2018 (7) TMI 768 - AT - Central Excise

CENVAT Credit - input services - Rent-a-Cab service for transporting the employees from various pick up points to the manufacturing facility for the period after 2011 - Held that - With effect from 01.04.2011, Cenvat Credit Rules, 2004, have been amended to provide for specific exclusion in respect of rent-a-cab service from the definition of input service. The exclusion clause has got three limbs categorized as (A), (B) and (C). The phrase specifically for personal consumption appearing in (C) is not linked to clause (A) and (B). In the present case the services sought to be denied are part of limb (B). The exclusion clause is provided in the statute is with reference to the specific definition clause only. Something which may be covered has got to be excluded by way of exclusion. In view of the exclusion clause the arguments with regard to the coverage, the services under the definition clause first part would not be correct - While deciding the matter the bench did not make any distinction between the services covered under clauses (B) and (C). Such interpretation which has been done ignoring the specific provisions in law cannot be but per incurium and hence cannot be binding precedence. Accordingly, the submissions made cannot be a reason for allowing the credit in respect of rent-a-cab service in the present case. Penalty - Held that - The adjudicating authority holds that there is no mens rea and penalties under Rule 25 have not been imposed. I am not in a position to uphold any penalties imposed under the said Rule - penalties imposed under Rule 15 also could not sustain as The matter is in respect of bare interpretation - penalties set aside. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Admissibility of service tax credit on Rent-a-Cab service post-2011.
2. Interpretation of Cenvat Credit Rules, 2004 regarding exclusion of certain services.
3. Precedence of Commissioner (Appeals) orders.
4. Imposition of penalties under Rule 25 and Rule 15.

Issue 1: Admissibility of service tax credit on Rent-a-Cab service post-2011:
The appeal challenged the Commissioner (Appeals) order disallowing service tax credit on Rent-a-Cab service after 2011 for transporting employees to the manufacturing facility. The argument was that these services were essential for smooth operations and should be considered business expenses. The appellant cited a similar case where credit was allowed and relied on a Tribunal decision. However, the Tribunal held that post-2011 amendments to Cenvat Credit Rules excluded rent-a-cab services from input services. The exclusion clause was specific and not linked to personal consumption. The argument that these services were part of business expansion was dismissed as the exclusion clause applied to specific definitions. Previous Tribunal decisions also supported the inadmissibility of CENVAT Credit for rent-a-cab services.

Issue 2: Interpretation of Cenvat Credit Rules, 2004 regarding exclusion of certain services:
The Tribunal analyzed the amendments to Cenvat Credit Rules, 2004 post-2011, which excluded services like outdoor catering, health services, etc., if used primarily for personal consumption. The appellant's reliance on a Tribunal decision was rejected as the decision did not differentiate between services under different clauses. The Tribunal emphasized that the exclusion applied to services primarily for employee consumption. The Tribunal concluded that the specific provisions in law must be considered, and reliance on judgments ignoring such provisions was not valid.

Issue 3: Precedence of Commissioner (Appeals) orders:
The Tribunal clarified that orders of Commissioner (Appeals) in similar cases were not binding precedents if not appealed due to threshold limits. Citing legal precedents, the Tribunal emphasized that authorities' orders could not be used to claim unintended benefits contrary to rules and laws. The Tribunal highlighted that such orders could not set a precedent for allowing unintended benefits.

Issue 4: Imposition of penalties under Rule 25 and Rule 15:
Regarding penalties, the Tribunal noted that no mens rea was found, and penalties under Rule 25 were not imposed. Penalties under Rule 15 were reduced by the Commissioner (Appeals) but were further modified by the Tribunal based on a previous decision. The Tribunal held that in cases of bare interpretation, no penalty should be imposed. Thus, penalties were adjusted accordingly, and the appeal was dismissed on all other grounds.

This detailed analysis of the judgment covers the admissibility of service tax credit, interpretation of Cenvat Credit Rules, the precedence of Commissioner (Appeals) orders, and the imposition of penalties under Rule 25 and Rule 15.