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2014 (1) TMI 610
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.... construction equipments, excavators and cranes of Chapter 84 of the Central Excise Tariff. They availed 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 at their Corporate office to its manufacturing units, one of which is TCECL, Dharwad, the appellant. The impugned order disposed 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, '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, 'authorized service station' service, 'AMC of photocopier machines', 'club association' services, 'insurance' service, service tax paid on p....
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....vice coupons issued to them by the assessee. As per Circular No. 643/34/2002-CX., dated 1-7-2002 (para 7) 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 hence 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 service rendered by its dealers were used by 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 the appellant by the service 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 Services was erroneous. The appellant h....
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....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' services used by the appellant to recover payment from customers was part of the business activities of the appellant. Therefore, Service Tax paid for this activity was admissible as input service credit. The service tax paid for insuring the manufacturing plants, warehouse and sales offices of the assessee 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 evidence in the form of relevant invoices and other materials. The appellants provided output service of maintenance and repair service. Hence, C&F agency services availed for packing qualified as input service for the output service. Photo....
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....rvices of the dealers utilized by the appellant was part of the overall maintenance contract with the customer 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(l) 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) [2007 (6) S.T.R. 249 (Tri. - Del.) = 2007 (212) E.L.T. 410 (Tri. - Del.)], which had been vacated by the judgment of the Punjab & Haryana High Court in Ambuja Cements Ltd. v. Union of India [2009 (236) E.L.T. 431 (P & H) = 2009 (14) S.T.R. 3 (P & H)]. The decision in the case of India Japan Lighting Pvt. Ltd. v. CCE [2007 (8) S.T.R. 124 (Tri.-Chennai) = 2007 (218) E.L.T. 103 (Tri.-Chennai)] relied on by the Commissioner was no longer a good law in view of the Larger Bench decision of the Tribunal in the case of ABB Ltd. ....
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.... case. In the Vikram Ispat case (supra), the Tribunal had distinguished the Coca Cola India Pvt. Ltd. v. CCE, Pune-III [2009 (15) S.T.R. 657 (Bom.) = 2009 (242) E.L.T. 168 (Bom.)] case from that of Maruti Suzuki Ltd. In the case of M/s. Sundaram Brake Linings case (supra), the Tribunal held a similar view distinguishing the decision of the Tribunal in the GTC Industries case and the High Court's judgment in the Coca Cola India Pvt. Ltd. case. The Department had not accepted the judgment of the Hon'ble High Court in the Coca Cola India Pvt. Ltd. case and an appeal had been filed before the Apex Court vide SLP No. CC/3580/2010. 7.1 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....
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....ch insurance had been taken at the branch office, warehouse as well as transit insurance were actually used for providing taxable output service such as maintenance or repair by the appellants themselves. Moreover, the maintenance or repair services were actually provided by the dealers. Therefore, the services involved did not conform to the input service 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 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. In so far 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 o....
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.... We find that in principle, the authorities are not averse to allow the disputed credit. We find that this matter has to be remanded to the Commissioner so that the appellants can establish its entitlement to the credit in terms of the provisions contained in the CENVAT Credit Rules. (ii) Rail Travel Agent's Service : The dispute in relation 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 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 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....
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....anke Products (supra). We find that the taxable entry 'maintenance or repair service' read as follows during the material period: "Section 65(64) : "management, maintenance or repair" means any service provided by - (i) any person under a contract or an agreement; or (ii) a manufacturer or any person authorised by him, in relation 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-warra....
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....ices can be brought under "activities relating to business", which we discuss in the latter part of this order. (viii) Insurance and Courier service : Insurance service is provided for insuring branch offices, warehouses, stocks, medical insurance of employees, transit insurance for spares and car insurance. As per the impugned order, the assessee pays Service Tax on insurance of warehouse, branch office and for stocks, medical insurance of employees, transit insurance for spares and car 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, Bangalore - 2009 (236) E.L.T. 145 (Tri.-Bang.) = 2009 (13) S.T.R. 616 (Tribunal) (ii) CCE, Raipur v. Beekay Engineering & Cast....
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....p; Club Association Service : As regards this service, the assessee had taken corporate membership in Bangalore Club and claimed credit on the ground that the membership was for official purpose and was related to business activities. We find that membership of any employee of the assessee in Bangalore Club is not an activity related to business. We uphold the decision of the Commissioner. (xii) Courier service : This service was availed for transportation of spares from central warehouse to feeder warehouses and branches for transport of replacement materials under warranty or for providing 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. We find that 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 factory to customer's place and (iii) transportation of goods from wareho....
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.... the ground that as per definition contained in Rule 2(l) of Cenvat Credit Rules, input service was service which was used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture and clearance of the final products upto the place of removal and included certain activities relating to business. An illustrative list of such activities was contained in the definition. Therefore, service tax paid on services which were not directly or indirectly used, in or in relation to the manufacture and clearance of the final products of the assessee upto the place of removal, or which were not inputs for the provision of the output services of the assessee were not input services eligible to credit. 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, Aurangabad [2009-TIOL-997-CESTAT-MUM = 2009 (16) S.T.R 195 (T....
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....ct the same was eligible input service. However, he was of the opinion that the observation of the Hon'ble High Court contained in para 39 in which the High Court found the definition of input service to comprise five independent definitions ran counter to the ruling of the Apex Court in the Maruti Suzuki Ltd. case. 12. He has cited various decisions of the Tribunal in support of the Revenue's case. We discuss these decisions below seriatum. a. Vikram Ispat v. CCE, Aurangabad [2009-TIOL-997-CESTAT-MUM = 2009 (16) S.T.R. 195 (Tri. - Mum.) = 2012 (277) E.L.T. 218 (Tri. - Mum.)] In this case following the Maruti Suzuki Ltd. case, a ld. Single Member of the Tribunal held that any service to be brought within the ambit of definition of input services should be one which satisfies the essential requirement contained in the main part of the definition. This requirement was equally applicable to the various items mentioned in the inclusive part of the definition. We observe that this view is inconsistent with the view taken by the Hon'ble High Court of Bombay in the Coca-Cola India Ltd. case. The Tribunal held....
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.... expression "used in, or in relation to the manufacture of excisable goods" would have to be followed in respect of input services also. The law permits credit of duty/tax in respect of inputs/input services only when the same are used in, or in relation to manufacture of excisable goods. The law does not provide any other basis. It does not provide for credit on the basis that the value of input/input service is included in the value of finished excisable goods. Hence, the tests laid down in Maruti Suzuki (supra) cannot be overlooked. Use of the input service must be integrally connected with the manufacture of the final product. The input service must have nexus with the process of manufacture. It has to be necessarily established that the input service is used in or in relation to the manufacture of the final product. One of the relevant test would be can the final product emerge without the use of the input service in question. When these tests are applied following the decision of the Hon'ble Supreme Court in Maruti Suzuki (supra), one finds that the impugned outdoor catering service does not meet the same in relation to the manufacture of the finished excisable goods listed i....
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....ation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal; Obviously, several items that figure in the inclusive part of the definition of input service do not conform to the substantive and specific part in the definition of input service. Activities such as credit rating, share registry do not have any impact whatsoever on the manufacturing and clearance of finished goods by a manufacturer. Therefore, as regards input service the items appearing in the inclusive list need not necessarily satisfy the requirement prescribed in the main part of the definition. Since the Apex Court did not consider "input service" of Rule 2(l) of Cenvat Credit Rules but decided what is ''input" under Rule 2(k) of the definition, the ratio....
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....lation to business could cover all the activities that were related to the functioning of a business. The term business could not be given a restricted definition to say that business of a manufacturer was to manufacture final products only. The term "business" therefore, particularly in fiscal statutes, was of wide import. The definition of input service employed the phrase activities relating to business. The words 'relating to' further widened the scope of the expression activities relating to business. Similarly, the use of the word activities in the phrase activities relating to business further signified the wide import of the phrase "activities relating to business". The Rule making authority had not employed any qualifying words before the word activities, like main activities or essential activities etc. Therefore, it must follow that all and any activity relating to business fell within the definition of input service provided there was a relation between the manufacturer of concentrate and the activity. 16. What followed from the above discussion was that the credit could be availed on the tax paid on the input service, as long as the manufacturer could demonstrate....
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....e) of para 9.1 inasmuch as, in the impugned order, the learned Commissioner denied CENVAT credit on these services to the assessee solely on the ground of lack of evidence to establish entitlement. 19. Insofar as the services discussed in sub-para (v) (Management Consultancy Service), sub-para (vi) (Maintenance or Repair Service), sub-para (vii) (Recovery Agent's Service), sub-para (viii) (Insurance and Courier Service) and sub-para (xii) (Courier Service) of para 9.1 are concerned, I note that the learned brother has allowed CENVAT credit on these services to the assessee by holding that these services qualify to be brought under "activities relating to business" within the meaning of this expression used in the definition of "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004. He has obviously, relied on the decision of the Hon'ble Bombay High Court in the case of Coca Cola India Pvt. Ltd. v. CCE [2009 (242) E.L.T. 168 (Bom.) = 2009 (15) S.T.R. 657 (Bom.)] discussed in paragraphs 14 and 15. Accordingly, it has been held that any activity relating to business would fall within the definition of 'input service' provided there is a relation between the manufacture....
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....ot forget that when the learned Member (Technical) recorded the order, the decision of the Nagpur Bench of the Hon'ble High Court was not available. Nevertheless, the law as interpreted by the Hon'ble High Court requires to be followed. Therefore, I am of the view that the issues discussed in sub-paragraphs (v) to (viii) and sub-para (xii) of para 9.1 also have to be remanded to the lower authority with a direction to decide afresh on the admissibility of CENVAT credit on the services to the assessee after giving them a reasonable opportunity to establish that the relevant services/activities were integrally connected with the business of manufacturing the final products. 20. As regards the issue discussed in sub-para (ix) (Professional Fee service) of para 9.1, I agree with the remand order for reason similar to the one stated in para 18. With regard to Annual Maintenance Contract in respect of photocopying machines [sub-para (x) of para 9.1], I observe that the learned JCDR failed to rebut the arguments which were made by the learned counsel on the strength of case law. Therefore, I am in agreement with the conclusion reached by learned brother. Further, I am in full agreem....
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....d establish an integral connection between the activity/service and the business of manufacturing the final product. This is the reason why I have found it necessary to widen the scope of the remand order made by the learned brother. 22. Without prejudice to the views expressed by me hereinbefore, I observe that neither in the case of Coca Cola India Pvt. Ltd. nor in the case of Ultratech Cement Ltd. did anybody bring to the notice of the Hon'ble High Court the relevant provisions of Section 37 of the Central Excise Act, which authorised the Central Government to make rules, inter alia, to provide for "credit of service tax paid or payable on taxable service used in, or in relation to, the manufacture of excisable goods". The question whether the inclusive part of the definition of 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004 is within the scope of the legislative authority delegated to the Central Government by Parliament under Section 37 and, if so, to what extent, was not debated before the Hon'ble High Court. Sd/- (P.G. Chacko) Member (Judicial) POINTS OF DIFFERENCE (a) Whether, in respect of the services discussed in sub-p....
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....,29,461/- (Rs. 1,23,22,725/- + Rs. 94,06,736/-) along with interest and imposed penalties based on two show-cause notices dated 5-11-2007 and 2-9-2008. The period of dispute is from October, 2006 to March, 2008. (c) The appellant has challenged the order of the Commissioner before the Tribunal on various grounds. 25. While hearing the appeal there were differences of opinion which were formulated as follows : (a) Whether, in respect of the services discussed in sub-para (v) (Management Consultancy Service), sub-para (vi) (Maintenance of Repair Service) sub-para (vii) (Recovery Agent's Service), sub-para (viii) (Insurance and Courier Service) and sub-para (xii) (Courier Service) of para 9.1. The appeal should be allowed as held by the learned Member (Technical) OR The case should be remanded as held by the learned Member (Judicial). (b) Whether in the remanded matters, the appellant should be required to establish integral connection between the service and the manufacture of final product for the benefit of CENVAT credit on the service as held by the ....
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.... In respect of the post-warranty period, the appellants enter into 'Annual Maintenance Contract' (AMC) with the customers who have purchased the machineries but the services are rendered through their dealers. The customers do not pay to the dealers who undertake the services. The dealers who undertake the services raise the bills on the appellants and they pay service tax. The service tax so paid by the dealers are taken as credit, inasmuch as the appellants are paying service tax on the entire amount towards AMC collected by the appellants from the customers. In this regard, the learned advocate relies on the decision of the Tribunal in the case of Commissioner of Central Excise, Vododara-II v. Danke Products [2009 (16) S.T.R. 576 (Tri.-Bang.)]. (c) Recovery Agency Services : The learned counsel submits that the appellants had utilised services of recovery agents for recovery of amounts due from the defaulting customers to whom the goods were sold and these services should be treated as coming under "activities relating to business" and, therefore, should be held to have nexus for the purpose of treating s....
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....cessary and as long as the 'input services' are related to business activities of the assessee, the credit should be extended. 26.3 He further submits that the issue of jurisdiction of the Commissioner, Belgaum to adjudicate the dispute regarding input service credit distributed by the Bangalore based ISD distributor stands remanded to the original authority. 27. The learned Commissioner (AR) made the following submissions : (a) In his opinion, the most important question to be decided is whether availability of credit on service depends upon establishing integral connection between the service and the business of manufacture of final products. On this issue, he submits that the decision of the Hon'ble Bombay High Court in Ultratech Cement case very clear which has been rendered after taking into account the decision in Coca Cola case as could be seen from paragraphs 37 & 38. There is no conflict between the two decisions. In the decision in case of Coca Cola one of the five limbs of the definition as "service used in relation to activity relating to business" has been identified. On the other hand, the decision in Ultratech Cement case explain....
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.... and the proposal to remand for fresh consideration of the eligibility of nine services has been made in the light of decision in Coca Cola case holding 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 Pvt. Ltd. case by the Hon'ble High Court to become input Service". On the other hand, Hon'ble Member (Judicial) took note of the decision in the case of Ultratech Cement Ltd. relevant portion of which reads as follows : "29. The expression "activities in relation to business" in the definition of "input service" postulates activities which are integrally connected with the business of the assessee. If the activity is not integrally connected with the business of the manufacture of final product, the service would not qualify to be a input service under Rule 2(l) of the 2004 Rules." In view of the above judgment, he was of the opinion that "a manufacturer claiming the benefit of CENVAT credit on any service under Rule 2(l) on the premise that the service is covered by the above expression should establish an integral connection between the activity/serv....