Case Law Details
Pr. Commissioner of Central Tax Vs Kalyan Jewellers India Ltd. (CESTAT Bangalore)
SEO Title: CESTAT Upholds CENVAT Credit on Aircraft Running Expenses and Executive Jet Hiring Charges, Dismisses Revenue Appeal – CESTAT
The Revenue appealed against the order of the Commissioner (Appeals), which had allowed the respondent’s claim of CENVAT credit on aircraft running expenses and executive jet hiring charges for the period 2015-16 and 2017-18 (up to June 2017). The respondent was engaged in sourcing jewellery through conversion of bullion into gold jewellery, manufacturing gold jewellery, distributing jewellery to retail showrooms across India through regional offices, and providing output services including business auxiliary services and renting of immovable property. During audit for the period April 2015 to June 2017, it was observed that the respondent had availed CENVAT credit on certain services which, according to the department, were ineligible under the CENVAT Credit Rules, 2004. A show cause notice dated 18.02.2021 was issued for the period 01.04.2016 to 30.06.2017. The adjudicating authority confirmed recovery of the credit with interest and imposed an equivalent penalty. On appeal, the Commissioner (Appeals), by order dated 11.07.2024, held that the activities carried out by the respondent were directly or indirectly involved in the manufacture of the final product, allowed the credit, and also held that the extended period of limitation was not invocable in the absence of evidence of willful suppression. Revenue challenged that order.
The Revenue contended that the respondent had availed CENVAT credit on services such as ground handling charges, landing charges, airworthiness management services, helicopter landing services, hire charges of ground support equipment, royalty paid to the Airports Authority of India, navigation charges, pilot and cabin crew training services, and hire charges of a nine-seater executive jet. It argued that maintenance and repair services relating to motor vehicles not qualifying as capital goods were excluded from the definition of “input service” under the CENVAT Credit Rules, 2004 and that the respondent was not entitled to credit. The Revenue further submitted that the relevant facts came to light only during audit and that the respondent had suppressed the correct extent of CENVAT credit by making erroneous entries in statutory returns, justifying invocation of the extended limitation period and the penalty imposed by the adjudicating authority.
The respondent submitted that the Commissioner (Appeals) had correctly held that there was no restriction on availing CENVAT credit on aircraft running expenses and executive jet hiring charges as these services were used directly or indirectly in or in relation to manufacture of the final product. It was argued that the adjudicating authority had denied credit solely on the ground that documentary evidence establishing such use had not been produced. According to the respondent, the invoices for aircraft running expenses and executive jet hiring charges were issued in its own name, service tax had been paid, and the services were utilised for transportation of high-value gold from the central hub at Thrissur to showrooms, travel of executive managers and directors for overseeing business operations across India, inauguration of new showrooms, and transportation of brand ambassadors for event management programmes. The respondent contended that these services constituted activities relating to business and promotion of sales covered by the inclusive portion of the definition of “input service.” It also submitted that the adjudicating authority had failed to establish suppression, willful misstatement or fraud for invoking the extended period of limitation.
The Tribunal observed that the Commissioner (Appeals) had held there was no restriction on availing CENVAT credit on the impugned services as they were used directly or indirectly in or in relation to manufacture of the final product. It also noted the respondent’s contention that the services related to business activities and sales promotion falling within the inclusive definition of “input service.” The Tribunal found that the services had been considered in earlier Tribunal decisions cited before it, where such credits had been allowed. It further observed that the invoices had been issued in the respondent’s name and that service tax had been paid on those services.
The Tribunal held that, in the absence of admissible evidence establishing misuse of the services for purposes other than business, CENVAT credit could not be denied. It concluded that the respondent was entitled to the credit claimed and that the order of the Commissioner (Appeals) allowing the CENVAT credit was sustainable. Accordingly, the Tribunal upheld the impugned order and dismissed the Revenue’s appeal.
Cases Discussed
- M/s. Purvankara Ltd. Vs. CC, Bangalore (CESTAT Bangalore), Service Tax Appeal No. 20024/2019, Final Order No. 21796-21800/2024 dated 03.10.2024
- Sanmar Foundries Ltd. Vs. Commissioner of Central Excise (CESTAT Chennai), 2016 (43) STR 362 (Tri.-Chennai)
- Lakshmi Machine Works Ltd Vs. Commissioner, Coimbatore (CESTAT Chennai), 2013 (30) STR 98 (Tri.-Chennai)
- Pushpam Pharmaceuticals Company (SC), 1995 (78) ELT 401 (SC)
FULL TEXT OF THE CESTAT BANGALORE ORDER
The issue in the present appeal is whether the Respondent who had availed input service credit and utilized the same for the period from 2015-16, 2017-18 (up to June 2017) is eligible to claim such credit against Aircraft running expenses and hiring charges of executive Jet.
2. The brief facts are the Respondent is involved in sourcing of jewelry through conversion of Bullion via gold jewellery makers and distribute to retail show rooms across India under the control of various Regional Offices of the Respondent across India. The Respondent is also manufacturing gold jewelry and provider of output services like business auxiliary services, renting of immovable property service and having service tax registration. During Audit for the period April 2015 to June 2017, it is observed that the Respondent had availed input service credit on various services and which are ineligible as per the provisions of CENVAT Credit Rules, 2004, proceeding were initiated and show cause notice was issued on 18.02.2021 for the period from 2016-18 alleging availment of ineligible credit for the period from 01.04.2016 to 30.06.2017. Thereafter Adjudication authority as per the Order-in-Original held that the Respondent availed ineligible credit and ordered recovery of the same with interest and also imposed penalty of equal amount. Aggrieved by said order, an appeal was filed before the Commissioner (Appeals) and Commissioner (Appeals) as per the impugned order dated 11.07.2024 held that the activities carried out by the Respondent are directly or indirectly involved in manufacture of final product. Hence, they are eligible for the input services as claimed by them. The first Appellate authority also held that the impugned order could not establish the necessary ingredients to prove the intent to evade service tax on part of Respondent by way of willful suppression of facts. Accordingly, in the absence of any evidence regarding suppression of facts, demand confirmed by invoking the extended period of limitation is also unsustainable and the appeal of the Respondent was allowed. Aggrieved, Revenue reviewed the impugned order and as per Review Order No.1/2024/CE, dated 16.10.2024 filed the present appeal.
3. When the appeal came up for hearing, Learned Authorised Representative (AR) for the Revenue submits that Respondent has availed services such as ground handling charges, Landing charges, airworthiness management service, helicopter landing services, hire charges of ground supporting equipment, royalty fee paid to Airport authority of India, Navigation charges and services availed for training of pilots and cabin crew. They have availed CENVAT credit on the hire charges of a nine seater executive jet, also. Learned AR further submits that the services by way of maintenance and repairs of motor vehicles are excluded from the definition of input service as defined in Rule 2(1) of Cenvat Credit Rules, 2004 in so far as they relate to motor vehicles which are not capital goods. Motor vehicles falling under chapter heading 8702, 8703, 8704 and 8711 (used for transport of persons and goods) are specifically excluded from the’ definition of ‘capital goods’ as per Rule 2(a) of Cenvat Credit Rules, 2004. The motor vehicles in question are indeed not capital goods of the respondent. Hence input service credit on maintenance and repair of motor vehicles is not available to the respondent by virtue of Rule 2(1)(BA) of Cenvat Credit Rules, 2004.
4. Learned Authorised Representative (AR) further submits that as per the impugned order the Commissioner (A) held that suppression of facts with intent to evade payment of service tax cannot be invoked in this case as no willful intention to evade payment tax has been proved by department, in the light of Hon’ble Apex Court decisions cited by him. The case laws relied upon by appellate authority is relevant in the old central excise context and not applicable in the instant case. The relevant information regarding the extent of availment and utilization of CENVAT credit surfaced only when an investigation was carried out by Audit Officers of GSTA Hqrs., Directorate of Audit (Central), Kochi Branch. The respondent being a manufacturer, should have self-assessed the correct availability of CENVAT credit due to them and should have discharged their correct duty liability, voluntarily. The fact that the respondent suppressed the entire extent of their taxability from the department by making erroneous entries in their statutory returns establishes that they have deliberately and willfully suppressed the relevant information with an intention to evade payment of central excise duty. Therefore, the findings of Commissioner (A) are not sustainable and demand confirmed by invoking extended period of limitation and penalty imposed by Adjudication Authority are sustainable.
5. Learned Counsel appearing for the Respondent draws our attention to the finding in the impugned order and submits that while allowing the appeal, first Appellate authority as regards the aircraft running expenses and the hiring expenses of executive jets incurred by the Respondent held that; “I find that there is no restriction for the availment of cenvat credit on such services availed by the appellant in terms of the definition of input service as these services were used directly or indirectly and in or in relation to the manufacture of the final product”. Further submits that the Adjudication Authority had denied the availment of Cenvat Credit on aircraft running expenses and expenses on hiring of executive jets solely on the ground that the Respondent had not produced the documentary evidences to prove that these services were used directly or indirectly or in or in relation to the manufacture of the gold jewellery. However as per evidence on record, the relevant copies of the cenvatable invoices of various aircraft running expenses and hiring of executive jets expenses and such invoices were issued in the name of the Respondent and not in any individual name and the Respondent had remitted the element of service tax on which they had availed Cenvat Credit. Further submits that such services were utilised by the Respondent primarily for the transportation of the high valued gold from the central hub facility at Thrissur to various showrooms, for travelling of the Executive Managers and Directors of the company for overlooking the day to day activities of the company spread across the length and breadth of the country, for the inauguration of new showrooms and for the use of brand ambassadors of the company at event management shows. Further submits that such services do fall within the ambit of input service as they are activities which relates to the business and promotion of sales which form part of the inclusive clause of the definition of input service. Learned Counsel further draws our attention to decision of the Tribunal in the matter of Sanmar Foundries Ltd. Vs. Commissioner of Central excise, reported in 2016(43) STR 362 (Tri- Chennai), wherein it is held that Cenvat Credit- Input service credit- Management, maintenance and repair service of helicopter- Helicopter was used for transportation of directors and chairman of the company- No requirement under Rule 2(1) of the Cenvat Credit Rules, 2004 which defines input service that the usage has to be in relation to a particular unit- Input definition was very wide and the inclusive definition covered activities relating to business which has not been taken into consideration- Credit not to be denied. Also, in the case of Lakshmi Machine Works Ltd Vs. Commissioner, Coimbatore, reported in 2013 (30) STR 98 (Tri.-Chennai) held that appellant is eligible for input service credit of maintenance of aircraft which is used by Managing Director in course of business activity. Any activity during business of manufacturing is entitled to credit of input service.
6. Learned Counsel further submits that the Appellate Authority categorically held that the Adjudication Authority confirmed the demand by invoking extended period of limitation without establishing the necessary ingredients to prove the intent to evade service tax on part of the Respondent by way of suppression of facts, willful misstatement or fraud. In this regard, the Learned Counsel relied on the judgment of Hon’ble Supreme Court in the case of Pushpam Pharmaceuticals Company, reported in 1995(78) ELT 401 (SC) and submits that as per the law laid down by Hon’ble Supreme Court, department is not justified in initiating proceedings for short levy after the expiry of the normal period since “suppression of facts” has been used in the company of strong words such as fraud, collusion, or willful default, suppression of facts must be deliberate and with an intent to escape payment of duty.
7. Learned Counsel further submits that the aviation services are availed by their Directors and Executives for official travel and hence it is an eligible input services as held by the Tribunal in large number of cases. While considering the issue in the matter of M/s. Purvankara Ltd. Vs. CC, Bangalore in Service Tax Appeal No. 20024/2019, this Tribunal as per the Final Order No. 21796-21800/2024 dated 03.10.2024 held that the aviation services are availed for official travel and Revenue has not adduced any evidence to show that the services used are for any other purpose other than official /business purpose.
8. Heard both sides and perused the records.
9. We find that the first Appellate authority held that there is no restriction for the availment of cenvat credit on impugned services availed by the Respondent in terms of the definition of input service as these services were used directly or indirectly and in or in relation to the manufacture of the final product. Further it is the contention of the Respondent that such services fall within the ambit of input service as they are activities which relate to the business and promotion of sales which form part of the inclusive clause of the definition of input service. We find that the services were considered by the Tribunal in the cases, cited supra, and have been allowed as eligible for cenvat credit. Further we find that the invoices were issued in the name of the Respondent and Respondent had remitted service tax on such services which they have claimed as credit. We find that in the absence of any admissible evidence to substantiate any misuse of the said services for any other purposes the cenvat credit cannot be denied. Fact being so, the Respondent is eligible for credit as claimed by them and the impugned order allowing the cenvat credit is sustainable and liable to be upheld.
10. In view of the above discussion the impugned order is upheld and the appeal filed by the Revenue is dismissed.
(order pronounced in Open Court on 15.07.2026)
Author Bio
