2013 (3) TMI 42 - AT - Central Excise

CENVAT credit on rent-a-cab service and service of air travel ticket agents - Held that - The manufacturer is consuming the rent a cab and air travel services for carrying the employees/officials to various zonal offices of the railways and to arrange supply of materials by the suppliers/sub-contractors for the official use as distinct from the conveyance or perquisite account for the employees. Therefore, it can be said that the rent a cab services / tour operator and air travel services are used by the manufacturer and cannot be treated as perquisites for the employees. The other part of the test is whether the activity of business which is treated as a cost to the company is also used in relation or in relation to the manufacture of the final product. As find from the submissions made that the rent a cab and air travel agent s services are hired by the company for specific purposes of use by the officers of the company in coordinating vendors of inputs, sub-contractors engaged in the manufacture and therefore, all these purposes, are closely related to manufacture of the final product. The issue of eligibility for CENVAT credit on rent-a-cab service used for bringing their employees from residence to factory and back is already decided by the Hon ble Karnataka High Court in the case of CCE, Bangalore Vs. Stanzen Toyotetsu India (P) Ltd. (2011 (4) TMI 201 - KARNATAKA HIGH COURT) & case of service of air travel agents are on much better footing because these activities are directly in relation to marketing of their finished goods. Hence, no reason to deny CENVAT credit on such services. - in favour of assessee.

Summary

Issues:
1. Dispute over CENVAT credit on rent-a-cab service and air travel ticket agents.
2. Burden of proof under Rule 9(6) of CENVAT Credit Rules.
3. Precedent set by the Hon'ble Karnataka High Court regarding rent-a-cab service.

Analysis:

Issue 1: Dispute over CENVAT credit on services
The appeal concerns the CENVAT credit claimed by the appellants for rent-a-cab service and air travel ticket agents utilized for various purposes related to their manufacturing activities. The Revenue contended that these services lacked a sufficient nexus with the manufacturing process, making the appellants ineligible for the credit. The Commissioner adjudicated ten show-cause notices covering the period from 4/2007 to 3/2011. The Commissioner emphasized that the services must be used in or in relation to the manufacture of the final product to qualify as input services. It was argued that while these services may not directly contribute to manufacturing, they are indirectly related to the manufacturing process, as they are utilized for coordinating vendors and sub-contractors engaged in the manufacture. The Commissioner found that the services were indeed used in relation to the manufacture of the final product, and hence, the demand was dropped.

Issue 2: Burden of proof under Rule 9(6) of CENVAT Credit Rules
The Revenue, dissatisfied with the Commissioner's decision, filed an appeal, asserting that under Rule 9(6) of the CENVAT Credit Rules, the burden of proving the admissibility of CENVAT credit rests on the claimant. However, the Revenue failed to produce documentary evidence to challenge the Commissioner's findings. The Commissioner, on the other hand, was satisfied with the documents presented by the respondent, confirming the purpose of the services. As the appeal memorandum lacked factual evidence to counter the Commissioner's decision, the appeal was dismissed.

Issue 3: Precedent set by the Hon'ble Karnataka High Court
Regarding the rent-a-cab service, the judgment referred to a precedent set by the Hon'ble Karnataka High Court in a similar case, where it was established that such services were eligible for CENVAT credit. Moreover, the services of air travel agents were deemed directly related to the marketing of the final goods, further justifying the eligibility for CENVAT credit. Consequently, the appeal by the Revenue was rejected, and the cross-objection filed by the respondent was disposed of accordingly.

In conclusion, the judgment upheld the eligibility of the appellants for CENVAT credit on the rent-a-cab service and air travel ticket agents, emphasizing the indirect but significant relation of these services to the manufacturing process. The burden of proof, as per Rule 9(6) of the CENVAT Credit Rules, was highlighted, and the decision was influenced by a precedent set by the Hon'ble Karnataka High Court regarding similar services.