TaxTMI 
TaxTMI 
2011 (1) TMI 685
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....cavators and cranes of Chapter 84 of the Central Excise Tariff. They availed the CENVAT credit of duty paid on inputs, capital goods and Service Tax paid on input services. TCECL have their Corporate office at Bangalore registered with the Department as an 'Input Service Distributor' under Rule 4A of the Service Tax Rules, 1994, for distributing the credit of Service Tax paid and accounted for at their Corporate office to its manufacturing units, one of which is TCECL, Dharwad, the appellant. The impugned order disposed of two show-cause notices, one dated 5-11-2007 and another dated 2-9-2008. Both the show-cause notices had proposed to disallow and recover credit of Service Tax taken by TCECL on various taxable services such as 'air travel agents' service, 'management consultancy' service, 'goods transport agents' service, 'management consultancy' service, 'goods transport agents' service, maintenance & repair service, 'car hiring' ('rent-a-cab') service, 'telephone and mobile' service, 'courier' service 'recovery agent's service, 'rail travel agent's' service, 'warranty handling' service', 'authorised service station' service, 'AMC of photocopier machines', 'club association' ser....
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.... provided services on production of mandatory service coupons issued to them by the assessee. As per Circular No. 643/34/2002-CX, dated 1-7-2002 (para 7) the CBEC had clarified that these services were provided free by the dealer on behalf of the assessee and the cost towards this was reimbursed to him. This was one of the considerations for sale of the goods (motor vehicles, consumer items, etc.). In the case of the appellant, this element formed part of the assessable value of the machinery sold by it. Therefore, the assessee was entitled to avail credit of the Service Tax involved. 4.1 Another ground raised is that the services rendered by its dealers were used by the appellant for providing maintenance or repair services to its customers and the appellant was fully entitled to avail of the input credit of Service Tax on the invoices raised on it by the services centres. In case of this service, the words used in the definition of 'input service' in Rule 2(l)(i) are service "used by a service provider of taxable service for providing output service". Therefore, the denial of credit of Service Tax paid under this head was not legal. The denial of credit on Rail Travel Agents S....
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....hile passing the impugned order. 4.3 As regards Service Tax reimbursement pertaining to mandatory services, these services were provided by the dealer on behalf of the appellant; the credit of the related Service Tax should not have been disallowed. The recovery agents' service used by the appellant to recover payment from customers was part of its business activity. Therefore, Service Tax paid for this activity was admissible as an input service credit. The service tax paid for insuring its manufacturing plants, warehouse and sales offices and insurance paid for movement of materials used for manufacture and maintenance or repair as well as insurance paid for vehicles used for sales promotion was due, as the assessee provided output service of repair and maintenance. The medical insurance for the employees also formed part of the business activities of the assessee. 4.4 As regards professional fees and manpower supply, the assessee had produced necessary evidences in the form of relevant invoices and other materials. The appellants provided output service of maintenance and repair. Hence, C&F agency services availed for packing qualified as an input service for the output se....
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....es of the dealers utilized by the appellant were parts of the overall maintenance contract with the customers and satisfied the definition of 'input service'. 6.1 As regards the GTA service, it was submitted that the definition of 'input service' in clause (ii) of Rule 2(1) covered services "used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal." In the case of transport from the factory to the depot, place of removal was depot and the appellant was entitled to credit. The Commissioner had wrongly relied on the Gujarat Ambuja Cement case (supra), which had been vacated by the judgment of the Punjab & Haryana High Court in Ambuja Cements Ltd. v. Union of India [2009] 20 STT 182 (Punj. & Har.). The decision in the case of India Japan Lighting (P.) Ltd. v. CCE [2007] 11 STT 498 (Chennai - CESTAT) relied on by the Commissioner was no longer a good law in view of the Larger Bench's decision of the Tribunal in the case of ABB Ltd. v. CCE&ST [2009] 21 STT 77 (Bang. - CESTAT) and the judgment of the Punjab & Haryana High Court. The appellant utilized GTA services for transp....
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.... the decision of the Tribunal in the GTC Industries' case (supra) and the High Court's judgment in the Coco Cola India (P.) Ltd.'s case (supra). The Department had not accepted the judgment of the Hon'ble High Court in the Coca Cola India (P.) Ltd.'s case (supra) case and an appeal had been filed before the Apex Court vide SLP No. CC/3580/2010. 8. The learned JCDR has made the following submissions in respect of the various services involved : (a) Air Travel Agent's Service: The appellant had not submitted evidence to establish that the services of Air Travel Agents availed by the assessee was in relation to sales promotion or activities relating to business as defined under Rule 2(l) of the CCR. (b) JCDR made the same submissions as in the case of Sl. No. (1) in respect of Rail Travel Agent's service , Car hiring/rent-a-cab service, Authorised service station's service. (c) As regards the professional fees, he submitted that the appellant had failed to produce any evidence to establish that the service related to Chartered Accountant's service. (d) As regards the Management Consultancy services, it was argued that they....
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....ices involved did not conform to the input services given in definition 2(l) of CCR. (i) As regards the packing expenses incurred at the C&F agent's premises, it is submitted that these were services availed subsequent to the sale of the goods from the assessee's premises and, therefore, no credit could be availed. It was also not established that the spares packed at C&F Agent's premises were fully used either for further manufacture of excisable goods or for providing taxable service. (j) As regards the GTA service, the JCDR submitted that the service relatable to transport from factory to depot was admissible. Insofar as the transportation of goods from factory to customer's premises, credit could be allowed if it was established that the sale was on FOR destination basis and the place of delivery was the customer's premises where the ownership of the goods including risk remained with the seller and the cost of transportation was included in the assessable value of the goods sold, in terms of CBEC Circular, dated 23-8-2007. He seeks the matter to be remanded for factual verification. As regards the Service Tax paid on outward transportation of go....
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....on to this service is essentially similar to the Air Travel Agents service. The credit was disallowed for the assessee's alleged failure to establish its entitlement to the credit with evidence that the service was an input service availed for sales promotion. This dispute is also remanded. (iii) Car hiring/Rent-a-cab service : As regards the credit under this head also, the authorities are inclined to allow the credit provided the assessee establishes with evidence that the service involved conform to input service under Rule 2(l) of CCR. The dispute is remanded. (iv) Authorised Service Station's service : The appellants claimed before the adjudicating authority that the impugned service was availed for servicing the vehicles owned by the assessee and used for travel by its employees for sales promotion. From the records, we find that the appellants had not established the above claim. We remand this dispute for a fresh decision by the Commissioner. (v) Management Consultancy service : Under this category, the appellants had availed consultancy from agencies such as M/s. Watson Wyatt, India Life Capital Pvt. Ltd., etc. M/s. Watson Wyatt was ....
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....ion to, - (a) management of properties, whether immovable or not; (b) maintenance or repair of properties, whether immovable or not; or (c) maintenance or repair including reconditioning or restoration, or servicing of any goods, excluding a motor vehicle." During the period from 1-6-2007, the activity was service as per (ii)(c) of the above definition, i.e., service provided by a manufacturer or any person authorized by him in relation to maintenance or repair including reconditioning or restoration, or servicing of any goods, excluding motor vehicle. We find that the service rendered by the dealer during the warranty period and post-warranty period is as per the authorisation by the appellant. During the warranty period, the appellant is bound by a contract with the customers to provide 'free service'. In the Danke products' case (supra), the Tribunal upheld the findings of the Commissioner (Appeals) in the order impugned before it to the effect that the person who (Danke Electricals) undertook maintenance and repair service of transformers under warranty period had not rendered service to the buyers of transformers but to the manuf....
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....insurance. The appellants have claimed that insurance service relating to manufacturing plant, warehouse, sales office and for transportation were inputs for the assessee to provide its output service, namely, maintenance or repair service. The same argument is advanced in respect of insurance of cars used for sales promotion. Courier service was also an input for the assessee's output service. As regards the insurance services, the appellants relied on the following decisions:- (i) Millipore India Ltd. v. CCE 2009 (236) ELT 145/22 STT 536 (Bang. - CESTAT) (ii) CCE v. Beekay Engineering & Castings Ltd. [CE Appeal No. 2131 of 2007-SM, dated 11-6-2009] We find that the tax incurred under insurance service for insuring the employees of the assessee was held to be an eligible input service in the decision of the Tribunal in Stanzen Toyotetsu India (P.) Ltd. v. CCE [2009] 21 STT 321 (Bang. - CESTAT). In the Beekay Engineering & Castings Ltd. case, the Tribunal held that tax paid on premium of general insurance against losses due to fire, machinery breakdown, cash handling, group gratuity and group accident policy was eligible for credit. We ....
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....maintenance or repair services or for sale of goods to dealers. The Commissioner held that these activities were post removal and clearance of goods and not entitled to credit. Transportation of spares for maintenance, etc., by courier could come under activity relating to business. (xiii)One of the important services for which the assessee had availed major share of the total credit disallowed and demanded was under GTA for (i) transportation of goods from factory to depot; (ii) transportation of goods from warehouse to customer's site, for providing maintenance or repair services or for providing services during warranty period. During hearing, the learned JCDR fairly conceded that service tax paid under GTA for transportation of goods from factory to depot is admissible. Accordingly, we allow this part of the appeal. As regards the transportation of goods from factory to customer's place, we find that the Department has relied on a judgment of the Punjab & Haryana High Court wherein their Lordships held that tax paid for transportation of goods from the factory to the customer's premises was admissible when the three conditions stipulated in the CBEC Circular No. 97/6/2007-ST....
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....e not input services eligible to credit. The Commissioner has not allowed credit of service tax paid on activities undertaken after the manufacture and clearance of final products or not covered in the list of items specified in the inclusive definition of input services. 11. Ld. Jt.CDR has made an endeavour to support the impugned order relying on the following case law and the rule 2(l) of CCR. (a) Vikram Ispat v. CCE [2009] 22 STT 170 (Mum. - CESTAT) (b) Vikram Ispat's case (supra) (c) Maruti Suzuki Ltd.'s case (supra) (d) Chemplast Sanmar Ltd.'s case (supra) (e) Manikgarh Cement Works's case (supra) (f) Sundaram Brake Linings Ltd.'s case (supra) Relying on the definition of "input service" under Rule 2(l) of the Cenvat Credit Rules, the learned JCDR submitted that to qualify as an input service, such service should be used by a provider of a taxable service for providing output service or used by the manufacturer in the manufacture and clearance of final product up to the place of removal. However, as far as services specifically mentioned in the i....
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....hat the Coca-Cola India (P.) Ltd.'s case (supra) judgment stood overruled by the Maruthi Suzuki Ltd.'s case (supra) judgment. (b) Vikram Ispat's case (supra) In this case, the ld. Single Member of the Tribunal followed his own decision in the Vikram Ispat's case (supra). (c) Maruti Suzuki Ltd.'s case (supra) In this case, the Apex Court considered the definition of 'input' contained in Rule 2(k) of the Cenvat Credit Rules. The Apex Court held that the items appearing in the inclusive part of the definition also had to satisfy the definition contained in the specific and substantive part of the definition. (d) Chemplast Sanmar Ltd.'s case (supra) In this case, Single Member of the Tribunal found that the provision contained in section 37(2) of the Act under which the Cenvat Credit Rules were framed enabled the Government to frame rules for providing credit of service tax paid or payable on taxable services "used in, or in relation to manufacture of excisable goods". The services which were used by the manufacturer subsequent to completion of manufacture and for sale of goods cannot be considered as input servic....
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....irit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production; (ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service; Explanation 1.-The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2.-Input includes goods used in the manufacture of capital goods which are further used in the factory of the manufacturer; The inclusive part of the definition is a short and finite list of goods which could find multifarious uses other than in manufacture also. The definition of input service under Rule 2(l) is ....
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....ollowing questions and answered them in the affirmative. (a) Whether services of advertising and marketing procured by the appellants in respect of advertisements for aerated waters are covered by the definition of the words "input services" as defined in Rule 2(l) of the CENVAT Credit Rules, 2004, when admittedly the appellants manufacture concentrates exclusively used for the manufacture of the respective aerated waters which are advertised by the Appellants? (b) Whether the advertisement or sales promotion of aerated waters undertaken by manufacturer of concentrate is covered by the inclusive part of the definition of "input service" contained in Rule 2(l) of the CENVAT Credit Rules, 2004? 15. The Hon'ble High Court considered expressions used in the definition of input service pertinent to decide the controversy. The definition of input service used the terms 'means' and 'includes'. Relying on decision in Regional Director, Employees' State Insurance Corpn. v. High Land Coffee Works of P.F.X. Saldanha & Sons [1991] 3 SCC 617, the High Court held that the expression 'means and includes' was exhaustive. By the word 'includes' services which may ot....
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....for services to qualify as input services. It would, therefore, appear that all services which constitute activities related to business need not have a nexus with manufacture in a manner different from what was found in the Coca Cola India (P.) Ltd.'s case (supra) by the Hon'ble High Court to become input service. 17. In the instant cases, we find that the issues involved are complex and do not lend themselves to one clear interpretation. The appellant is entitled to a lenient treatment as to its penal liability. We set aside the penalties. The Commissioner has to decide the question raised by the appellant on his jurisdiction to decide the impugned show-cause notices. Except where we have specially rejected the plea of the appellant or allowed its prayer for relief, all other matters have to be considered by the Commissioner afresh. It will be open to the assessee to canvass its claim relating to any particular activity such as that falling under GTA or any other activity also under the head "activities relating to business". We thus allow the appeal filed by M/s. TCECL by way of remand for taking a fresh decision on the issues remanded in terms specified by us after hearing t....
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....s of the manufacture of final product, the service would not qualify to be a input service under Rule 2(l) of the 2004 Rules." [Emphasis supplied] In another context, the Nagpur Bench clarified certain observations contained in Coca Cola judgment by stating that such observation had to be construed to mean that, where input service was integrally connected with the business of manufacturing the final product and the cost of the input service formed part of the cost of the final product, then credit of service tax paid on such input service would be admissible to the manufacturer. What is thus discernible from the Hon'ble High Court's judgment in Coca Cola India (P.) Ltd.'s case (supra) as clarified in the case of Ultratech Cement Ltd. (supra) a binding judicial view to the effect that, if the activity was not integrally connected with the business of manufacture of final product, the service would not qualify to be an input service under Rule 2(l) for the purpose of the CENVAT credit. Therefore, the Judicial member was unable to concur with the view (as expressed in para 16) that "all services which constitute activities related to business need not have a nexus with manufacture....
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.... of the above definition." On the other hand, in para 43 of the Hon'ble High Court's judgment, it was held that, for availing the benefit of the CENVAT credit on service tax paid on advertisement services, a manufacturer should demonstrate that such services had an effect or impact on the manufacturing of the final product and should establish the relationship between the services and the manufacture of the final product. Noticeably, the view taken by the Hon'ble High Court in para 43 ibid is in conformity with the ratio of the Hon'ble Supreme Court's judgment in the case of Maruti Suzuki Ltd. (supra). It is also noticed that, in the case of Ultratech Cement Ltd. (supra), the Nagpur Bench of the Hon'ble Bombay High Court has expressed the view that, while interpreting the words used in the definition of 'input service', only the ratio laid down by the Apex Court in Maruti Suzuki Ltd.'s case (supra) in the context of the definition of 'input' would apply and not the judgment in its entirety. Be that as it may, what is relevant for the present purpose, according to me, is the view taken by the Nagpur Bench of the High Court with regard to the expression "activities in relation to bus....