2023 (1) TMI 736 - AT - Central Excise

Appellate Tribunal Clarifies Cenvat Credit Rules for Rent-a-Cab Service

The Appellate Tribunal CESTAT Ahmedabad held that the appellant was entitled to Cenvat credit for Rent-a-Cab service as the rented vehicle was considered ... CENVAT Credit - input services - Rent-a-Cab service - denial on the ground that the Rent-a-Cab service is excluded from the purview of definition of input service - Applicability of exclusion Clause given in Rule 2(l) of Cenvat credit Rules, 2004 - HELD THAT:- The exclusion is provided in respect of those Rent-a-Cab service where the vehicle taken on rent is not a capital goods. This very issue has been considered by this Tribunal in M/S. MARVEL VINYLS LTD. VERSUS C.C.E. INDORE [2016 (11) TMI 1126 - CESTAT NEW DELHI] where it was held that As such the interpretation of the lower authorities that motor vehicle are not capital goods for the services recipient cannot be appreciated in as much as motor vehicles are admittedly capital goods in terms of the Rule 2 (A) of Cenvat Credit Rules. Reliance also placed in the case of GUALA CLOSURES (INDIA) PVT. LTD. VERSUS C.C.E., AHMEDABAD-II [2018 (10) TMI 1411 - CESTAT AHMEDABAD] where it was held that The services of Rent a cab and Hotel Accommodation are services are used for overall business activities of the appellant. The only business carried out by the appellant is manufacturing of excisable goods and sale thereof. Therefore, these services are actually related to the manufacturing activities of the appellant. Thus, it can be seen that since the Motor Vehicle was held to be a capital goods, the eligibility of Cenvat credit on Rent-a-Cab service shall not be hit by the exclusion clause provided under Rules 2(l) of Cenvat Credit Rules, 2004 - In the present case also the vehicle taken on rent is defined as capital goods in terms of Rule 2(a) of the Cenvat Credit Rules, 2004, therefore, the exclusion clause is not applicable in the present case. Appeal allowed - decided in favor of appellant. Issues:1. Eligibility for Cenvat credit in respect of Rent-a-Cab service.Analysis:The Appellate Tribunal CESTAT Ahmedabad addressed the issue of whether the appellant is entitled to Cenvat credit for Rent-a-Cab service. Both lower authorities had denied the credit, stating that the service falls outside the definition of input service. The appellant argued that the exclusion is subject to the condition that the rented Motor Vehicle is not a capital goods. The Tribunal referred to previous judgments and analyzed the exclusion clause in Rule 2(l) of the Cenvat Credit Rules, 2004. It was noted that the exclusion applies only if the rented vehicle is not a capital goods. The Tribunal emphasized that the interpretation should focus on the service provider, not the recipient, and held that the appellant was eligible for the credit as the rented vehicle was considered capital goods. The impugned order was set aside, and the appeal was allowed.In a related judgment, the Tribunal discussed the eligibility of Cenvat credit on Rent-a-Cab service and Hotel Accommodation. Citing various precedents, the Tribunal concluded that these services were related to the manufacturing activities of the appellant, making them admissible for Cenvat credit. The Tribunal also addressed the issue of courier services, stating that credit is admissible only for services used for the removal of goods up to the place of removal. The demand for Cenvat credit on Rent-a-Cab service and Hotel Accommodation was set aside, while the matter regarding courier services was remanded for requantification. The Tribunal noted the absence of malafied intention and set aside the penalty imposed by the lower authority. The appeal was disposed of accordingly.In summary, the judgments clarified the interpretation of exclusion clauses in the Cenvat Credit Rules, emphasizing the importance of considering whether the rented vehicle is classified as capital goods. The decisions underscored the relevance of previous rulings and precedents in determining the eligibility of Cenvat credit for specific services, ultimately providing relief to the appellants in both cases.