2026 (2) TMI 1268 - AT - Central Excise

Cenvat credit admissibility under Rule 2(l) upheld in principle but requires documentary verification; rent a cab excluded.

Cenvat credit on listed input services is admissible in principle under Rule 2(l) of the Cenvat Credit Rules, 2004 where services satisfy a direct or ... Admissibility of CENVAT credit on input services - Nexus with manufacture/business - Exclusionary clauses in the definition of input service (post-01.04.2011) - Remand for limited factual verification of invoices and nexus - Inadmissibility of rent-a-cab services - Consequential interest and penalty liability pending final verification - HELD THAT:- We hold that credit on pest control and housekeeping services is admissible in principle under the inclusive limb of the definition of “input service”. However, we also find that no invoices or supporting documentary material have been placed before this Bench to conclusively establish the nature of the services, their nexus with the manufacturing activity, and their non-coverage under the exclusion clause. In the absence of such evidence, we are unable to render a final determination on admissibility. Accordingly, remand is the only option available, and the issue is remanded to the adjudicating authority for the limited purpose of factual verification of invoices, nexus and eligibility, and to allow the credit if found in order. Gardening and cleaning services - In the appellant’s own case, M/s. 8CETEX Petrochemicals Limited v. Commissioner of CGST & Central Excise, Chennai, [2025 (1) TMI 1694 - CESTAT CHENNAI], this Tribunal has taken a similar view in respect of housekeeping and cleaning services relating to factory upkeep, subject to verification of documentary evidence. Respectfully following the aforesaid decisions, we hold that credit on gardening and cleaning services is admissible in principle under the inclusive limb of Rule 2(l), subject to verification that the services were actually used for factory upkeep/statutory compliance and are not hit by the exclusion clause. However, since no invoices or supporting documentary material have been placed before this Bench, the matter is remanded to the adjudicating authority for limited verification of nexus, eligibility and quantification. Construction services (commercial and industrial) - In the appellant’s own case [2025 (1) TMI 1694 - CESTAT CHENNAI], this Tribunal allowed credit after examining documentary evidence and concluding that the services were in the nature of repair/maintenance and not hit by the exclusion clause. Respectfully following the said decision, we hold that credit is admissible in principle if the services pertain to repair/renovation and are not barred construction. Since invoices and work documents have not been produced before this Bench, the issue is remanded for limited verification though the issue of eligibility of credit is decided in favour of the appellant. Cab services - We find that rent-a-cab services are specifically excluded under Rule 2(l)(B) post-01.04.2011 when used primarily for employee transportation or personal consumption. Accordingly, no credit is admissible on this component. As regards interest and penalty, we clarify that recovery is governed by Section 11A of the Central Excise Act, 1944, and interest is payable under Section 11AA/11AB as applicable, particularly where inadmissible credit has been taken and utilized. Penalty consequences arise under Section 11AC, subject to the statutory conditions prescribed therein. If reversal along with applicable interest is established prior to issuance of show cause notice under Section 11A(2B), penalty may not sustain. Since documentary evidence is not available on record, this limited aspect is remanded to the adjudicating authority for verification. Plant civil work services - We observe that admissibility of such credit depends entirely upon the factual nature of the activity undertaken. However, we find that no invoices, work contracts or supporting documents have been placed before this Bench to conclusively establish the scope and nature of the civil work services. In the absence of documentary evidence, we are unable to record a final finding. Accordingly, remand is the only option, and the matter is remanded to the adjudicating authority for limited verification of the nature of work, nexus with manufacturing activity, and applicability of the exclusion clause. Labour and manpower services - We find that manpower deployed for housekeeping, cleaning and maintenance of factory premises has nexus with manufacturing operations. Tribunal decisions including Ultratech Cement Ltd. v. CCE, Hyderabad [2016 (12) TMI 381 - CESTAT HYDERABAD], support eligibility of such services even post-01.04.2011, provided they are not exclusively used for excluded activities. Accordingly, credit is admissible in principle, subject to verification of invoices and nexus. Membership services - We note that the Chennai Bench in Trimble Information Technologies India (P) Ltd. v. Commissioner of GST [2021 (8) TMI 395 - CESTAT CHENNAI], held that corporate membership subscriptions incurred for business promotion and brand expansion are eligible input services. Following the ratio of the said decision, we hold that membership of CII may be admissible in principle as an eligible business-related input service. However, no documentary evidence has been placed before this Bench to conclusively establish the precise nature and purpose of the membership subscription. In the absence of such evidence, remand becomes unavoidable. Accordingly, the matter is remanded to the adjudicating authority for limited verification, and credit shall be allowed only if purpose of membership is not for recreation, but, for the business. Thus, we hold that the disputed input services, namely pest control/housekeeping, gardening and cleaning, construction-related services, plant civil work, manpower services for factory maintenance, and membership services, are admissible as input services in principle, being capable of falling within the inclusive part of Rule 2(l) of the CENVAT Credit Rules, 2004, even after the amendment w.e.f. 01.04.2011, subject to fulfillment of the statutory conditions of nexus with manufacture/business and non-applicability of the exclusion clauses. The disputed input services, namely pest control/housekeeping, gardening and cleaning, construction-related services, plant civil work, manpower services for factory maintenance, and membership services, are admissible as input services in principle, being capable of falling within the inclusive part of Rule 2(l) of the CENVAT Credit Rules, 2004, even after the amendment w.e.f. 01.04.2011, subject to fulfillment of the statutory conditions of nexus with manufacture/business and non-applicability of the exclusion clauses. No invoices or supporting documents have been produced either before the lower appellate authority or before this Bench to conclusively establish eligibility. It is settled law that CENVAT credit cannot be finally allowed without verification of documentary evidence. Therefore, remand is unavoidable for the limited purpose of verifying receipt, nexus, and exclusion applicability of the disputed services. Accordingly, the matter relating to credit of ₹27,28,645/- is remanded to the adjudicating authority for limited verification of invoices and eligibility strictly in terms of Rule 2(l), as amended. Credit on rent-a-cab services is held inadmissible being specifically excluded under Rule 2(l)(B). The plea of reversal prior to SCN, along with interest, shall be verified by the adjudicating authority, and penalty consequences shall follow accordingly. The appellant’s prayer for waiver of interest and penalty cannot be considered at this stage, as these are purely consequential and will depend upon the final determination of inadmissible credit, if any, after verification. Thus, the appeals are partly allowed by way of remand in the above terms and disposed of accordingly. Issues: (i) Whether CENVAT credit of Rs.27,28,645/- on disputed input services is admissible under Rule 2(l) of the Cenvat Credit Rules, 2004 as amended w.e.f. 01.04.2011; (ii) Whether the disputed services satisfy the 'nexus with manufacture' test or are barred by post-2011 exclusionary clauses; (iii) Whether credit can be allowed in absence of invoices and supporting documentary evidence or requires remand for verification; (iv) Whether waiver/quashing of interest and penalties can be considered at this stage.Issue (i): Whether CENVAT credit of Rs.27,28,645/- on disputed input services is admissible under Rule 2(l) of the Cenvat Credit Rules, 2004 as amended w.e.f. 01.04.2011.Analysis: The Tribunal examined categories of services claimed (pest control/housekeeping, gardening and cleaning, construction-related services, plant civil work, manpower services for factory maintenance, and membership services) against the inclusive limb and exclusionary clauses of Rule 2(l) as amended. Reliance was placed on Supreme Court and Tribunal precedents establishing a broad nexus test, and on prior Tribunal decisions including the appellant's earlier order. For multiple service categories the Bench found admissibility in principle but noted absence of invoices and supporting documents to finally quantify or allow credit; rent-a-cab services were specifically excluded under Rule 2(l)(B) and held inadmissible.Conclusion: Credit on the disputed services is admissible in principle under Rule 2(l) of the Cenvat Credit Rules, 2004 subject to verification; credit on rent-a-cab services is inadmissible.Issue (ii): Whether the disputed services satisfy the 'nexus with manufacture' test or are barred by post-2011 exclusionary clauses.Analysis: The Tribunal applied the nexus test and the explicit exclusionary provisions in Rule 2(l)(A) and Rule 2(l)(B). It held that pest control, housekeeping, cleaning, gardening (where for statutory compliance/green belt), repair/maintenance construction (if repair/renovation and not barred construction), plant civil work (depending on factual nature), manpower for factory maintenance, and corporate membership for business purposes may satisfy the nexus test and not fall within exclusions; rent-a-cab and clear construction services aimed at building/foundations fall within exclusion.Conclusion: The services identified are capable of meeting the nexus test and not being hit by exclusions in principle; specific applicability of exclusionary clauses depends on factual verification (except rent-a-cab which is excluded).Issue (iii): Whether credit can be allowed in absence of invoices and supporting documentary evidence or requires remand for verification.Analysis: The Tribunal noted absence of invoices, work contracts and other supporting documents before both appellate and tribunal records. It held that CENVAT credit cannot be finally allowed without documentary verification of receipt, nexus and non-applicability of exclusions; while Commissioner (Appeals) remand powers are curtailed, the Tribunal may remit for limited factual verification where record is incomplete.Conclusion: Credit cannot be finally allowed without documentary verification; the matter is remanded to the adjudicating authority for limited verification of invoices, nexus and eligibility strictly under Rule 2(l), 2004.Issue (iv): Whether waiver/quashing of interest and penalties can be considered at this stage.Analysis: Interest and penalty consequences depend on final factual finding on inadmissible credit and statutory provisions governing recovery and penalty (Sections 11A, 11AA/11AB and 11AC of the Central Excise Act, 1944). In absence of final adjudication the Tribunal declined to adjudicate waiver requests and remitted relevant aspects for verification.Conclusion: Waiver or quashing of interest and penalties is not considered at this stage and stands remitted for decision by the adjudicating authority after verification.Final Conclusion: The disputed input services (except rent-a-cab) are held admissible in principle under Rule 2(l) of the Cenvat Credit Rules, 2004 subject to documentary verification of receipt, nexus with manufacture/business and non-applicability of exclusion clauses; the matter of Rs.27,28,645/- is remanded to the adjudicating authority for limited verification and consequential determination of credit, interest and penalty within three months.Ratio Decidendi: Services that have a direct or indirect nexus with manufacture or business and are not specifically excluded by the post-01.04.2011 clauses of Rule 2(l) of the Cenvat Credit Rules, 2004 are admissible in principle as input services, but final allowance requires documentary verification of receipt, nexus and non-applicability of exclusionary provisions.