Case Law Details

Case Name : Commissioner of Central Excise, Bangalore-III Vs Tata Auto Comp Systems Ltd. (Karnataka High Court)
Appeal Number : CEA No. 132 of 2009
Date of Judgement/Order : 11/04/2012
Related Assessment Year :
Courts : All High Courts (3788) Karnataka High Court (196)

HIGH COURT OF KARNATAKA

Commissioner of Central Excise, Bangalore-III

Versus

Tata Auto Comp Systems Ltd.

CEA NO. 132 OF 2009

APRIL 11, 2011

JUDGMENT

Ravi Malimath, J.  

This appeal is by the revenue being aggrieved by the order of the Tribunal holding that the assessee is entitled to avail Cenvat credit on the Service tax paid on the transportation services provided by the assessee to their staff for pick up and drop from the residence to the factory and vice-versa.

2. The assessee are holders of Central Excise Registration Certificate for manufacture of motor vehicle parts and accessories. Accordingly, the assessee is availing Cenvat credit of duty paid on inputs, capital goods and input services. The assessee was availing Cenvat and utilizing input tax credit relating to transportation services (Rent-a-Cab Service). Hence, the show cause notice was issued to them as to why the input Service tax availed and utilized on transportation services should not be treated as wrongful availment and utilization of input service credit and the same should not recovered. The assessee replied to the same. However, the assessing officer confirmed the demand. Aggrieved by the same, the assessee preferred an appeal before the Commissioner of Appeals who rejected the same. Aggrieved by the same, the assessee preferred an appeal before the Tribunal.

3. The Tribunal by relying on the decision in the case of Stanzen Toyotetsu (P.) Ltd. v. CCE [2009] 21 STT 321 (Bang. – CESTAT) held that the assessee is entitled for availment of Cenvat credit on the Service tax paid on transportation services provided to their staff. Aggrieved by the same, the revenue has preferred this appeal.

4. This appeal was admitted to consider the following substantial question of law :-

“(1)  Whether the transportation service, provided in the factory of the M/s. Tata Auto Comp. Systems Ltd., to their staff for pick up and drop from their residence to the factory and vice versa, was an input service, in or in relation to manufacture, whether directly or indirectly of the final products within the meaning and comprehension of Rule 2(1) of the Cenvat Credit Rules, 2004?

(2)  Consequently whether the Cenvat credit of the Service tax, so paid for receiving the transportation services by them for pick up and drop from their residence to the factory and vice versa, was eligible for availment and utilization in terms of Rule 3 read with Rule 2(1) and Rule 9 thereof?”

The identical question of law came up for consideration before this Court in the case of CCE v. Stanzen Toyotetsu India (P.) Ltd. [2011]32 STT 244 (Kar.). This Court took the view that the transportation/Rent-a-Cab service is provided by the assessee to their employees in order to reach their factory premises in time which has a direct bearing on manufacturing activity. In fact, the employee is also entitled to conveyance allowance which would form part of his condition of service. Therefore, by no stretch of imagination it can be construed as a welfare measure by denying the availment of Cenvat credit to the assessee for providing transportation facilities as a basic necessity which has a direct bearing on the manufacturing activity. While so holding the Court held that if the credit is availed by manufacturer then the question is what are the ingredients that are to be satisfied for availing such a credit. That the said service should have been utilized by the manufacturer directly or indirectly in or in relation to the manufacturer directly or indirectly in or in relation to the manufacturer of final products or used in relation to activities relating to business. If any of the test is satisfied then the service falls under input service and the manufacturer is eligible to avail Cenvat credit and the Service tax paid on such credit.

5. In this view of the matter, the substantial questions of law are answered in favour of the assessee and against the revenue.

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0 responses to “Transport / Rent-a-Cab service of employees to and from factory is input service”

  1. Mr. suresh Vidhate says:

    If there is bonded period for any judgments? if yes than let us know the period because, we have taken objection against our Central excise auditor on the base of judgment High court of Karnataka Commissioner of Central Excise, Bangalore- III versus Tata Auto Copm. System Ltd. CEA No 132 of 2009 April 11, 2011
    Pl. suggest to us Service Tax credit is appicable on Ren-a-Cab ofr the period of 2013 to 2015

  2. CA Anshul Jain says:

    Can this judgement extended to output service prviders also?

  3. Sai Sridhar says:

    This case is very relavant for sotware industry for the Refund claims or availament, prior to 1st Apr’2012. No surprises if the dept may come with Retro clarificatory note.

  4. Sanjay Bardapurkar says:

    Please confirm, whether service tax credit on the transportation service, provided in the factory to their staff for pick up and drop from their residence to the factory and vice versa is available from 01/04/2012 ???

  5. Sudhansu says:

    Please check though it is a judgement , but the same is not valid in present terms . To put it clear :w.e.f. 1st April’ 2012 , Cenvat credit is not available in respect of services related to Rent a Cab service as it has been excluded from the definition of input service vide Notification No. 18/2012-CE (NT), 17.03.12.

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