2016 (2) TMI 979 - AT - Service Tax

Cenvat credit - input services - shifting and relocation expenses of the employees incurred by the assessee under the their transfer policy - Held that - I hold that transfer and shifting expenses incurred by the appellant company pursuance of the policy of employees transfer is eligible input service prior to 1-4-2011. I also hold that in view of the clarification of C.B.E. & C. vide Circular No. 943/4/2011-CX, it has been clarified that expenses having some-tinge of personal nature are not allowable with effect from 1-4-2011, if the same is incurred particularly for an employee. Such expenses are allowable if the same are provided to employees in general as expenditure in relation to the business of an assessee - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Disallowance of Cenvat credit on input services related to shifting and relocation expenses of employees
- Eligibility of shifting expenses as an input service
- Application of extended period of limitation

Analysis:

Issue 1: Disallowance of Cenvat credit on input services
The appellant appealed against the order-in-appeal upholding the disallowance of Cenvat credit on input services for shifting and relocation expenses of employees. The appellant believed that such expenses were related to their business activities and thus eligible for Cenvat credit. The Revenue objected during an audit, leading to a show cause notice for disallowance of Cenvat credit. The Commissioner (Appeals) dismissed the appeal, stating that the expenses had no nexus with the appellant's business. The appellant contended that the transfer of employees was in furtherance of business prospects and profitability. The Tribunal held that such expenses incurred by the appellant were eligible input services prior to 1-4-2011.

Issue 2: Eligibility of shifting expenses as an input service
The appellant argued that prior to 1-4-2011, shifting expenses qualified as an input service, as transfer of employees was in the business interest. The appellant referred to Circular No. 943/4/2011-CX and legal precedents to support their claim. The Tribunal agreed with the appellant, emphasizing that expenses with a personal nature were not allowable after 1-4-2011 if specifically for an employee. However, if provided to employees in general, such expenses were considered allowable as business-related expenditure.

Issue 3: Application of extended period of limitation
The Revenue relied on the impugned orders, highlighting that the appellant did not declare the Cenvat credit separately for the service in question, justifying the application of the extended period of limitation. Despite this, the Tribunal ruled in favor of the appellant, allowing the appeal and setting aside the impugned order. The appellant was granted consequential benefits in accordance with the law.

In conclusion, the Tribunal found in favor of the appellant, recognizing shifting expenses related to employee transfers as eligible input services before 1-4-2011. The decision was supported by legal interpretations and precedents, emphasizing the distinction between personal and business-related expenses. The Tribunal's ruling overturned the disallowance of Cenvat credit and provided relief to the appellant.