Admissibility of Cenvat Credit on rent-a-cab services assessed; limitation remand ordered and partial relief granted

Admissibility of Cenvat credit on rent-a-cab services was assessed against statutory exclusions and administrative circulars, with reliance on the Apex Court's Solar Industries precedent to treat employee too-and-fro transportation as non-input service; consequence: cenvat credit was not available on the facts and wrongful availment attracted penalty. Lower authority findings that the assessee suppressed facts in ST-3 returns and that duty would have remained undetected but for audit support recovery; consequence: extended period and regular limitation issues were engaged. Matter remitted to Commissioner (Appeals) for fresh examination of limitation both factually and legally.

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Issues: (i) Whether rent-a-cab service availed by the appellant during 01.04.2016 to 30.06.2017 is an admissible "input service" under Rule 2(1) of the Cenvat Credit Rules, 2004 after the amendment excluding renting of motor vehicles; (ii) Whether the show cause notice dated 26.03.2019 for the period 01.04.2016 to 30.06.2017 is barred by limitation or requires enquiry on facts regarding suppression of information.

Issue (i): Whether rent-a-cab service is admissible as input service post-amendment excluding services by way of renting of a motor vehicle which is not capital goods.

Analysis: The exclusion of services by way of renting of a motor vehicle from the definition of "input service" as introduced in Rule 2(1)(B) of the Cenvat Credit Rules, 2004 is applicable to the period in question. Supreme Court authority and tribunal precedent dealing with transportation of employees and too-and-fro conveyance have been applied to conclude that provision of transportation to employees is not an "input service" for credit purposes. The factual character of the service as employee conveyance does not convert it into an admissible input service where the statutory exclusion applies.

Conclusion: The claim for Cenvat credit in respect of rent-a-cab service during the stated period is not admissible and is against the assessee's claim.

Issue (ii): Whether the demand for denied credit and related penalties/interest is time-barred or requires further examination on limitation and factual suppression.

Analysis: Section 73 of the Finance Act, 1994 prescribes the period for issuance of notice and Rule 7(1) of the Service Tax Rules, 1994 prescribes return-filing periodicity relevant to computing limitation. The record shows prior adjudications and earlier notices on related issues; however, factual questions remain regarding disclosure in returns and whether facts were suppressed so as to invoke extended limitation. The appellate court found that limitation and factual aspects warrant re-examination by the Commissioner (Appeals).

Conclusion: Limitation and the question of suppression are remitted for fresh examination by the Commissioner (Appeals).

Final Conclusion: The appeal is decided partly on merits (denial of credit under the exclusion in Rule 2(1)(B)) and partly by remand (limitation and suppression to be re-examined), leaving the merits-based bar on rent-a-cab credit intact while directing further factual and legal scrutiny on limitation issues.

Ratio Decidendi: Where statutory amendment expressly excludes renting of motor vehicles from the definition of "input service", transportation of employees by rent-a-cab is not an admissible Cenvat credit; questions of limitation and suppression of facts must be remitted for factual and legal determination where material facts concerning disclosure in returns are disputed.

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