2018 (12) TMI 1159 - AT - Central Excise

CENVAT Credit - input services - rent-a-cab service - period from January 2011 to March 2013 - Held that - The appellant has not produced any evidence to establish that the motor vehicles are capital goods for the service provider for the period from 1.4.2011 to 31.3.2013 the credit is ineligible and the demand for the said period is therefore upheld. Penalties - Held that - The issue is interpretational and also transitional period penalty imposed are unjustified. Appeal allowed in part.

Summary

Issues: Disallowance of credit on rent-a-cab service

Analysis:
The appellant, engaged in the manufacture of hydraulic cylinders, availed rent-a-cab services for employee pick-up and drop facilities related to IT work during the period from January 2011 to March 2013. The appellant argued that these services were directly linked to employee performance for efficient work and thus, the credit on the services was rightfully availed. The appellant also contended that due to the interpretational nature of the issue and the transitional period during the amendment to the definition of input services, penalties should be waived. On the other hand, the ld. AR supported the findings of the impugned order, stating that post the amendment excluding services related to motor vehicles, credit could only be eligible if the motor vehicles were considered capital goods for the service provider.

The Tribunal considered the period from January 2011 to March 2013 and acknowledged that credit was eligible only for the first three months until 31.3.2011, as the definition of input services had a broader scope during that time. However, post 1.4.2011, with the amendment excluding services related to motor vehicles unless they were considered capital goods for the service provider, the credit was deemed ineligible. Referring to a previous case, the Tribunal highlighted the necessity for the appellant to provide evidence establishing the motor vehicles as capital goods for the service provider, which was not done. Consequently, the demand for the period from 1.4.2011 to 31.3.2013 was upheld as ineligible for credit.

Regarding the penalties, the appellant requested their waiver, citing the interpretational nature of the issue and the transitional period. The Tribunal agreed that the penalties were unjustified under the circumstances and modified the impugned order to allow credit for the period up to 31.3.2011 while waiving the penalties imposed, without affecting the demand or interest for the period from 1.4.2011 to 31.3.2013. As a result, the appeals were partly allowed with the specified adjustments and consequential benefits, if any, were granted.