2019 (1) TMI 1246 - AT - Service Tax

CENVAT Credit - input services - rent-a-cab service - scope of exclusion part of the definition of input service under Rule 2(l) of Cenvat Credit Rules, 2004 - Held that - Tribunal in the case of Marvel Vinyls Ltd. Vs. CCE, Indore 2016 (11) TMI 1126 - CESTAT NEW DELHI has considered the issue after the amendment in the definition of input service after 01.04.2011 and the Tribunal in this case has held that, the motor vehicle will always be a capital goods or otherwise for the person who is providing the services. For service provider falling under the category of renting of motor vehicle the motor vehicle would always be a capital goods. Denying the cenvat credit on rent-a-cab service is not sustainable - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against demand of ineligible cenvat credit for rent-a-cab service.

Analysis:
The appeal challenged an order confirming a demand for availing ineligible cenvat credit for rent-a-cab services. The appellant, registered under various service categories, faced a demand of ?1,76,086 for availing such credit during 2013-14, with interest and penalties proposed. The appellant contended that except for ?30,526, the rest of the credit was eligible as the vehicles hired were capital goods of the service provider. The adjudicating authority upheld the demand under Section 73(2) proviso, levying interest and penalties. The Commissioner (Appeals) affirmed this decision, allowing only ?30,526 to be appropriated to the Government.

Legal Interpretation:
The appellant argued that the impugned order was unsustainable concerning ?1,45,560, focusing on whether rent-a-cab service could be considered an input service. Referring to Rule 2(l) of the Cenvat Credit Rules, the appellant contended that renting motor vehicles could be an eligible input service if the vehicles were capital goods of the service provider. The AR defended the impugned order.

Precedent Analysis:
The Tribunal cited the case of Marvel Vinyls Ltd. Vs. CCE, Indore, highlighting the interpretation of the exclusion clause related to renting motor vehicles as input services. The Tribunal emphasized that the exclusion applied only when the motor vehicle was not a capital good. It concluded that if the motor vehicle was a capital good, cenvat credit on the service tax paid would be admissible. The Tribunal found flaws in the lower authorities' interpretation, emphasizing that the capital goods status should be assessed based on the service provider, not the recipient. By following this precedent, the impugned order denying cenvat credit for rent-a-cab service was deemed unsustainable, leading to the appeal's allowance with consequential relief.

This detailed analysis of the legal judgment showcases the issues raised, the legal interpretations presented by both parties, and the precedent relied upon to set aside the impugned order.