By TIOL News Service

CHENNAI, MAY 18, 2016: THE dispute in the appeal is about the eligibility of CENVAT Credit on certain services like Maintenance or repair of Helicopter, Rent a cab and Management, maintenance or repair Service.

The credit on Maintenance or repair of helicopter was denied on the ground that the appellant failed to produce evidence that the helicopter was used for business purposes only, since it appears that the helicopter was used for the purpose of other companies also, as the Managing Director of this Company was also the Managing Director of other group companies at Mettur, Cuddalore and trips to such places have been proved.

After hearing both sides, the Tribunal held:

++ With regard to the eligibility of credit on the maintenance and repair service of helicopter, the Commissioner (Appeals) has not disputed the eligibility of credit, but has sought to deny on the ground that the helicopter was not exclusively used for the appellant's unit at Viralimalai. The Commissioner (Appeals) has failed to note that the helicopter was used for the transportation of the Directors and Chairman of the company. While not disputing the eligibility for credit based on the Tribunals ruling in the case of Force Motors Ltd. Vs. Commissioner, 2008-TIOL-1199-CESTAT-MUM, wherein it was held that in this modern age, use of aircraft is to be considered as a bare requisite for business purposes and held that any service tax paid on the services for the maintenance of aircraft is admissible as credit. The appellant has filed copy of Invoices raised by the appellant company on other companies for the usage of Helicopter and Service Tax has also been collected under the category Business Auxiliary Service. There is no requirement under Rule 2(l) of the Cenvat Credit Rules, 2004 which defines ‘input service' that the usage has to be in relation to a particular unit. Input service definition during the period in dispute i.e., March 2010 to April 2010 was very wide and the inclusive definition covered activities relating to business, which has not been taken into consideration. The denial of credit is therefore incorrect and unsustainable.

++ As regards eligibility to credit on Rent a Cab service and contract bus service, a consistent stand taken by various Courts and Tribunals is that when there is a recovery of cost, the proportionate credit should be reversed. The denial of the entire credit is erroneous and the appellants are directed to reverse the proportionate credit to the extent of recovery of cost from the employees.

++ As regards eligibility for credit on management and consultancy service, when there is no dispute on the consultancy provided, denial for the reason that, there is every reason to believe that his consultancy service is not meant for the exclusive use of the appellants unit alone in the show cause notice without elaborating as to the reason for the said belief is unsustainable. The show cause notice is the foundation for any proceeding. In this case, the allegation is too vague and therefore, the appellant's contention to the contrary cannot be doubted. Accordingly, credit is eligible.

(See 2016-TIOL-1180-CESTAT-MAD)