2014 (1) TMI 37 - AT - Service Tax

Denial of CENVAT Credit - Air travel agent services - Credit denied to them on the ground that the said services cannot be treated as input services - Held that - air travel was performed for the purpose of company business. The Service Tax paid on the said air travel agent service is admissible as credit - value of travel stand paid by the company office indicating that the air travel was undertaken by the employees in connection with the business of appellant. In terms of provisions of Income Tax law an assessee cannot incur any expenses of any personal nature on any of its employees/Director. Inasmuch as it is the appellant who had paid for said air travel, it has to be held that the air travel was undertaken in connection with the business of the appellant company - Following decision of Commissioner of Central Excise, Ahmedabad v. Fine Care Biosystems 2009 (7) TMI 142 - CESTAT, AHMEDABAD and ABB Ltd. 2009 (5) TMI 48 - CESTAT, BANGALORE - Decided in favour of assessee.

Summary

Issues:
1. Denial of Cenvat credit for air travel agent services.
2. Determination of whether air travel can be considered as input services for Cenvat credit.
3. Interpretation of expenses incurred by the company for air travel in connection with business.

Analysis:

1. The judgment addresses the denial of Cenvat credit amounting to Rs. 34,428/- for air travel agent services by the appellants. The lower authorities rejected the credit on the basis that the services were not considered as input services, and there was a lack of evidence to prove that the air travel was related to the business activities of the employees.

2. The issue of whether air travel can be classified as input services for availing Cenvat credit has been extensively discussed in previous decisions. Reference was made to a Tribunal decision in the case of Commissioner of Central Excise, wherein it was established that air travel undertaken for the purpose of company business is eligible for Service Tax credit. This legal precedent supported the appellant's claim for the admissibility of the Service Tax paid on air travel agent services.

3. The appellants argued that the company had covered the expenses for the air travel, indicating a business connection. The judgment highlighted that as per Income Tax laws, an assessee cannot incur expenses of a personal nature for employees or directors. Therefore, since the company had borne the cost of air travel, it was deemed to be undertaken in connection with the business of the appellant company. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief granted to the appellant.

In conclusion, the judgment resolved the issues by establishing the eligibility of air travel as input services for Cenvat credit based on legal precedents and the interpretation of expenses incurred by the company in connection with business activities.