2024 (12) TMI 1299 - AT - Service Tax

CENVAT Credit - input services availed by the Appellant are in compliance with Rule 2(l) of the CENVAT Credit Rules, 2004 or not -CENVAT Credit on Passenger Boarding Bridge (classified under CETH 9801), Bridge Mount Converter (classified Under CETH 9801) etc. related to project import - CENVAT credit on professional services related to Hotel project - CENVAT credit - Chartered Flights hired by Chairman and Managing Director - Pinnacle Award ceremony - sponsorship service and event management services with respect to events (for celebrating National and State functions such as Kannada Rajyotsava, independence day - Photography service (incurred for various airlines and other promotional events) - Landscaping bills relating to Trumpet flyover, which includes landscape maintenance of landscaping as part of Airport activity in a greenfield airport - immigration services incurred for relocation charges of the expats - Guest House maintenance - Flower Decoration - Hotel accommodation - Membership fees - CENVAT credit on construction services - Denial of CENVAT credit on Mobile Command Post Vehicles, Projection Screens and Advertising Structures. CENVAT Credit on Passenger Boarding Bridge (classified under CETH 9801), Bridge Mount Converter (classified Under CETH 9801) etc. related to project import - HELD THAT - It is an admitted fact that the said goods were imported as part of 'Project Import' and in the absence of any such conditions for availing of CENVAT credit as per CENVAT Credit Rules, 2004, as held by various authorities, the same are eligible for CENVAT credit irrespective of the fact that whether it is falling under the category of inputs or capital goods. CENVAT credit on professional services related to Hotel project - HELD THAT - The Expenses incurred by the appellant includes professional and consultancy fees paid in relation to arbitration, feasibility study for the investment in the Hotel project - Since these are incurred to know the viability and feasibility for the investment in such project, the same should qualify to be input services - Credit allowed. CENVAT credit - Chartered Flights hired by Chairman and Managing Director - Pinnacle Award ceremony - sponsorship service and event management services with respect to events (for celebrating National and State functions such as Kannada Rajyotsava, independence day - Photography service (incurred for various airlines and other promotional events) - Landscaping bills relating to Trumpet flyover, which includes landscape maintenance of landscaping as part of Airport activity in a greenfield airport - immigration services incurred for relocation charges of the expats - Guest House maintenance - Flower Decoration - Hotel accommodation - Membership fees - HELD THAT - Even if the said services are not directly related to output service, considering the activity of the appellant, they are required for the output service, it is held that the appellant is entitled to the CENVAT credit under dispute. CENVAT credit on construction services - denial on the ground that assessee has not produced any documentary evidence to show that service is in relation to repair/modification work and not towards original construction - HELD THAT - These services used for repairs of premises of provider of output service is specifically included in the inclusion portion of input service definition, Cenvat credit is eligible. Denial of CENVAT credit on Mobile Command Post Vehicles, Projection Screens and Advertising Structures - HELD THAT - It is a special purpose customized motor vehicle designed and the same is neither used to carry passengers nor goods. The vehicle is a special purpose vehicle equipped with satellite telephone and internet communication capabilities to react, if the local and cellular telephone services and broadband internet are not available. This is not a vehicle designed to carry passengers and goods instead is a specially designed vehicle for disaster response and recovery of assets. This kind of motor vehicle finds special mention in the definition of capital goods as per Rule 2(a)(A)(viii) of CENVAT Credit Rules, 2004 - thus, recognized as capital goods due to their specialized nature, thus eligible for credit. Appeal allowed in part.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the Cenvat credit on the input services availed by the Appellant complies with Rule 2(l) of the CENVAT Credit Rules, 2004.
• Whether specific services and goods, such as Passenger Boarding Bridges, professional services related to a hotel project, chartered flights, and others, qualify as input services or capital goods for Cenvat credit eligibility.
• Whether the denial of Cenvat credit by the adjudicating authority on various grounds was justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Compliance with Rule 2(l) of the CENVAT Credit Rules, 2004

• Legal Framework and Precedents: The CENVAT Credit Rules, 2004, particularly Rule 2(l), defines what constitutes input services eligible for credit. Previous tribunal decisions were cited to support the Appellant's position.
• Court's Interpretation and Reasoning: The court examined whether the services and goods in question were used in or in relation to the provision of output services, as required by the rules.
• Key Evidence and Findings: The Appellant argued that all inputs were used for output services, citing various precedents where similar claims were upheld.
• Application of Law to Facts: The court applied the definitions and precedents to the facts, determining the eligibility of each service and good for Cenvat credit.
• Treatment of Competing Arguments: The court considered the Revenue's argument that certain services lacked a direct nexus with output services but ultimately found in favor of the Appellant for most claims.
• Conclusions: The court concluded that the Appellant was entitled to Cenvat credit for most services and goods under dispute.

Issue 2: Eligibility of Specific Services and Goods for Cenvat Credit

• Passenger Boarding Bridges and Related Equipment: The court found these eligible for credit as they were part of 'Project Imports' and thus classified under relevant headings for CVD purposes.
• Professional Services for Hotel Project: The court held that expenses related to feasibility studies and consultancy fees were input services, as they related to the business operations.
• Chartered Flights: The court accepted these as business expenses necessary for the Appellant's operations, thus eligible for credit.
• Pinnacle Award Ceremony and Sponsorship Services: These were deemed necessary for business promotion and maintaining standards, thus qualifying for credit.
• Photography Services: The court found these services related to business promotion and eligible for credit.
• Landscaping and Construction Services: The court acknowledged these as necessary for maintaining the airport premises, thus eligible for credit.
• Mobile Command Post Vehicles: Recognized as capital goods due to their specialized nature, thus eligible for credit.

3. SIGNIFICANT HOLDINGS

• The court emphasized that "even though the input services are not directly related to output service, considering the activity of the appellant, they are required for the provision of the output service."
• The judgment reinforced the principle that services and goods used in business operations, even if not directly linked to output services, can qualify for Cenvat credit if they are necessary for the business's functioning.
• The final determination was that the Appellant's appeals (ST/21313/2017 and ST/20289/2020) were allowed, and the Department's appeal (ST/20352/2020) was dismissed, affirming the Appellant's entitlement to Cenvat credit.

This judgment underscores the nuanced interpretation of the CENVAT Credit Rules, particularly in assessing the eligibility of diverse services and goods as input services or capital goods, and highlights the importance of the business necessity in determining credit eligibility.