2016 (8) TMI 699 - AT - Central Excise

Cenvat credit - service tax paid on rent-a-cab service - rent-a-cab service are employed for logistical purposes of employees of the factory of the assessee - period in dispute is January 2011 to June 2012 - Held that - as regards the cenvat credit for the period January 2011 to 31.3.2011, it is found that the issue is fairly settled in favour of the appellant in the case of Kakinada Seaports Ltd. v. C.C.E. & ST & Cus., Visakhapatnam II - 2015 (11) TMI 51 - CESTAT BANGALORE which stands confirmed by Hon ble Karanataka High Court in the case of C.C.E., Bangalore v. Stanzen Toyotetsu india (P) Ltd. - 2011 (4) TMI 201 - KARNATAKA HIGH COURT ; John Deere India Pvt. Ltd. v. C.C.E., Pune III - 2015 (9) TMI 261 - CESTAT MUMBAI . Therefore, the cenvat credit availed on service tax paid for the period January 2011 to 31.3.2011 is eligible to be availed as cenvat credit. As regards the cenvat credit on the service tax paid on the rent-a-cab for the period from 1.1.2011 it is found that the provisions of Rule 2(l)(B) of Cenvat Credit Rules , 2004, excludes the category of rent-a-cab for availment of cenvat credit. Therefore, in view of an unambiguous provisions,it is found that the appellant is not eligible to avail cenvat credit for the period subsequent to 1.4.2011. The said amount is to be recovered from the appellant along with interest. Imposition of penalty - Held that - it is found that the said penalty is upheld has not reversed the cenvat credit which he has improperly availed; as the provisions of Rule 2(l) were effective from 1.4.2001 and they should not have availed the cenvat credit of the service tax paid on the rent-a-cab service. - Appeal disposed of

Summary

Issues:
1. Eligibility of cenvat credit on service tax paid for rent-a-cab services utilized by the appellant from January 2011 to June 2012.

Analysis:

The main issue in this case revolves around the eligibility of the appellant to avail cenvat credit on the service tax paid for rent-a-cab services used from January 2011 to June 2012. The Revenue argues that these services are not directly related to the manufacturing process of the final product. On the other hand, the appellant contends that the rent-a-cab services were essential for the logistical operations of the factory employees.

Regarding the cenvat credit for the period from January 2011 to March 2011, the Tribunal finds precedent in favor of the appellant based on the case law of Kakinada Seaports Ltd. v. C.C.E. & ST & Cus., Visakhapatnam II and subsequent confirmations by the Hon'ble Karnataka High Court in cases such as C.C.E., Bangalore v. Stanzen Toyotetsu India (P) Ltd. and John Deere India Pvt. Ltd. v. C.C.E., Pune III. Consequently, the Tribunal rules in favor of the appellant, allowing the cenvat credit for this period.

However, for the period after April 1, 2011, the Tribunal refers to Rule 2(l) (B) of the Cenvat Credit Rules, 2004, which explicitly excludes rent-a-cab services from availing cenvat credit. Therefore, the Tribunal concludes that the appellant is not eligible to claim cenvat credit on the service tax paid for rent-a-cab services post-April 1, 2011. The Tribunal orders the recovery of the amount along with interest from the appellant for this period.

Regarding the penalty imposed by the adjudicating authority and upheld by the first appellate authority, the Tribunal maintains the penalty as the appellant improperly availed cenvat credit on rent-a-cab services despite the clear provisions of Rule 2(l) from April 1, 2001. The Tribunal upholds the penalty due to the appellant's non-compliance with the rules.

In conclusion, the appeal is disposed of with the decision to allow cenvat credit for the period up to March 2011 but deny it for the subsequent period based on the provisions of Rule 2(l) (B) of the Cenvat Credit Rules, 2004. The penalty imposed on the appellant is upheld due to the improper availing of cenvat credit post-April 1, 2001.