output service. This included service tax paid on 'hotel accommodation' used by employees on outstation duties.3. Dispute and Proceedings: Revenue auditors challenged the eligibility of cenvat credit for service tax paid on accommodation services. A Show Cause Notice (SCN) was issued seeking recovery of cenvat credit, interest, and penalties. The Assistant Commissioner confirmed the demand, which was upheld by the Commissioner (Appeals), leading to the appeal before CESTAT.4. Appellant's Argument: The appellant contended that hotel accommodation service used for providing the taxable output service is covered under the definition of 'input service' in Rule 2(l) of CCR, making the cenvat credit admissible.5. Interpretation of 'Input Service': The appellant's activities as a manufacturer and service provider necessitated employees to stay at outstation sites, making hotel accommodation a crucial input service for providing the output service. The exclusion and inclusive parts of the definition of 'input service' were analyzed to support the appellant's claim.6. Precedent and Legal Position: Reference was made to a previous case where cenvat credit on accommodation services was allowed, emphasizing the necessity of such services for providing output services.7. Judgment: The Tribunal held that hotel accommodation service is an eligible input service under Rule 2(l) of CCR as it is essential for rendering the taxable output service of 'Erection, Commissioning and Installation.' The impugned order was set aside, and the appellant was granted consequential benefits.In conclusion, the judgment clarified the admissibility of cenvat credit for hotel accommodation services used in providing specific output services, emphasizing the relevance of input services in the manufacturing and service provision processes.