Business Use of Travel Agency and Broadband Services Qualifies for CENVAT

Keihin Fie Private Limited Vs Commissioner of Central Excise (CESTAT Chandigarh)

CESTAT Chandigarh held that Travel Agency Service, AMC Photocopy Machines and Broadband services used for the purpose of business and not for any personal use is eligible for CENVAT Credit.

Facts- The appellant, an Indo-Japanese venture, is engaged in the business of manufacture and sale of carburetors and other goods, classifiable under Chapters 84 and 87 of the Central Excise Tariff Act, 1986.

On the basis of audit, five show-cause notices for the period 2005-06 till April 2012 were issued in relation to the disallowance of CENVAT credit on Input Services. Commissioner vide the impugned order allowed substantial CENVAT credit but denied CENVAT credit on inadmissible Input Services. Being aggrieved, the present appeal is filed.

Conclusion- With regards to Travel Agency Service, it is held that the service tax paid to travel agents for making arrangements of the employees to visit customers, suppliers and other authorities is for the purpose of business only and cannot be termed as ^“for personal use of the employees^‟. Further, with regard to CENVAT on AMC Photocopy Machines and Broadband Services, it is held that these services fall very much in the definition of “Input Service” as both the services are required for the business purposes and not for any personal use.

FULL TEXT OF THE CESTAT CHANDIGARH ORDER

These five appeals are directed against the common Order-in-Original dated 22.11.2012 passed by the Commissioner (Appeals) of Central Excise whereby the Commissioner (Appeals) has denied the CENVAT credit on Input Services to the tune of Rs.13,41,243/-. The details of the Input Services on which the CENVAT credit was denied are given herein below:

2. Briefly the facts of the present case are that the appellant, M/s Keihin Fie Private Limited, an Indo-Japanese venture, is engaged in the business of manufacture and sale of carburetors and other goods, classifiable under Chapters 84 and 87 of the Central Excise Tariff Act, 1986 and is having their factory at Plot No.81-83 and 94-96, Sector 6, HSIDC, Growth Centre, Bawal, District Rewari. On the basis of audit, five show-cause notices for the period 2005-06 till April 2012 were issued in relation to the disallowance of CENVAT credit on Input Services. The appellant filed reply to all these show-cause notices and after following the due process, the Commissioner vide the impugned order allowed substantial CENVAT credit but denied CENVAT credit on inadmissible Input Services as cited supra against which the present appeals have been filed.

3. Heard both sides and perused the records of the case.

4. Learned Counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts, the law and the binding judicial He further submitted that as regards Construction Services, it has been observed in Para 32 of the Order-in-Original that Commercial Construction Services were availed by the appellant prior to 2008 for creating or extending or modifying the facilities related to production or for other allied activities. He further submitted that the Adjudicating Authority has wrongly relied upon the CBEC Circular No.98/1/2008 dated 04.01.2008 and held that CENVAT credit has been wrongly availed by the appellant in respect of Commercial Construction Services. He further submitted that prior to 01.04.2011, the definition of “Input Service” allows the CENVAT credit on construction related services and this has been held to be Input Service in the case of Rico Auto Industries Limited Vs CCE, Delhi-III [reported at (2023) 7 Centax 197 (Tri. Chan)].

4.1. As regards Outdoor Catering Service, learned Counsel for the appellant submitted that in Para 39 of the Order-in-Original, the Adjudicating Authority has alleged that the recovery made by the appellant in relation to canteen activities and that such expenses do not form part of the cost of production and thus inadmissible. Learned Counsel, in reply to these objections, submitted that as per the provisions of the Factories Act, 1948, the appellant was under an obligation to provide canteen facilities to its employees and the allegation about recovery from employees was never alleged in any of the show-cause notices and the said Order-in-Original has travelled beyond such allegations. In this regard, he relied upon the decision in the case of Blackrock Services India Private Limited Vs Commissioner of CGST, Gurgaon [reported at (2022) 1 Centax 138 (Tri. Chand.). He further submitted that prior to 1^st April, 2011, CENVAT credit in respect of Canteen Services was entitled to avail and this has been settled by the decision of the Hon^‟ble High Court of Karnataka in the case of Toyota Kirloskar Motor Private Limited [reported at 2021 (50) GSTL 286 (Kar.)] and re-affirmed by the Hon^‟ble Supreme Court of India in the same matter as reported at 2021 (55) GSTL 129 (SC).

4.2. As regards Travel Agency Service, learned Counsel submitted that the appellant has availed the services of travel agencies to make travel arrangements for the employees of the appellant such as visits to customers, suppliers, Statutory Authorities/ Government offices. He further submitted that without the requisite services, it is impossible for the appellant to undertake its business. He also submitted that the Adjudicating Authority has only presumed that the Travel Agency Service is for the personal use of the employees, without their being any supporting or cogent evidence. For this submission, he relied upon the decision in the case of Ramco Cements Ltd. Vs CCE, Puducherry [reported at 2017 (5) GSTL 105 (Tri. Chennai)].

4.3. As regards AMC of Photocopy Machines, learned Counsel submitted that the appellant has availed the CENVAT credit in relation to AMC of Photocopy Machines but the Adjudicating Authority has wrongly presumed that photocopy can be for personal use or business use without their being any supporting or cogent evidence. For this submission, he relied upon the decision in the case of Parson Machinery (I) Private Limited Vs CCE, Aurangabad [reported at 2009 (16) STR 20 (Tri. Mumbai)].

4.4. As regards Broadband Services, learned Counsel submitted that the appellant has availed CENVAT credit in relation to certain broadband services availed by the appellant. He also submitted that in today^‟s global era, internet/ broadband services are required for any business activity to function. He further submitted that in Para 42 of the Order-in-Original, the Adjudicating Authority held that internet services are not required for manufacturing activities of the appellant. For this submission, he relied upon the decision in the case of Arm Embedded Technologies Private Limited Vs CCE, Bangalore [reported at 2016 (45) STR 133 (Tri. Bang.).

4.5. As regards the imposition of penalty, learned Counsel submitted that penalty cannot be imposed because the appellants are entitled to take the CENVAT credit.

5. On the other hand, learned Authorized Representative for the Department reiterated the findings of the impugned order.

6. After considering the submissions of both the parties and perusal of the material on record, I find that as regards Construction Services which was availed by the appellant prior to December 2008 for modifying the facilities related to production are covered in the definition of “Input Service” as provided under Rule 2(l) of the CENVAT Credit Rules, 2004. This issue has been decided in favour of the appellant in the case of Rico Auto Industries Limited (supra). Further, as regards Outdoor Catering Service, I find that the CENVAT credit has only been denied on the ground that the sample salary slip of one of the employees shows that the appellants are recovering some amount from the employees for providing outdoor catering but this allegation was not there in the show-cause notice and hence, the Order-in-Original has travelled beyond the show-cause notice. Moreover, prior to 1^st April, 2011, CENVAT credit on Canteen Services was permitted as held by the Hon^‟ble High Court of Karnataka in the case of Toyota Kirloskar Motor Private Limited (supra) which was affirmed by the Hon^‟ble Supreme Court also. Therefore, the CENVAT credit has rightly been availed with regard to the outdoor catering. Further, with regards to Travel Agency Service, I find that the service tax paid to travel agents for making arrangements of the employees to visit customers, suppliers and other authorities is for the purpose of business only and cannot be termed as ^„for personal use of the employees^‟. This is also covered in the case of Ramco Cements Ltd. (supra). Further, as regards CENVAT on AMC Photocopy Machines and Broadband Services, I find that these services fall very much in the definition of “Input Service” as both the services are required for the business purposes and not for any personal use.

7. In view of my discussions above, I set aside the impugned order by allowing all the five appeals of the appellant.

(Pronounced on 29/09/2023)