2013 (9) TMI 96 - AT - Central Excise

Cenvat credit - Input services - Nexus with Business / manufacturing activity - credit taken on (i) Rent a Cab Services (ii) Telephone Services and (iii) Contract Bus Services for the period 2006-07 to 2010-11 - Distribution of Credit - input service distributor (ISD) - Held that - Relying upon the decisions in the cases CCE Vs. Cadila Healthcare Ltd.- 2013 (1) TMI 304 - GUJARAT HIGH COURT ; CCE Vs. Manikgarh Cement- 2010 (10) TMI 10 - BOMBAY HIGH COURT etc. there is a uniformity in view of the Courts and Tribunal that has emerged that rent a-cab services utilized to bring workers or executives to factory is covered by definition at Rule 2 (l) - If there is no management by the corporate office a manufacturing organization cannot survive finance cannot be procured raw materials cannot be purchased manufactured goods cannot sold and so on. So the argument to separate the corporate office from manufacturing activity for the purpose of deciding eligibility to Cenvat credit on services received is flawed especially having regard to the fact many services usually received by corporate office is listed specifically in the inclusive portion of the definition of input service. The concept of input service distributor as defined in Rule 2 (m) of the Cenvat Credit Rules 2004 also implies allowing credit of services availed by an office which cannot utilize the credit as in the case of a corporate office. In the first place as per the definition input service means service used by the manufacturer whether directly or indirectly in or in relation to the manufacture of final products. The scope of this expression is further expanded by an inclusive portion mentioning specific services to remove any ambiguity in the definition in respect of these services. Such inclusive part has one expression reading activities relating to business such as accounting auditing financing recruitment and quality control coaching and training computer networking credit rating share registry and security inward transportation of inputs or capital goods. Here again the listing within this category cannot be taken to be exhaustive but only illustrative. Against such legal frame work it is to be decided whether the impugned service will fall within the definition when received at the corporate office. In the matter of extending Cenvat credit to these three services I do not see any distinction that can be made between the factory and corporate office going by the provisions in Cenvat Credit Rules 2004. Matter is examined above with reference to rent-a-cab service similar logic should apply to contract bus service and telephone service. In the case of telephone service the clarification issued by Ministry vide para 8.3 of Circular No. 97/8/2007-S.T. dated 23-8-2007 is very relevant Regarding the nexus of input services with the manufacturing activities it is not understood what sort of nexus is being asked for. Is it necessary to show what was talked in each call through each of the telephone in respect of which Cenvat credit is claimed? Demand for such demonstration can only lead to meaningless harassment to assessees. Where the expenditure is incurred by the company in its books of accounts there is a presumption in favour of the appellant that the service is availed in relation to their business. So long as Revenue has not proved anything to the contrary I do not see any merit in the argument of Revenue Credit on input services allowed - Decided in favor of Assessee.

Summary

Issues:
Cenvat credit on Rent a Cab Services, Telephone Services, and Contract Bus Services for the period 2006-07 to 2010-11.

Analysis:
1. The dispute revolves around the Cenvat credit taken by the appellant on Rent a Cab Services, Telephone Services, and Contract Bus Services. The amount demanded, along with interest, totals Rs. 1,84,920, with an additional penalty imposed under section 11AC of the Central Excise Act. The credit was taken by the corporate office in Chennai as an input service distributor passed on to their factory in Papanasam, Thanjavur for excise duty payment.

2. The adjudicating authority and the Commissioner (Appeal) held that the services provided to officers and executives at the corporate office were not directly related to manufacturing activities. They argued that services like Rent a Cab, Telephone, and Contract Bus Services for personal comfort and welfare do not qualify as input services under the Cenvat Credit Rules, 2004. The authorities relied on various legal precedents to support their decision.

3. The Counsel for the appellant argued that the definition of input service under Rule 2(l) of the Cenvat Credit Rules includes services used in relation to business activities, such as accounting, auditing, financing, and quality control. They contended that the corporate office's management is essential for the manufacturing process to continue, justifying the inclusion of such services as input services. The Counsel presented legal precedents supporting their argument.

4. The Tribunal analyzed the various decisions cited by both parties and emphasized the importance of the corporate office's role in managing the business, including activities relating to business listed in the inclusive portion of the input service definition. The Tribunal rejected the Revenue's argument that services provided to the corporate office do not qualify as input services, highlighting the uniformity in court views regarding services like Rent a Cab utilized for transporting workers or executives to the factory.

5. The Tribunal concluded that the services availed by the corporate office, including Rent a Cab, Telephone, and Contract Bus Services, qualify as input services under the Cenvat Credit Rules, 2004. The Tribunal set aside the impugned order and allowed the appeal, emphasizing the necessity of these services for the smooth functioning of the manufacturing business.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Tribunal's decision regarding the eligibility of Cenvat credit on the services in question.