TaxTMI 
TaxTMI 
2016 (11) TMI 237
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....nd Rent-a-Cab Services by treating the same as input services? (ii) Whether the respondent has contravened the provisions of sub-Rule (1) of Rule 3 CENVAT Credit Rules, 2004? (iii) Whether the CENVAT credit availed by the respondent is liable to be recovered from them under Rule 14 of the CCR- 2004 read with proviso to Section 11A (1) & Section 11AB of the Central Excise Act, 1944? (iv) Whether the respondent has rendered themselves liable to penalty under Rule 15(2) of the CENVAT Credit Rule, 2004 read with Section 11AC of the Central Excise Act, 1944? (v) Whether Interest leviable at the appropriate rate is also recoverable from them on the inadmissible CENVAT credit under Rule 14 of the CENVAT credit, 2004 read with section 11AA of the Central Excise Act, 1944?" 3 The facts relevant for the present appeals are that the respondent - assessee is engaged in the manufacture of motor vehicles and parts thereof falling under Chapter Heading 87 of Central Excise Tariff Act, 1985. It is also availing CENVAT credit of the duty paid on inputs, input services and capital goods used in the manufacture of motor vehicles under CENVAT Credit Rules, 2004 (for short "the 2004 Rules"). The ....
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....re of Mandap Keeper and Rent-a-Cab services reveals that these services have been utilized after clearance of the goods upto the place of removal. These services have not been used by the respondents, whether directly or indirectly, in or in relation to manufacture of final product, and clearance of final product upto the place of removal. Hence, these services cannot be termed as 'input services' by the respondent for manufacture of final product. He has argued that the benefit is admissible only if an integral connection could be shown between the service and the business of manufacturing of motor vehicle. He has further argued that neither the activities of Mandap Keeper or Rent-a-Cab service is mentioned in the list of activities enumerated in the definition of 'input service'. 7. Learned counsel for the respondent on the other hand contended that it had availed the Mandap Keeper Services to organize meetings and events for promotion of their products such as a new vehicle launches, sales promotion events and also for business dealer meets, conferences, Executive Level Meetings etc. These services are important for the respondent to promote the sale of vehicles....
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....endment of 2011 to Rule 2(l), whereby, the construction services were also excluded from the definition of 'input service', it was held that this implied that prior to this amendment, the said activity was covered by Rule 2(l). This Court had observed that if the said service was not covered by Rule 2(l), it would not have been necessary to introduce the amendment. It was also observed that the amendment not being retrospective, would not retrospectively exclude this activity from the said definition. For the same reasons, it has been contended that Rent-a-Cab service fell within the definition of Rs. input services' before its specific exclusion vide amendment of the 2011 w.e.f. 01.04.2011. 11. We have heard Learned counsel for the parties and gone through the paper-book. Relevant Rules and statutory provisions 12. The relevant Rule 2(l) of the CENVAT Credit Rules, 2004 (as amended by CENVAT Credit (Amendment) Rules, 2008), which defines the term Rs. input service' is as under:- "2(l) "input service" means any service,- (i) used by a provider of taxable service for providing an output service; or (ii) used by the manufacturer, whether directly or indirectly, in or....
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....f; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or (B) specified in sub-clauses (d), (o), (zo) and (zzzzj) of clause (105) of section 65 of the Finance Act, in so far as they relate to a motor vehicle except when used for the provision of taxable services for which the credit on motor vehicle is available as capital goods; or (C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee;" 15. Clause (105)(o) of Section 65 of the Finance Act, 1994 reads as under:- "(105) "taxable service" means any service provided (or to be provided)- xx xx xx (o) to any person, by a rent-a-cab scheme operator in relation to the renting of a cab;" 16. Vide Circular No.943/4/2011.CX., dated 29-4-2011, the Government of India, Ministry of Finance (Department of Pe....
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....concerned: "(i) Any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products (ii) Any service used by the manufacturer whether directly or indirectly, in or in relation to clearance of final products from the place of removal (iii) Services used in relation to setting up, modernization, renovation or repairs of a factory, or an office relating to such factory. (iv) Services used in relation to advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, (v) Services used in relation to activities relating to business and outward transportation upto the place of removal." 19. The Court held that the expression business being an integrated/continuous activity, it could not be merely restricted to the manufacture of the product. In the absence of any qualifying words before the term 'activities in relation to business', it had to be construed widely and would cover all activities which were related to the functioning of the business. "25. The expression Business is an integrated/continuous activity and is not confined restricted to mere manufacture of the....
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....nditure incurred by the assessee on advertisements sales promotion, market research will have to be allowed as input stage credit more particularly if the same forms a part of the price of final product of the assessee on which excise duty is paid. In other words, credit of input service must be allowed on expenditure incurred by the assessee which form a part of the assessable value of the final product. If the above is not done, as sought to be done by the department in the present case, it will defeat the very basis and genesis Cenvat i.e. value added tax." 21. The Court held that it was not necessary that the contents of the advertisement must be that of the final product manufactured by the person advertising. As long as the manufacturer can demonstrate that the advertisement services availed have an effect or impact on the manufacture of the final product and establish the relationship between the input service and the manufacture of the final product, the manufacturer could avail the credit of the service tax paid by him. Once the cost incurred by the service has to be added to the cost, and is so assessed, it is a recognition by Revenue of the advertisement services havin....
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....e definition of input service read as a whole makes it clear that the said definition not only covers services, which are used directly or indirectly in or in relation to the manufacture of final product, but also includes other services, which have direct nexus or which are integrally connected with the business of manufacturing the final product. In the facts of the present case, use of the outdoor catering services is integrally connected with the business of manufacturing cement and therefore, credit of service tax paid on outdoor catering services would be allowable. 35. The argument of the Revenue, that the expression "such as" in the definition of input service is exhaustive and is restricted to the services named therein, is also devoid of any merit, because, the substantive part of the definition of "input service" as well as the inclusive part of the definition of "input service" putport to cover not only services used prior to the manufacture of final products, subsequent to the manufacture of final products but also services relating to the business such as accounting, auditing.... etc. Thus, the definition of input service seeks to cover every conceivable service use....
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.... respondent to promote the sale of vehicles are connected to the business of manufacture of the respondent for which they are entitled to avail CENVAT credit, especially when the expense so mentioned is part of cost on which excise duty is paid. 24. Similarly, the Rent-a-Cab services used by the executives of the respondent for the purpose of travelling required for business meetings, visits to the dealerships, visits to the vendor sites, dealers meet, business promotion activities, vehicles launch, conferences etc. is a an expenditure in relation to business being incurred by the respondent in order to promote the sales and for efficient running of the business for which they are entitled to avail CENVAT credit. 25. Further, as argued by the Ld. Counsel for the respondent, as the cost of services of Rent-a-Cab and Mandap Keeper received, were included in the assessable value of the final product, on which excise duty is paid, which fact has not been disputed by the appellants, the respondent is entitled to avail the CENVAT credit on the service tax paid on such services on the ratio of the decision in Coca Cola India( supra). 26. The aforesaid view is further supported by decis....
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....urer directly or indirectly in or in relation to the manufacture of final products or used in relation to activities relating to business. If any one of these two tests is satisfied, then such a service falls within the definition of "input service" and the manufacturer is eligible to avail Cenvat credit of the service tax paid on such service. 13. Rent-a-Cab service is provided by the assessee to these workers to reach the factory premises in time which has a direct bearing on the manufacturing activity. In fact, the employee is also entitled to conveyance allowance. It also would form part of a condition of service and the amounts spent on the conveyance of the employees is also a factory which will be taken into consideration by the employees in fixing the price of the final product. By no stretch of imagination can it be construed as a welfare measure. It is a basic necessity. To ensure that the work force comes on time at the work place, the employers have taken this measure which has a direct bearing on the manufacturing activity. At any rate it is an activity relating to business." This judgment has been followed in Commissioner of C.Ex., Bangalore-III vs. TATA Auto Comp....
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.... "8. The land was take on lease to construct the factory. The factory was constructed to manufacture the final product. The land and the factory were required directly and in any event indirectly in or in relation to the manufacture of the final product and for the clearance thereof up to the place of removal. But for the factory the final product could not have been manufactured and the factory needed to be constructed on land. The land and the factory are used by the manufacturer in any event indirectly in or in relation to the manufacture of the final product, namely, metal-sheets. The respondents' case, therefore, falls within the first part of Rule 2(l) aptly referred to by Mr. Amrinder Singh as the 'means part." 31. Taking note of the fact that by amendment to the Rule 2(l) in the year 2011, which was enforced w.e.f., 1.4.2011, whereby, construction services were excluded from the definition of 'input service', the Hon'ble Court held that if the said services were not covered by Rule (l), there was no necessity to introduce the said amendment. This made it clear that prior to the amendment, setting up of a factory premises of a provider for input service relating to....