2021 (11) TMI 11 - AT - Central Excise

CENVAT Credit - input services - air travel agency - place of removal - amended definition of input services given in Rule 2 (l) of Cenvat Credit Rules, 2004 as is applicable w.e.f. 01.04.2011 - HELD THAT - The input service could be any service which was used by the manufacturer and / or any output service provider directly or indirectly, in or in relation to manufacture of final products and those which are used for the purpose of clearances of final products upto the place of removal; but not limited to and include the services used in relation to, inter alia, sales promotion; procurement of inputs; quality control; auditing etc. as specified in the inclusive part of the definition - with regard to the services related to the activities specified in the inclusive part of the definition, there is no necessity to establish any direct relation or nexus with the manufacturing activity. This implies that it is not only the activities specified in the inclusive part of the definition but also any services used in relation to such activities specified in the inclusive part of the definition, would qualify themselves as an input service, under Rule 2 (l) of CCR. Air Travel Agency Service having been used by the officials of the manufacturer for traveling to different places for creating the demand for the products manufactured by them is also a service used in relation to procurement of inputs, sales promotion/ marketing activities (which is a specified activity in the inclusive part of the definition) thus it also qualify itself as an input service, even after 01.04.2011. There is no denial to the fact that the air-travel agency service, in the present case has been used for business purpose i.e. for the purpose of promotion of sales, auditing, review of various business processes, inspection of vender premises and other business purposes. None of these services were used for personal use or consumption by any employee. Accordingly, they were all for the purpose of the appellant company, its corporate office and all other units - in respect of air-travel services itself in appellant s own case the Department has allowed the credit. There are no justification in the order under challenge while denying the said eligibility despite admitting that the service was not used by the employees personally - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether air-travel agency service is eligible for Cenvat credit of service tax paid for it, in terms of the amended definition of input services under Rule 2 (l) of Cenvat Credit Rules, 2004 as applicable from 01.04.2011.

Analysis:

Issue 1: Whether air-travel agency service is eligible for Cenvat credit

The case involves the appellant, a manufacturer of bulk drugs and drug intermediates, availing Cenvat Credit of service tax paid on inputs, capital goods, and input services. The Department alleged that the appellant contravened Rule 3 of Cenvat Credit Rules, 2004 by availing credit on air-travel agency service, which they claimed did not constitute an input service. Show Cause Notices were issued proposing recovery of amounts, which were confirmed initially and on appeal. The central issue revolves around whether air-travel agency service qualifies as an input service under the amended definition.

The appellant argued that air-travel agency service is eligible for Cenvat Credit as it indirectly relates to the manufacture of final products by creating demand. They contended that the service was used for business purposes and not for personal employee consumption, thus meeting the criteria of an input service. The Department, however, relied on the amended definition effective from 01.04.2011, emphasizing that services used post-manufacturing, like sales promotion and auditing, are not considered input services. They highlighted a Board Circular disallowing credit for services primarily for employee consumption.

The Tribunal analyzed the definition of input services under Rule 2 (l) of CCR, 2004, post the April 2011 amendment. The definition includes services used directly or indirectly in relation to manufacturing and clearance of final products. It encompasses various activities like sales promotion, auditing, and procurement of inputs. The Tribunal emphasized that the inclusive part of the definition is crucial, covering services indirectly contributing to manufacturing promotion. As the air-travel agency service was used for business purposes and not for personal employee consumption, it was deemed eligible for Cenvat Credit.

In conclusion, the Tribunal set aside the order denying eligibility for Cenvat Credit on air-travel agency service. The decision was based on the service's business use and alignment with the inclusive part of the definition. The appeal was allowed, emphasizing that the service was not used for personal employee consumption, meeting the criteria for an input service.

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