2016 (8) TMI 482 - AT - Central Excise

Cenvat credit - Rent-a-Cab service for engaging cabs for carrying staff from residence to the factory and back - Commissioner (A) denied credit on the ground which was not mentioned in the SCN that appellant recovered cost of transportation from its employees - ground mentioned in the SCN was that the impugned service was not an input service as it had no nexus with the manufacture of the final product. Held that - apart from the fact that the Commissioner (Appeals) has taken this new ground which was not mentioned in the Show Cause Notice and thus traversed beyond the Show Cause Notice it is also noted that the appellant categorically stated that it did not recover any part of the service tax from its employees and the entire service tax was paid by the appellant only. Therefore the Cenvat credit is admissible. - Decided in favour of appellant with consequential relief

Summary

Issues: Whether CENVAT credit is permissible for 'Rent-a-Cab' service for transporting staff from residence to the factory and back.

Analysis:
The appeals were filed against an Order-in-Appeal dated 02.03.2015 concerning the admissibility of CENVAT credit for engaging cabs to transport employees. The primary adjudicating authority allowed the credit, but the Commissioner (Appeals) disallowed it based on the recovery of amounts from employees for bus facility, citing a judgment of the Bombay High Court. The appellant argued that similar issues had been decided in their favor by the Karnataka High Court and CESTAT in other cases. They contended that the amounts collected from employees were token amounts for transport costs, and the entire service tax was paid by the appellant, not recovered from employees.

The Departmental Representative supported the impugned order, citing the Bombay High Court judgment. The Member (Tribunal) analyzed the contentions of both sides and referred to the Karnataka High Court and CESTAT judgments supporting the admissibility of CENVAT credit for such services. The Member noted that the impugned credit denial was not based on the same ground as mentioned in the Show Cause Notice. The appellant clarified that no part of the service tax was recovered from employees, and the entire tax was borne by them. The Member distinguished the facts of the case from the Bombay High Court judgment, emphasizing that if the service tax was borne by the consumer, the manufacturer cannot claim credit, which was not the case here. Therefore, the Member found the impugned order unsustainable and allowed the appeals with consequential relief, if any, to the appellant.