2016 (3) TMI 300 - AT - Central Excise

CENVAT credit of service tax paid under Rent a Cab service on account of engaging cabs for transport of children of staff members from resident to school and back - Held that - To call the activity of transportation of staff children from the colony to the school and back as an activity relating to business is devoid of any logic, reason or rationale. The judgement of CESTAT in the appellant s own case (2012 (12) TMI 228 - CESTAT NEW DELHI) cited by the appellant allowed such credit on the ground that the cost of the said service was included in the cost of production as per CAS-4 standards. That in my view is not a valid ground for treating the impugned service as input service because input service has been clearly defined in Rule 2(l) of CENVAT Credit Rules, 2004 and if every service which forms part of cost of production (CAS-4) is to be treated as service in relation to activities relating to business, then there was no need to define input service in the manner it has been done. Indeed the said ground would render several words of the definition redundant. It is settled law that statute should be so interpreted as not to render, to the extent possible, the words used by legislature redundant. The said judgement of CESTAT is a Single Member judgement. On the other hand, the Division Bench judgement of CESTAT in the appellant s own case (supra) cited by ld. Departmental Representative has clearly held that rent a cab service availed for transportation of children of employees from colony to school and back is not an input service in terms of Rule 2(l) of CCR, 2004. It is obvious that CESTAT Division Bench decision would prevail over the Single Member CESTAT decision. I however note that the issue involved was interpretation of CENVAT Credit Rules and the Division Bench in the said judgement waived penalty on that account. Accordingly, waiver of penalty in the present case is also justified, more so in the light of the fact that the Single Member Bench CESTAT judgement decided the issue in favour of the appellant.

Summary

Issues:
Appeal against Order-in-Appeal denying CENVAT credit for service tax paid under 'Rent a Cab' service for transporting staff children from colony to school and back.

Analysis:
The appellant contended that the activity was business-related and thus qualified as an input service under the relevant period's definition. Citing a previous judgment in their favor, the appellant argued for the admissibility of the credit.

The Departmental Representative argued that transporting staff children was not a business-related activity, hence the credit was not admissible. Referring to another judgment, the representative opposed the appellant's claim.

The tribunal analyzed the definition of input service during the relevant period as per Rule 2(l) of CENVAT Credit Rules, 2004. While the definition included activities related to business, the tribunal found transporting staff children did not logically qualify as such. The tribunal noted that considering the cost of the service in the cost of production was not a valid ground for treating it as an input service, as defined in the rules. The tribunal highlighted the need to interpret statutes to avoid rendering any words redundant.

The tribunal acknowledged a previous Single Member judgment in the appellant's favor but emphasized a Division Bench judgment that held transporting staff children was not an input service as per Rule 2(l) of CCR, 2004. The tribunal noted that the Division Bench decision would prevail over the Single Member judgment. However, considering the issue involved interpretation of CENVAT Credit Rules, the Division Bench waived the penalty in the previous case. Therefore, the tribunal justified waiving the penalty in the present case, especially since the Single Member judgment favored the appellant.

In conclusion, the tribunal partly allowed the appeal by setting aside the penalty, considering the circumstances and the interpretation of the CENVAT Credit Rules.