2009 (3) TMI 874 - AT - Central Excise

Summary

Issues:
1. Availment of CENVAT credit on service tax for rent-a-cab service used for employee transportation.
2. Interpretation of the definition of "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004.
3. Examination of the scope of the term "indirectly" in relation to the use of rent-a-cab service for business activities.

Analysis:

1. The Appellate Tribunal observed that the lower authority permitted the respondents to claim CENVAT credit on service tax for rent-a-cab service utilized for transporting their employees during the disputed period. The appellate authority determined that the service fell within the definition of "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004. The service was utilized for various business-related activities such as visiting government authorities, suppliers, market research, and outdoor business, indirectly contributing to the manufacture and clearance of final products. This decision was influenced by a previous case where a similar service was deemed admissible as input service tax credit. However, the scope of the term "indirectly" in this context was contested by the Ld. DR, suggesting that transportation of items other than goods might not qualify as an input service.

2. In the case cited by the consultant, the service tax paid on rent-a-cab service for bringing employees to work in the factory was considered admissible as input service tax credit, emphasizing the indirect relation to manufacturing activities. The Ld. DR argued that the term "indirectly" needed further examination, pointing out that the transportation of inputs or capital goods was explicitly mentioned in the definition of "input service," potentially excluding the transportation of other items. The Appellate Tribunal acknowledged the need to scrutinize this argument, as it was not previously raised before the co-ordinate bench. To ensure judicial consistency, the case was referred to a Division Bench for a comprehensive evaluation of the interpretation of "input service" in the context of rent-a-cab services for employee transportation.

3. The key issue revolved around the interpretation of the term "indirectly" concerning the utilization of rent-a-cab services for business-related activities. While the lower authority and the appellate authority supported the admissibility of CENVAT credit based on the indirect link to manufacturing processes, the Ld. DR raised concerns about the scope of this indirect connection. The decision to refer the case to a Division Bench reflected the need for a thorough analysis of whether services like employee transportation, beyond goods transport, could be considered within the ambit of "input services" for tax credit purposes. This step aimed to ensure a consistent and well-founded interpretation of the relevant legal provisions.