2019 (2) TMI 2132 - AT - Central Excise

Entitlement to Cenvat credit on various input services availed by a manufacturer of motor vehicles - credit received prior to 1.4.2011 - credit for the services received by the respondent- assessee at Mundra Port and JNPT Port - Services received at ONGC Mumbai - Training and Coaching Services - IT (Software) Services - CHA and Cargo Handling Services for Export - Warehouse and storage services - Land Survey Service (Real Estate Consultant) - Hotel Broadway Services. Denial of credit which have been received prior to 1.4.2011 - HELD THAT - In terms of the decision of the Hon ble Bombay High Court in the case of Ultratech Cement 2010 (10) TMI 13 - BOMBAY HIGH COURT wherein it has been held that any service availed by an assessee being a manufacturer of excisable goods in the course of their business is entitled to avail credit in terms of Rule 2(l) of Cenvat Credit Rules 2004. Admittedly the services in question have been availed by the assessee for technical assistance for engineering design development manufacture testing quality control sale of the goods and after-sale service in accordance with agreement. Therefore we hold that the assessee is entitled to avail credit on the said services. In that circumstance the impugned order quo denial of credit of Rs.96, 17, 096/- is set aside and the appeal filed by the respondent-assessee is allowed. Credit for the services received by the respondent- assessee at Mundra Port and JNPT Port - HELD THAT - It is found that in the export of goods the port of export is the place of removal of the goods as held by this Tribunal in the case of Honda Motorcycles 2018 (8) TMI 1093 - CESTAT CHANDIGARH . Therefore the respondent-assessee is entitled to availed credit on the service received at port being the place of removal of the goods. In that circumstance we do not find any infirmity in the impugned order and the Cenvat credit is allowed. Services received at ONGC Mumbai - HELD THAT - In this case the Commissioner in the impugned order has observed that the assessee is providing service to its client for provision of output service of manpower recruitment and supply to ONGC. Therefore the assessee is entitled to avail credit on that services. Admittedly the respondent-assessee has paid service tax to G4S Facility Services to provide the drivers which ultimately provided to ONGC. Therefore the respondent- assessee is entitled to avail credit on the said services being output service provider. In that circumstance there are no infirmity in the impugned order. Training and Coaching Services - HELD THAT - The respondent-assessee is receiving the services of NIS Sparta and Strategic Learning to impart the training to the employees/representative of dealers. The case of the Revenue is that on the said service the assessee is not entitled to avail credit. The said service has been availed by the assessee and its dealers to increase efficiency of personnel working at the dealers premises. The respondent-assessee arranges various trainings for the dealers staff. For the purpose of arranging such trainings the respondent-assessee received the services of Training and Coaching Services which provided qualified persons for imparting the requisite training from NIS Sparta and Strategic Learning Moreover the respondent-assessee can employ persons at dealers premises who are having expertise in handing the vehicles. In that circumstance the said service is an input service used by the respondent-assessee for providing output service therefore the respondent-assessee is entitled to avail credit and there are no infirmity in the impugned order. IT (Software) Services - SCN issued on the ground that the output services cannot be availed when the assessee was registered as manufacturer as the premises registered under the Service Tax - HELD THAT - The respondent-assessee has entered into standard dealership agreements with the said dealers on principal to principal basis with specific conditions regarding modus of operandi of sale purchase and passing of title dealer operation product specification standard of outlets promotion and advertising etc. The respondent-assessee sells the vehicles in terms of dealership agreement to the dealers whereby the title and all risks with respect to the vehicles pass on to the concerned dealers at the factory gate of the respondent-assessee in case of sales to domestic dealers - The said service is integral part of the respondent-assessee for management of data maintenance of repair of vehicles after sale service in warranty period. Therefore the said service is entitled for input service credit - the assessee is entitled to avail credit on the said service. Therefore there are no infirmity in the impugned order. CHA and Cargo Handling Services for Export - it is alleged that the port cannot be the place of removal therefore they are not entitled to avail credit - HELD THAT - The services of CHA and cargo handling services for export have been availed by the respondent-assessee at port of export and in the impugned order the Commissioner has recorded that the services in question have been availed by the respondent-assessee for export of vehicles and in the case of export the place of removal is the port of export therefore the respondent-assessee is entitled to avail credit on the said service. Admittedly these facts are not disputed therefore there are no infirmity in the impugned order. Warehouse and storage services - HELD THAT - The respondent-assessee has availed the said services for storing the vehicles meant for export and port of export being the place of removal therefore the Commissioner has allowed the credit on Warehouse and storage services availed by the respondent-assessee. Admittedly the facts of the case are not in dispute that the said service has been availed for storage of vehicles which are meant for export. In that circumstance the credit cannot be denied to the appellant and the Commissioner in the impugned order has allowed the credit to the respondent-assessee. Therefore there are no infirmity in the impugned order. Land Survey Service (Real Estate Consultant) - HELD THAT - The respondent has stated that they have availed the said service for undertaking the activity of setting up the regional and zonal offices etc. across India so that they would have a presence in other parts of India and to facilitate more effective and efficient management of their ever expanding business across the country. In pursuance of the same they had located and intended to purchase certain properties. They therefore used the services of a consultant for evaluation of the properties prior to the purchase of the same. The said service sought to be denied as the same is not related to the manufacturing of the goods of the appellant. It is found that the said services have been used by the respondent-assessee for setting up the regional and zonal offices which are used for marketing and advertising to expand their customer base. Therefore the said activity which is related to the manufacturing of vehicles by the respondent-assessee in that circumstance the respondent-assessee is entitled to avail credit on the said services is having relation to manufacturing activity and the Commissioner has righty allowed the credit. Hotel Broadway Services - credit sought to be denied on the ground that the service is not related to the export of goods - HELD THAT - The respondent-assessee has availed the said service in respect of promotional activity to promote the goodwill of the brand name of the respondent- assessee and the same is covered in the inclusive part as advertisement or sales promotion activity. The respondent-assessee has allowed the credit under the common head of services provided at port without giving a finding on each service and therefore sought remand of the matter back to the adjudicating authority. In 2008 the respondent-assessee has launched the National Road Safety Mission with the objective to train 5, 00, 000 people in safe driving out of which 1, 00, 000 would be under privileged sections of society; to collaborate with the Institute of Driving Training and Research and various state governments with the goal of promoting road safety. This initiative apart from being an attempt to discharge its corporate social responsibility was taken up as a means to promote goodwill of the brand name of the respondent-assessee in the market amongst its competitors. Therefore the said activity is in respect of sales promotion and advertisement of their product would constitute input services as per the includes part of the definition of input service in terms of Rule 2 (l) of Cenvat Credit Rules 2004. Therefore the Commissioner has rightly allowed the credit on the said service. Therefore the respondent-assessee has rightly availed credit on that service. Therefore there are no no infirmity in the impugned order. Conclusion - i) Services integral to manufacturing sale and after-sale service including technical assistance training IT support systems and promotional activities qualify as input services eligible for Cenvat credit. ii) In export transactions the port of export is the place of removal of goods and services availed at the port for export are eligible for credit. iii) Credit is allowable on services used for setting up regional and zonal offices when such services relate to marketing advertising and expansion activities connected to manufacturing operations. The appeal filed by the Revenue deserves no merit and accordingly the same is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal revolve around the entitlement to Cenvat credit on various input services availed by a manufacturer of motor vehicles. The specific issues include:

• Whether Cenvat credit is allowable on accommodation services (catering and housekeeping) used by personnel providing technical assistance integral to manufacturing and sale of excisable goods, particularly when services were availed prior to 1.4.2011 but credit was claimed after that date.
• Whether Cenvat credit is permissible on services received at Mundra Port and JNPT Port, considering the place of removal of goods in export transactions.
• The entitlement to credit on services rendered at ONGC Mumbai, specifically manpower recruitment and supply services.
• Whether credit can be availed on training and coaching services provided to employees and dealers' representatives.
• Entitlement to credit on IT (software) services related to Dealer Management System used for sales and after-sales service management.
• Allowability of credit on CHA (Customs House Agent) and cargo handling services for export, and the relevance of the port as the place of removal.
• Credit on warehouse and storage services used for vehicles meant for export.
• Whether credit can be availed on land survey services (real estate consultancy) used for setting up regional and zonal offices outside manufacturing premises.
• Credit entitlement on Hotel Broadway services used for promotional activities and brand goodwill enhancement.
• Whether the Revenue's appeal challenging the allowance of credit on port services under a common head without specific findings requires remand.

2. ISSUE-WISE DETAILED ANALYSIS

Accommodation Services (Catering and Housekeeping)

The legal framework involves Rule 2(l) of the Cenvat Credit Rules, 2004, and Circular No. 843/4/2011-CX dated 29.4.2011. The Tribunal referred to the decision of the Hon'ble Bombay High Court in Ultratech Cement (2010), which held that any service availed by a manufacturer in the course of business is eligible for credit.

The Court noted that the services in question were received prior to 1.4.2011, although credit was claimed after that date. The respondent's parent company provided technical assistance integral to manufacturing and sale, and the accommodation services supported personnel facilitating these activities.

The Tribunal reasoned that since these services were integral to manufacturing and sale, the credit could not be denied. The contention that the services were availed before 1.4.2011 was accepted, and the Circular was cited to support the allowance of credit claimed after that date. The Tribunal set aside the impugned order denying credit of Rs.96,17,096/- and allowed the appeal.

Services at Mundra Port and JNPT Port

The Revenue challenged the allowance of credit on the ground that the Commissioner allowed credit under a common head without specific findings on each service and sought remand.

The Tribunal referred to its earlier decision in Honda Motorcycles (2018), holding that in export transactions, the port of export is the place of removal. Since the respondent owned the goods until export and had set up facilities at the ports, the services were directly connected to the export activity.

The Tribunal found no infirmity in the impugned order and upheld the allowance of credit on port services without remand.

Services at ONGC Mumbai (Manpower Recruitment and Supply)

The respondent provided output services of manpower recruitment and supply to ONGC, specifically drivers supplied through a service provider.

The Commissioner allowed credit, recognizing the respondent as an output service provider. The Tribunal upheld this, noting that the respondent paid service tax on such services and was entitled to credit as an output service provider.

Training and Coaching Services

The Revenue contended that credit could not be availed on training services when the respondent was registered as a manufacturer and premises were registered under Service Tax.

The Tribunal observed that training was imparted to employees and dealers' representatives to increase efficiency. The training was provided by qualified persons and was integral to the business operations, including dealer management.

Since the training services were input services used for providing output services, credit was allowed. The Tribunal found no infirmity in the impugned order.

IT (Software) Services

The respondent received IT services from a third party for support and consultancy related to the Dealer Management System (DMS), a computerized network connecting the respondent, dealers, and service stations.

The Tribunal noted that the DMS was essential for communication, order placement, warranty management, and after-sale service, integral to the sale and servicing of vehicles.

Given the integral role of the IT services in manufacturing and sale operations, the Tribunal held that credit was rightly allowed.

CHA and Cargo Handling Services for Export

The Revenue argued that the port could not be the place of removal, and credit was allowed under a common head without specific findings.

The Tribunal reiterated that the port of export is the place of removal in export transactions. Since the services were availed for export of vehicles, credit was allowable. The Tribunal found no infirmity in the impugned order.

Warehouse and Storage Services

The respondent availed warehouse and storage services for vehicles meant for export. The Commissioner allowed credit, and the facts were undisputed.

The Tribunal held that since the place of removal was the port of export, credit on storage services related to export goods could not be denied.

Land Survey Service (Real Estate Consultant)

The Revenue sought to deny credit on the ground that services were used for setting up regional and zonal offices outside the factory and were unrelated to manufacturing.

The respondent stated that these offices facilitated effective management and business expansion across India, involving property evaluation prior to purchase.

The Tribunal held that since these activities related to marketing, advertising, and expansion of business connected to manufacturing, credit was allowable. The Commissioner's allowance of credit was upheld.

Hotel Broadway Services

The Revenue challenged credit on the ground that the services were unrelated to export.

The Tribunal found that the services were used for promotional activities to enhance brand goodwill, including a National Road Safety Mission aimed at training and public awareness, which also promoted the brand.

Such activities fell within the definition of input services under Rule 2(l) of the Cenvat Credit Rules, 2004, as advertisement or sales promotion. The Commissioner rightly allowed credit, and the Tribunal upheld this.

Revenue's Appeal on Port Services Credit

The Revenue contended that credit was allowed under a common head without specific findings and sought remand.

The Tribunal rejected this, noting the consistent finding that the port is the place of removal in export and the services were directly connected to export activities. The impugned order was affirmed without remand.

3. SIGNIFICANT HOLDINGS

The Tribunal established the following core principles and determinations:

• "Any service availed by an assessee being a manufacturer of excisable goods in the course of their business is entitled to avail credit in terms of Rule 2(l) of Cenvat Credit Rules, 2004."
• Services integral to manufacturing, sale, and after-sale service, including technical assistance, training, IT support systems, and promotional activities, qualify as input services eligible for Cenvat credit.
• In export transactions, the port of export is the place of removal of goods, and services availed at the port for export are eligible for credit.
• Credit is allowable on services used for setting up regional and zonal offices when such services relate to marketing, advertising, and expansion activities connected to manufacturing operations.
• The Commissioner's allowance of credit on various input services without detailed separate findings on each service is not a ground for remand if the overall nexus to manufacturing and export is established.

The Tribunal conclusively allowed the respondent-assessee's appeals relating to denial of credit on accommodation services and dismissed the Revenue's appeals challenging allowance of credit on port and other services, thereby affirming the entitlement to Cenvat credit on all the input services considered.