2012 (9) TMI 414 - AT - Service Tax

Cenvat credit on rent-a-cab - denial - Held that - Rent-a-Cab service is provided by the assessee to these workers to reach the factory premises in time which has a direct bearing on the manufacturing activity. In fact the employees is also entitled to conveyance allowance. It also would form part of a condition of service and the amounts spent on the conveyance of the employees is also a factor which will be taken into consideration by the employees in fixing the price of the final product as decided in CCE, Bangalore III Vs. Stanzenn Toyotetsu India (P) Ltd. 2011 (4) TMI 201 - KARNATAKA HIGH COURT The appellants shall be eligible for the credit of rent-a-cab service provided, they are able to satisfy that the rent-a-cab service has been utilized for transport of employees/officials or business related visitors to their factory/office - issue remanded back granting opportunity to the assessee to produce additional evidence - favour of assessee by way of remand.

Summary

Issues:
Appeal against order of Commissioner (Appeals) denying credit on rent-a-cab services; Contesting demand and penalty under CENVAT Credit Rules 2004 and Finance Act 1994; Applicability of rent-a-cab service as input service in relation to manufacturing activity; Setting aside of interest and penalty by Commissioner (Appeals); Claim raised for the first time before the Tribunal; Eligibility for credit of rent-a-cab service; Remand for fresh consideration with opportunity for additional evidence.

Analysis:

1. Appeal against Commissioner (Appeals) Order:
The appeal was filed against the order of the Commissioner (Appeals) denying credit on rent-a-cab services, proposing demand and imposing a penalty under CENVAT Credit Rules 2004 and the Finance Act 1994. The original authority and Commissioner (Appeals) upheld the demand but set aside the interest and penalty. The appellant contested the denial of credit, while the department challenged the setting aside of the penalty.

2. Nature of Utilization of Rent-a-Cab Service:
The appellant argued that the rent-a-cab service was primarily used for transporting employees to the factory and for business-related visitors, contending that it should be considered an input service related to manufacturing activities. Reference was made to a judgment by the Hon'ble High Court of Karnataka, emphasizing the necessity and direct impact of the service on the manufacturing activity.

3. Commissioner (Appeals) Decision and Department's Submission:
The Commissioner (Appeals) set aside the interest and penalty, prompting the department to argue that the denial of credit was justified, as the utilization of the rent-a-cab service for employee and visitor transport was raised for the first time before the Tribunal and not before the lower authorities. The department also contended that interest and penalty should not have been set aside.

4. High Court Decision on Rent-a-Cab Service:
The judgment highlighted the High Court's stance on rent-a-cab service, emphasizing its direct relevance to manufacturing activities and the necessity for ensuring timely employee presence at the workplace. The Court deemed it an activity related to business, not merely a welfare measure, and crucial for the manufacturing process.

5. Tribunal's Decision and Remand:
After considering arguments from both sides and reviewing the records, the Tribunal acknowledged the relevance of rent-a-cab service as an input service, provided it was used for transporting employees or business-related visitors. However, as these specific submissions were not made before the lower authorities, the Tribunal set aside the Commissioner (Appeals) order and remanded the matter to the original authority for fresh consideration. The appellant was granted an opportunity to present additional evidence and have a fair hearing.

6. Conclusion:
The appeals were allowed by way of remand, with stay petitions being disposed of. The Tribunal's decision emphasized the need for specific submissions and evidence regarding the utilization of rent-a-cab service for employee or visitor transport to qualify for credit, ensuring a fair reconsideration of the matter by the original authority.