2019 (3) TMI 762 - AT - Central Excise

CENVAT Credit - input service or not - service tax paid towards rent / licence fees / rental fee / maintenance charges for accommodation of retail outlets situated elsewhere than the factory of manufacture in Delhi, Kolkata etc. - Held that - The period of dispute namely December 2008 to November 2009 is well before the amendment caused to the definition of input service in Rule 2(l of the Cenvat Credit Rules, 2004 w.e.f. 1.4.2011 - the definition of input service before 1.4.2011 was very broad in its scope and included not just services utilized within the factory of manufacture, but also activities relating to business, such as accounting, auditing, services used in office relating to such factory or premises or sales promotion etc. It is not in dispute that the premises for which rent / licence fee / rental fees, maintenance charges etc. had been incurred by the assessee were all retail outlets of the assessee themselves. As such, they were not outlets of dealers appointed by the company but were run by the company themselves. The rent etc. incurred for these outlets are surely incurred for activities relating to business. In the circumstances, the impugned renting etc. are very much eligible input services and within the ambit of definition of Rule 2 (l) ibid - credit allowed - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Eligibility of credit of service tax paid towards rent, licence fees, rental fees, maintenance charges for accommodation of retail outlets.
2. Interpretation of the definition of "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004.

Analysis:
1. The case involved a dispute regarding the eligibility of credit of service tax paid towards rent, licence fees, rental fees, maintenance charges for accommodation of retail outlets situated elsewhere than the factory of manufacture. The department contended that these were ineligible credits, leading to proceedings for recovery of the credits availed with interest. The original authority upheld the demand, while the Commissioner (Appeals) later allowed the appeal of the assessee. The Tribunal observed that the renting expenses for the retail outlets were incurred by the assessee for activities relating to business, as the outlets were owned and operated by the company itself, not by appointed dealers. Therefore, the expenses were deemed eligible input services under the broad definition of "input service" prevailing before 1.4.2011. Consequently, the Tribunal found no fault with the decision of the lower appellate authority and dismissed the department's appeal.

2. The Tribunal delved into the interpretation of the definition of "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004, which included services used in relation to various business activities such as accounting, auditing, sales promotion, and activities relating to business. The Tribunal noted that the definition before 1.4.2011 encompassed services not only within the factory of manufacture but also those related to business activities. As the renting expenses for the retail outlets were incurred for the company's own outlets to further sales, they were considered to be incurred for activities relating to business. Therefore, the Tribunal concluded that the impugned renting expenses qualified as eligible input services within the ambit of the pre-amendment definition of "input service." Consequently, the Tribunal upheld the decision of the lower appellate authority, deeming the demand of cenvat credit and interest by the lower authority as unsustainable and dismissing the department's appeal.

In conclusion, the Tribunal held that the renting expenses for the retail outlets were eligible input services under the broad definition of "input service" prevailing before 1.4.2011, as they were incurred for activities relating to business. The Tribunal found the decision of the lower appellate authority to be just and fair, requiring no interference, and consequently dismissed the department's appeal.