CESTAT Chennai grants partial refund of Rs. 98,578 for input service credit on housekeeping and courier services

CESTAT Chennai allowed partial refund claim where appellant sought reversal of CENVAT credit on housekeeping, courier, hospitality and car hiring services. Tribunal held that input service credit cannot be claimed on output that is neither service nor excisable goods, following precedent in Woodward Governor case. However, considering low tax amount and appellant's prima facie eligibility, refund of Rs. 98,578 with interest was granted for certain input services used before April 2011 restrictions. Refund rejection of Rs. 39,71,696 for trading activities was upheld. Appeal partially allowed.

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Issues:
Claim for refund of CENVAT credit on trading activity and other input services, retrospective application of amendment to CENVAT Credit Rules, denial of input-service tax credit on trading activity, eligibility for refund of input services used for trading activities, applicability of statutory interest on credit utilized for trading activity.

Analysis:
The appellant, M/s. Alstom T&D India Ltd., filed a refund claim for CENVAT credit on trading activity and other input services along with interest paid under protest. The refund claim was rejected by the refund sanctioning authority, stating that the input services were not used directly or indirectly in manufacturing activity and did not fall under the exhaustive list of inclusive input services as per Rule 2(l) of CENVAT Credit Rules, 2004. The appellant appealed before the Commissioner (Appeals), who upheld the rejection. The Tribunal considered whether the appellant could claim input-service tax credit on an output that was neither a service nor excisable goods. The Tribunal referred to the judgment in the case of M/s Woodward Governor India Limited Vs Commissioner of Central Excise-Delhi-IV, which highlighted that trading activity was not covered under the CENVAT Credit Rules. The Tribunal also cited the Supreme Court's decision in Lally Automobiles Ltd. Vs Commissioner, affirming that CENVAT credit was not admissible on input services related to trading activity.

The Tribunal emphasized that trading activity could not be considered a taxable service and was not covered under the CENVAT Credit Rules. The Tribunal noted that a deemed fiction was created by including trading as an exempted service in the Rules from 01.04.2011, making it clear that trading activity could be considered exempted for CENVAT Credit Rules' operation. Prior to this clarification, trading was not covered under the credit scheme. The Tribunal held that the appellants should not have availed credit for input services used for both taxable output services and trading activity. The Tribunal upheld the denial of CENVAT credit on input services used in trading activities, following the law established in the Lally Automobiles case.

Regarding other input services like House Keeping Services, Courier Services, Hospitality services, and Car hiring services, the Tribunal noted that the period in question was before the changes brought by Notification No. 3/2011 dated 1.3.2011. The definition of "input services" at that time was broad, covering almost all services used for final product clearance. The Tribunal found no evidence that these services were not used for output services provision. Therefore, the Tribunal granted the refund for these services, considering the low tax amount involved and the appellant's eligibility.

In conclusion, the Tribunal partly allowed the appeal, granting a refund for certain input services used for trading activities but upholding the denial of refund for trading activity-related input services. The Tribunal also addressed the applicability of statutory interest on credit utilized for trading activity, emphasizing the importance of following established legal precedents.

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