CX - CENVAT -Phrase 'for personal consumption' appearing in clause (C) of Rule 2(l) of CCR, 2004 is not linked to clause (A) and (B)- Rent-a-cab service is a part of limb (B) and stands excluded from definition of Input service: CESTAT
By TIOL News Service
MUMBAI, JULY 23, 2018: THE lower authorities have denied credit of service tax paid on Rent-a-Cab service for the period after 01.04.2011 when provided by the manufacturer for transporting the employees from various pick up points to the manufacturing facility.
The appellant is before the CESTAT and while placing on record a copy of the order dated 18.09.2017 of the Commissioner (A) submits that in case of a similarly placed party, the credit has been allowed on the said services; that such services have been provided for the purposes of transporting the employees for smooth operation of manufacturing facility; that the expenses incurred are part of business expenses and hence credit of tax paid on these services should be allowed irrespective of amendment made in 2011. Reliance is also placed on the decision in Reliance Industries Ltd. - 2016-TIOL-2392-CESTAT-MUM.
The AR adverted to the exclusion clause in rule 2(l)(B) wherein the impugned services have been specifically mentioned. Support is also drawn from the decisions in J.K. Paper Mills - 2014-TIOL-3080-CESTAT-KOL and S.K.D. Lakshmanan Fireworks Industries - 2016-TIOL-275-CESTAT-MAD.
The Single Member Bench considered the submissions and in the matter of reliance placed on the order passed by the Commissioner(A) observed that it was disinclined to accept the said argument since -
(i) Section 35R(4) of the Central Excise Act, 1944, specifically provides that in case where the order of Commissioner (Appeals) has not been appealed against because of the amount involved is less than the threshold limit, the same would not be binding precedents. Further, the earlier order of the Commissioner (Appeals) cannot be a ground for passing of unintended benefit that was not due as per rule and law.
(ii) It has been specifically held by the High Court of Allahabad in the case of Super Cassettes - 2003-TIOL-54-HC-ALL-CX (Para 8) that such order of authorities cannot be a precedence for allowing the unintended benefit.
As regards the eligibility of credit on Rent-a-cab services post 01.04.2011 , the Member (Technical) observed -
"6.1. With effect from 01.04.2011, Cenvat Credit Rules, 2004, have been amended to provide for specific exclusion in respect of rent-a-cab service from the definition of input service. The exclusion clause has got three limbs categorized as (A), (B) and (C). The phrase specifically "for personal consumption" appearing in (C) is not linked to clause (A) and (B). In the present case, the services sought to be denied are part of limb (B).
6.2. With reference to other part of arguments that these are part of business expansion of the appellant. Hence exclusion clause is provided in the statute is with reference to the specific definition clause only. Something which may be covered has got to be excluded by way of exclusion. In view of the exclusion clause the arguments with regard to the coverage, the services under the definition clause first part would not be correct."
The Bench further relied on the decisions cited by the AR wherein the CENVAT Credit in respect of rent-a-cab service was held as inadmissible.
As regards support sought by the appellant of the Tribunal decision in Reliance Industries Ltd. (supra), the Member(T) extracted paragraph 6.3 of the same and remarked -
"8. The close analysis of Para 6.3 shows that the bench has been moved by the fact that on the amendments indicates ‘when such services are used primarily for consumption of its employees, CENVAT credit cannot be allowed.' The above reference could be held good only with reference to the services mentioned in clause (C) and not those mentioned Clause (A) & (B). While deciding the matter the bench did not make any distinction between the services covered under clauses (B) and (C). Such interpretation which has been done ignoring the specific provisions in law cannot be but per incuriam and hence cannot be binding precedence. Accordingly, the submissions made vis-à-vis relying on this judgments cannot be a reason for allowing the credit in respect of rent-a-cab service in the present case."
In the matter of imposition of penalty, it was observed that since the issue involves interpretation, no penalty could be imposed u/r 15 of CCR, 2004 following the decision in J.K. Paper Mills - 2014-TIOL-3080-CESTAT-KOL.
Except for the above modification in the impugned order of Commissioner(A) , the appeal was dismissed.
In passing: Incidentally, the decision in Reliance Industries was delivered by a Division Bench and the present is a Single Member Bench.
(See 2018-TIOL-2245-CESTAT-MUM)
