2014 (4) TMI 644 - AT - Central Excise

Duty demand - CENVAT Credit - Credit reversed before issuance of SCN - Whether the service availed for transportation of the staff from the residence to the factory and back can be treated as covered by the definition of input service , as given in Rule 2 (1) of Cenvat Credit Rules, 2004 - Held that - transportation of the employees of the companies has been held to be admissible Modvatable services by the Tribunal in the case of Stanzen Tototetsu India Pvt. Ltd. and said decision stand upheld by the Hon ble Karnataka High Court decision as reported in 2011 (4) TMI 201 - KARNATAKA HIGH COURT . On going through the said judgment of Hon ble High Court, I find that it stand observed by them that definition of input service is wide enough and takes into its ambit the services connected of furtherance of business. Test is whether service utilized is for manufacture of final product directly or indirectly or used in relation to activities relating to business. If any of these two tests are satisfied, service is well within the definition of input service and the manufacturer would be entitle to avail the credit. As such, by referring to CAS-4 standards relating to cost of the final product, it stand held by the Hon ble High Court that transportation of the employees service is an admissible modvatable service - even services used for maintenance and repair of the colony are cenvatable input services. If that be so, transportation provided for school children would also get covered in the definition of input services . - Decided in favour of assessee.

Summary

Issues:
1. Denial of Cenvat credit amounting to Rs. 8,13,065.
2. Whether transportation services for staff, children, and ambulance are eligible for Cenvat credit.
3. Applicability of penalties under Cenvat Credit Rules, 2004.

Analysis:

Issue 1: Denial of Cenvat credit amounting to Rs. 8,13,065
The Commissioner confirmed a Cenvat credit demand of Rs. 18,01,161 against the appellant, who challenged the denial of Cenvat credit amounting to Rs. 8,13,065. The appellant had already paid the balance amount of Rs. 9,88,096 before the show cause notice was issued.

Issue 2: Eligibility of transportation services for Cenvat credit
The appellant argued that transportation services for staff, children, and ambulance are eligible for Cenvat credit. The Tribunal in previous cases had held that transportation of employees from residence to the factory and back qualifies as an input service eligible for Cenvat credit. Similarly, hiring an ambulance as required by the Factories Act is considered an input service. The transportation of children from residential colonies to school was deemed necessary for the smooth running of the business and welfare of employees, thus falling within the definition of input services.

Issue 3: Applicability of penalties
The appellant requested setting aside the penalty, stating that the credit was availed based on statutory documents filed with returns, indicating no malafide intent. The Tribunal found that the transportation of employees and children, along with other related services, were essential for the business activities and production process, thus justifying the availment of Cenvat credit.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellant. The judgment emphasized the broad definition of input services, linking them to activities furthering business objectives. The decision highlighted the importance of transportation services for employees and children in the manufacturing process, ultimately supporting the appellant's claim for Cenvat credit.

This detailed analysis of the judgment provides insights into the issues raised, arguments presented, legal interpretations applied, and the final decision rendered by the Appellate Tribunal.