2016 (4) TMI 1069 - AT - Central Excise

Eligibility of Cenvat credit - Management, Maintenance and Repair service of helicopter - Department denied credit on the ground that the helicopter was not exclusively used for the appellant s unit at Viralimalai - Appellant filed copy of Invoices raised by the appellant company on other companies for the usage of Helicopter and Service Tax has also been collected under the category Business Auxiliary Service - Held that - there is no requirement under Rule 2(l) of the Cenvat Credit Rules, 2004 which defines input service that the usage has to be in relation to a particular unit. Input service definition during the period in dispute i.e., March 2010 to April 2010 was very wide and the inclusive definition covered activities relating to business , which has not been taken into consideration. The denial of credit is therefore incorrect and unsustainable. Eligibility of Cenvat credit - RentaCab service and contract bus service - used exclusively for the transportation of officers - Commissioner (Appeals) has held that they recover the cost from the employees and there is no denial of the same - Held that - a consistent stand taken by various Courts and Tribunals is that when there is a recovery of cost, the proportionate credit should be reversed. The denial of the entire credit is erroneous and the appellants are directed to reverse the proportionate credit to the extent of recovery of cost from the employees. Eligibility of Cenvat credit - Management and consultancy service - Held that - there is no requirement in the input service definition that the eligibility to credit is factory based. The consultancy provided has not been disputed. When there is no dispute on the consultancy provided, denial for the reason that, there is every reason to believe that his consultancy service is not meant for the exclusive use of the appellants unit alone in the show cause notice without elaborating as to the reason for the said belief is unsustainable. The show cause notice is the foundation for any proceeding. In this case, the allegation is too vague and therefore, the appellant s contention to the contrary cannot be doubted. Accordingly, credit is eligible. Imposition of penalty - Held that - the issue being interpretative in nature, penalty is not warranted and the same is accordingly set aside. - Decided in favour of appellant with consequential relief

Summary

Issues:
1. Eligibility of Cenvat credit on input services - Management, Maintenance and Repair service of helicopter, Rent-a-cab service, and Management Consultancy service.

Analysis:

1. Management, Maintenance, and Repair Service of Helicopter:
The appellant, a manufacturer of excisable goods, availed Cenvat credit on input services, including the maintenance of a helicopter. The department contended that the appellant failed to prove the services' direct relation to manufacturing activities. The appellant argued that as per Rule 6(5) of the Cenvat Credit Rules, credit should be allowed even if part of the service is used in manufacturing. The tribunal noted that the helicopter was used for transportation of company Directors and Chairman, and service tax was paid under "Business Auxiliary Service." The tribunal held that the denial of credit based on usage not being exclusive to the appellant's unit was incorrect, as the service definition was broad, covering activities related to business.

2. Rent-a-Cab Service:
Regarding the Rent-a-Cab service, it was used for transporting officers, and the cost was partly recovered from employees. The Commissioner held that proportionate credit should be reversed due to cost recovery. The tribunal disagreed, stating that the denial of the entire credit was erroneous. It directed the appellant to reverse only the proportionate credit related to the cost recovered from employees.

3. Management Consultancy Service:
The eligibility of credit on Management Consultancy service was questioned by the Commissioner, citing lack of evidence on exclusive use for the appellant's unit and the nature of consultancy provided. The tribunal found no factory-based eligibility requirement in the input service definition. It held that since the consultancy provided was not disputed, the denial of credit based on vague allegations was unsustainable. The tribunal deemed the credit on Management Consultancy service eligible.

4. Penalty Imposition:
Regarding the penalty, the tribunal considered the interpretative nature of the issue and concluded that no penalty was warranted. The penalty was set aside based on this interpretation.

In conclusion, the tribunal allowed the appeal, ruling that credit on the helicopter service was eligible, directed the reversal of proportionate credit on Rent-a-Cab service, and upheld the eligibility of credit on Management Consultancy service. The penalty was set aside.