Case Law Details
Taj Sats Air Catering Ltd. Vs CCGST (CESTAT Mumbai)
The issue involved in the matter is whether the Cenvat credit of service tax paid on ‘Tour Operator Service’ used for pick-up and drop of employees of the Appellant to and fro Andheri and Kurla to their office premises is admissible as ‘input service’ under Rule 2(l) of Cenvat Credit Rules, 2004.
The services of Tour Operator/Rent-a-Cab has been excluded from the definition of “input service” under Rule 2(l) ibid w.e.f. 01.04.2011 only if it is provided by way of renting of a motor vehicle, in so far as they relate to a motor vehicle which is not a capital goods. With effect from 01.04.2011, Cenvat Credit Rules, 2004, have been amended to provide for specific exclusion in respect of rent-a-cab service from the definition of input service. The exclusion clause has got three limbs categorized as (A), (B) and (C). In the present case the services sought to be denied by the department on the ground that it is part of limb (B).
In terms of Rule 2(l)(B) of Cenvat Credit Rules, 2004, these credits can be taken only if these services are used for providing taxable services for which credit on motor vehicle is available as capital goods. In other words the Revenue sought to deny the credit to the Appellants on the ground that these credits would have available to the Appellants only if they are a service provider providing Tour operator service or rent-a-cab operator service and since, they are not providing these services and are merely service recipient therefore, the credit on the Tour Operator Service/Rent-aCab service is not available to them and they are not eligible to take credit of these services.
The issue about the interpretation of amended Rule 2(l) qua rent-a-cab service came up for consideration before the Principal Bench of the Tribunal in the matter of M/s Marvel Vinyls Ltd vs Commissioner of Central Excise, Indore; 2016- TIOL-3071 -CESTAT – DEL, where the Tribunal held that the Appellant therein are entitled to the service tax paid on the said service.
Following the ration of the above decision of the Tribunal, I am of the view that the appellants are entitled for the Cenvat credit for rent a cab/ Tour Operator Service even for the period 2011-12 also.
FULL TEXT OF THE CESTAT JUDGEMENT
The instant Appeal has been filed against the impugned order dated 17.05.2018 passed by the Principal Additional Director General DGPM, WRU, Mumbai in Order-in-Appeal No. MUM-DGPM-WRU/APP172/17-18.
2. The issue involved in the matter is whether the Cenvat credit of service tax paid on “Tour Operator Service” used for pick-up and drop of employees of the Appellant to and fro Andheri and Kurla to their office premises is admissible as ‘input service’ under Rule 2(l) of Cenvat Credit Rules, 2004.
3. The facts of the case in brief are as follows. The Appellants are engaged in providing Management Consultants Service, Manpower Recruitment and Supply Agency, Storage and Warehousing Service, Dry Cleaning Service and also Outdoor Catering Service. The main service provided by the Appellant is Catering Service. During the course of Audit it was observed that the Appellant had wrongly availed Cenvat credit of service tax paid on transportation of employees to and fro Andheri and Kurla to their premises which, according to the department, does not have any nexus with the output service of the Appellant. Accordingly, two show cause cum demand notices were issued to the Appellant; (i) dated 21/11/2011 for the period to 2006-07 to 2010-11 for recovery of Cenvat credit of 12,82,357/- with interest and penalty and (ii) dated 28/09/2012 for the period 2011-12 for recovery of Cenvat credit of Rs. 63,267/- with interest and penalty. Both the show cause notices were adjudicated by the Additional Commissioner, Service Tax, Mumbai by way of Order-in-Original dated 14/12/20 16 by which the total Cenvat credit of Rs. 13,45,624/- was disallowed and the demand of the said amount was confirmed alongwith appropriate interest and equal penalty. The Appeal filed by the Appellant was rejected by the Learned Principal ADG vide impugned order dated 18/05/2018.
4. I have heard Learned Counsel for the Appellant and Learned Authorised Representative for the Revenue and perused the records of the case. Learned Counsel submitted that the Tour Operator Service is an input service used for transportation of employees in relation to business of providing the output service and credit of service tax paid thereon is admissible and not only availment of credit but also utilisation thereof for payment of service tax of output service is in accordance with law. He further submitted that the credit on service tax paid on Tour Operator is admissible as the services used is an input service not only for the period prior to 01/04/2011 but also after 01/04/2011, since the exclusion from definition of input service w.e.f. 01/04/2011, is only if the vehicles used for providing the said service are not capital goods. According to him, the services used for transportation of employees are for ensuring that the employee reaches to work place on time. He also raise the issue of limitation. According to him, the demand for the period from April, 2006 to March, 2011 is barred by limitation as known of the exigencies and envisaged under proviso to Section 73 is present case as there was suppression of facts, misdeclaration etc. and hence provision of Section 78 is not invocable. He also submits that the disputed input service was used for providing both taxable and exempt services and they have reversed the proportionate credit attributable to exempt services as per formula under Rule 6 (3A) of Cenvat Credit Rules, 2004 during the financial year 2011-12 and hence the credit which has been reversed, needs to be excluded from the demand. Learned Authorised Representative appearing on behalf of Revenue reiterated the findings recorded in the impugned order and prayed for dismissal for Appeal filed by the Appellant. He also submitted that these services are basically for personal consumption and has no nexus with the output services. According to him the Appellant failed to produce any material evidence before the Authority below in suppose of their contention.
5. Firstly let me take the issue with regard to the Cenvat credit availed buy the Appellant for the period prior to 1-4-2011. The definition of ‘input services’ during the relevant period had a wide ambit as it included the words “activities relating to business”. In various decisions, the Tribunal as well as the Courts have held that the Tour operator services/Rent-a-cab services are eligible for credit if it is established from records that the assessee i.e. the Appellant herein has used the said service for providing the output services. Rule 2(l) of the Cenvat Credit Rules, 2004 defines input service. The definition of input service is very wide and it also includes various services used in relation to the business. The only condition precedent is that it should be the activity relating to business. So far as Rent-a-Cab/Tour Operator service is concerned, it is the case of the appellant that the said service is utilized by the appellant for pick up and drop of employees to and from the work place so that they reaches to and fro to the work place on time and carries out the work efficiently of providing the output services. The said service cannot be said to be used primarily for the personal use of the employees. Alongwith the Memo of Appeal, the Appellants have filed invoices also to establish the nexus between the aforesaid input service with the output service. Rent-a-cab/Tour Operator service has been excluded from the definition of input service w.e.f. 1.4.2011 and prior to that it came within the definition of input service. Undoubtedly it is an expenditure in relation to business being incurred by the Appellant for its efficient running. Input Services are not only those services used directly or indirectly in the provision of output service, but it also includes services that relate to the business activities of the assessee. The expression ‘such as’ in Rule 2(l) ibid means that the stipulated activities that follow the expression are illustrative only and not exhaustive and that the expression “in relation to” used in Rule 2(l) has to be given a wider meaning. Therefore in my opinion Rent-a-Cab/Tour Operator service are in relation to the business activity undertaken by the Appellant and for the period prior to 1.04.2011 the Appellant is eligible for Cenvat Credit of the aforesaid input services. The submission of the Revenue that input services do not have direct nexus to the business activity of the Appellant is not sustainable. Now I take up the issue of limitation for the period prior upto March, 2011. The Appellant, from time to time, submitted its Cenvat Account to the department for the aforesaid period wherein Cenvat Credit taken and availed of, is reflected. They have also filed their ST-3 Returns regularly alongwith Cenvat Credit details and invoices for the relevant period which reflected details of Cenvat Credit taken & utilized and the details of payment in cash or by utilization of Cenvat Credit is also mentioned therein. Not only that, the records of the Appellants were being audited by the Audit Parties from time to time but no objections were ever raised. The condition precedent for invoking extended period is that there has to be some fraud or collusion or suppression on the part of the assessee. The Hon’ble High Court of Judicature at Bombay in the matter of Saswad Mali Sugar Factory Ltd. v. C.C.E., Pune II – 2013-TIOL-898-HC-MUM-ST = 2014 (33) S.T.R. 481 (Bom.) has clearly held that the conditions for invocation of the extended period of limitation under Section 73 of the Act and the conditions precedent for imposing penalty under Section 78 of the Act are identical, namely existence of elements of fraud, collusion and wilful misstatement or suppression of facts or contravention of the provisions of the Act with intent to evade payment service tax. In my opinion in the given facts any fraud, collusion, misstatement or suppression is missing on the part of the appellant and therefore so far as the demand for the period from April, 2006 to March, 2011 is concerned, the same is not sustainable on the ground of limitation also. Now the issue remaining is about the Cenvat Credit availed by the Appellant for the period 2011-12 i.e. after 01.04.2011. The services of Tour Operator/Rent-a-Cab has been excluded from the definition of “input service” under Rule 2(l) ibid w.e.f. 01.04.2011 only if it is provided by way of renting of a motor vehicle, in so far as they relate to a motor vehicle which is not a capital goods. With effect from 01.04.2011, Cenvat Credit Rules, 2004, have been amended to provide for specific exclusion in respect of rent-a-cab service from the definition of input service. The exclusion clause has got three limbs categorized as (A), (B) and (C). In the present case the services sought to be denied by the department on the ground that it is part of limb (B).
6. In terms of Rule 2(l)(B) of Cenvat Credit Rules, 2004, these credits can be taken only if these services are used for providing taxable services for which credit on motor vehicle is available as capital goods. In other words the Revenue sought to deny the credit to the Appellants on the ground that these credits would have available to the Appellants only if they are a service provider providing Tour operator service or rent-a-cab operator service and since, they are not providing these services and are merely service recipient therefore, the credit on the Tour Operator Service/Rent-aCab service is not available to them and they are not eligible to take credit of these services.
7. The issue about the interpretation of amended Rule 2(l) qua rent-a-cab service came up for consideration before the Principal Bench of the Tribunal in the matter of M/s Marvel Vinyls Ltd vs Commissioner of Central Excise, Indore; 2016- TIOL-3071 -CESTA TA – DEL, where the Tribunal held that the Appellant therein are entitled to the service tax paid on the said service. The relevant paragraphs of the said decision are extracted as under:
“xxx xxx xxx
3. After hearing both the sides, I find that the definition of input service is contained in Rule 2(l) of the Cenvat Credit Rules, 2004 and related to any service used by a manufacturer, whether directly or indirectly, in or in relation to manufacture of their final product and includes many services specified therein but excludes some of the services specified. An Exclusion Clause B was introduced w.e.f. 01.04.2011 to the following effect:
“[(b) [Services provided by way of renting of a motor vehicle], in so far as they relate to a motor vehicle which is not a capital goods;]”
4. a reading of the above Exclusion Clause show that services provided by way of renting of a motor vehicle do not stand excluded in totality. The Exclusion Clause is in respect of input services of renting of a motor vehicle, in so far as they relate to a motor vehicle which is not capital goods.
The contention of the assessee is that motor vehicle is a capital goods, as per the definition of the capital goods contained under rule 2(a) of the Cenvat Credit Rules 2004. The appellate authority has specifically observed that the said input service i.e. renting of “motor vehicles” have been specifically included except in case where motor vehicle is eligible for Cenvat Credit as capital goods.
5. He has however denied the benefit to the assessee on the ground that such motor vehicle are not capital goods for the appellant, Cenvat Credit availed on the input services of renting of motor vehicle would not be admissible.
6. However, I find flaw in the above interpretation of appellate He has for the appellant. A person who is receiving the input services of renting of immovable property, can never avail cenvat credit of duty paid on the motor vehicles and as such motor vehicle can never be a capital good to the recipient of the said services. The motor vehicle will always be a capital good or otherwise for the person who is providing the services. For service provider falling under the category of renting of motor vehicle the motor vehicle would always be a capital good. As such the expression- “ which is not a capital good appearing in the said exclusion clause would require examination vis-à-vis the service provider and not vis-à-vis the services recipient.” As such the interpretation of the lower authorities that motor vehicle are not capital goods for the services recipient cannot be appreciated in as much as motor vehicles are admittedly capital goods in terms of the Rule 2 (A) of Cenvat Credit Rules.
7. In view of the above analysis I hold that the appellant would be entitled to the Cenvat Credit on service tax paid on the said services. Accordingly, the impugned order is set aside and appeal allowed with consequential relief to the appellant.”
8. Following the ration of the above decision of the Tribunal, I am of the view that the appellants are entitled for the Cenvat credit for rent a cab/ Tour Operator Service even for the period 2011-12 also.
Accordingly, the Appeal filed by the Appellant is allowed with consequential relief, if any.
