2013 (12) TMI 1268 - AT - Service Tax

Availment of CENVAT Credit - Rent-a-cab service - Clearing & forwarding service - Whether rent-a-cab service used by them as conveyance for their employees and clearing & forwarding service used for transportation of goods from factory to the port for export during the period of dispute (June, 2005 to June, 2008) are covered by the definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 - Held that - Rent-a-Cab service is provided by the assessee to these workers to reach the factory premises in time which has a direct bearing on the manufacturing activity. In fact the employee is also entitled to conveyance allowance. It also would form part of a condition of service and the amounts spent on the conveyance of the employees is also a factor which will be taken into consideration by the employees in fixing the price of the final product. By no stretch of imagination can it be construed as a welfare measure. It is a basic necessity. To ensure that the work force comes on time at the work place, the employers have taken this measure which has a direct bearing on the manufacturing activity. At any rate it is an activity relating to business - appellant is entitled to Cenvat credit on rent-a-cab service used for conveyance of their employees to and from factory. In respect of the export consignments, the Bill of Lading inter alia serves as the document indicating ownership - incurring the freight and incurring charges for transit insurance could not be a sole consideration to decide the ownership or the point of the sale of the goods. In the present case, undisputedly, the ownership transfer takes place through Bill of Lading, which is issued at the port of export after loading of the goods on board the ship - Therefore view taken by the lower authorities against the party in relation to C & F service cannot be sustained - Following decision of COMMISSIONER OF CENTRAL EXCISE, MADURAI Versus M/s STANGL PICKLES & PRESERVES 2011 (2) TMI 462 - CESTAT, CHENNAI and Commissioner v. Stanzen Toyotetsu India (P) Ltd. 2011 (4) TMI 201 - KARNATAKA HIGH COURT - Decided in favour of assessee.

Summary

Issues: Whether 'rent-a-cab' service used for employees and 'clearing & forwarding' service for goods transportation qualify as 'input service' under Cenvat Credit Rules, 2004.

Rent-a-Cab Service Analysis:
The judgment refers to a case where the High Court held that providing rent-a-cab service to employees for reaching the factory premises on time is directly related to the manufacturing activity and is not merely a welfare measure but a business-related necessity. The court emphasized that such services impact the final product's pricing and are essential for ensuring a timely workforce at the workplace. Following this decision, the appellant is deemed entitled to Cenvat credit for rent-a-cab services utilized for employee conveyance.

Clearing & Forwarding Service Analysis:
Regarding the clearing and forwarding service used for transporting goods from the factory to the port for export, a dispute arose on whether it qualifies as an 'input service.' The appellant argued that since the FOB value of the goods included all charges until export and the ownership remained with them until export, the port should be considered the 'place of removal,' making the service eligible for credit. However, the respondent contended that insufficient evidence was provided to establish the fulfillment of conditions laid down in a specific circular. Despite the lower authorities deeming the factory gate as the 'place of removal,' the tribunal found that the ownership transfer, as indicated by the Bill of Lading issued at the port of export, signifies the port as the 'place of removal.' Citing precedents, the tribunal ruled in favor of the appellant, overturning the lower authorities' decision and allowing the appeal.

In conclusion, the judgment clarifies the eligibility of 'rent-a-cab' and 'clearing & forwarding' services as 'input services' under the Cenvat Credit Rules, 2004 based on the specific circumstances and legal interpretations provided by the High Court and tribunal decisions.