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2016 (11) TMI 237 - PUNJAB AND HARYANA HIGH COURT

2016 (11) TMI 237 - PUNJAB AND HARYANA HIGH COURT - TMI - Cenvat credit - Input services - Mandap Keeping Services and Rent-a-Cab Services - Rule 2(l) of the CENVAT Credit Rules, 2004 - Held that: - the Mandap Keeper Services used to organize meetings and events for promotion of their products such as a new vehicle launch, sales promotion events and also for business dealer meets, conferences, Executive Level Meetings etc. which activities being important for the respondent to promote the sale o .....

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iture in relation to business being incurred by the respondent in order to promote the sales and for efficient running of the business for which they are entitled to avail CENVAT credit - as the rent-a-cab service has been excluded from the definition of 'input service' by the 2011 amendment w.e.f., 1.4.2011, it has to be held that prior to the amendment, rent-a-cab service came within the definition of input service. As the assessment years in issue in the present case are 2009-10 and 2010- .....

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nd law are involved therein. However, the facts are being taken from CEA No.9 of 2016. 2. The appeal was admitted for consideration of the following substantial questions of law arising out of the order dated 14.05.2015 passed by the Customs Excise & Service Tax Appellate Tribunal, Principal Bench, New Delhi (for the short 'the Tribunal') in Excise Appeal Nos.3614-3615 of 2012 pertaining to the assessment years 2009-10 and 2010-11. (i) Whether the respondent can avail CENVAT credit o .....

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iable to penalty under Rule 15(2) of the CENVAT Credit Rule, 2004 read with Section 11AC of the Central Excise Act, 1944? (v) Whether Interest leviable at the appropriate rate is also recoverable from them on the inadmissible CENVAT credit under Rule 14 of the CENVAT credit, 2004 read with section 11AA of the Central Excise Act, 1944? 3 The facts relevant for the present appeals are that the respondent - assessee is engaged in the manufacture of motor vehicles and parts thereof falling under Cha .....

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on account of Mandap Keeper Service during 2007-08 and availed CENVAT credit for the same. It was also noticed that the respondent assessee had paid service tax of ₹ 6,07,104/- on account of Rent-a-Cab service during the period 2007-08 and availed CENVAT credit for the same. In total the respondent had availed CENVAT credit amounting to ₹ 82,86,163/- on both the aforementioned services during the period December, 2004 to March, 2009 which was not admissible to them as these services .....

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ce for its Gurgaon and Manesar Plants. The Commissioner, Central Excise, Delhi-III was of the opinion that the Mandap Keeper Service used by the assessee to organize meetings and events for promotion of their product such as launch of new vehicles, business needs, conferences, etc. had no nexus with the manufacture of final product and accordingly, it was not 'input service'. Similarly, the Rent-a-Cab service used for the purpose of travelling required for business meetings, visit to dea .....

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4.05.2016 (Annexure A-4) set aside the orders and allowed the appeals. 6 Learned counsel for the appellant has argued that Ld. the Tribunal has failed to appreciate that the very nature of Mandap Keeper and Rent-a-Cab services reveals that these services have been utilized after clearance of the goods upto the place of removal. These services have not been used by the respondents, whether directly or indirectly, in or in relation to manufacture of final product, and clearance of final product up .....

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ed counsel for the respondent on the other hand contended that it had availed the Mandap Keeper Services to organize meetings and events for promotion of their products such as a new vehicle launches, sales promotion events and also for business dealer meets, conferences, Executive Level Meetings etc. These services are important for the respondent to promote the sale of vehicles and therefore, are integrally connected to the business of manufacture of the respondent. 8 It was further submitted .....

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.) held that the manufacturer is eligible to take credit on Rent-a-Cab services used for transporting employees and the said services is integrally connected with the business of the manufacturer. 9. He further argued that the cost of services of Rent-a-Cab and Mandap Keeper received, become a part of the assessable value of the final product, on which excise duty is paid, therefore, the respondent is entitled to avail the CENVAT credit on the service tax paid on such services. He argued that th .....

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re this amendment, CENVAT credit was admissible in respect of Rent-a-Cab service. In this regard, he pointedly made a reference to circular dated 29.04.2011 issued by the Government of India to clarify certain issues relating to CENVAT Credit Rules. At Sr.No.12 of the said Circular, the question for clarification was : 'Is the credit available on services received before 01.04.2011 on which credit is not allowed now, example, Rent-a-Cab service?'. It was clarified that: Rs. The credit on .....

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red by Rule 2(l). This Court had observed that if the said service was not covered by Rule 2(l), it would not have been necessary to introduce the amendment. It was also observed that the amendment not being retrospective, would not retrospectively exclude this activity from the said definition. For the same reasons, it has been contended that Rent-a-Cab service fell within the definition of Rs. input services before its specific exclusion vide amendment of the 2011 w.e.f. 01.04.2011. 11. We hav .....

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manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, .....

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Credit (Amendment) Rules, 2011, which came into effect from 01.04.2011, the CENVAT Credit Rules, 2004 were again amended. Thereafter, the definition of Rs. input service reads as under:- (l) input service means any service, - (i) used by a provider of taxable service for providing an output service; or (ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services .....

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l goods and outward transportation upto the place of removal; but excludes services,- (A) specified in sub-clauses (p), (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act (hereinafter referred as specified services), in so far as they are used for- (a) construction of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specifi .....

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and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee; 15. Clause (105)(o) of Section 65 of the Finance Act, 1994 reads as under:- (105) "taxable service" means any service provided (or to be provided)- xx xx xx (o) to any person, by a rent-a-cab scheme operator in relation to the renting of a cab; 16. Vide Circular No.943/4/2011.CX., dated 29-4-2011, the Gover .....

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arity. Accordingly the following clarifications are presented issue wise in a tabular format. 1 to 11 Xxx Xxx 12. Is the credit available on services received before 1-4-2011 on which credit is not allowed now? e.g. Rent-a-service? The credit on such service shall be available if its provision has been completed before 1-4-2011 Scope of definition of 'input service' 17. The scope of the definition of 'input services' was considered in detail by a Division Bench of Bombay High Cou .....

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ers. The question for consideration was whether the Appellants therein, were eligible to avail credit of the service tax paid on advertising services, sales promotion, market research and the like availed by them and utilize such credit towards payment of excise duty on the concentrate. Credit had been denied on the ground that the advertisements did not relate to concentrates manufactured by the Appellants. The Court held that from the use of the expression 'means' and 'includes' .....

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y or indirectly, in or in relation to the manufacture of final products (ii) Any service used by the manufacturer whether directly or indirectly, in or in relation to clearance of final products from the place of removal (iii) Services used in relation to setting up, modernization, renovation or repairs of a factory, or an office relating to such factory. (iv) Services used in relation to advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, .....

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he expression Business is an integrated/continuous activity and is not confined restricted to mere manufacture of the product. Therefore, activities in relation to business can cover all the activities that are related to the functioning of a business. The term business therefore, in our opinion cannot be given a restricted definition to say that business of a manufacturer is to manufacture final products only. In a case like the present, business of assessee being an integrated activity compris .....

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s. The Rule making authority has not employed any qualifying words before the word activities, like main activities or essential activities etc. Therefore, it must follow that all and any activity relating to business falls within the definition of input service provided there is a relation between the manufacturer of concentrate and the activity. Therefore, the phrase activities relating to business are words of wide import. 20. Further, in view of the fact that the advertisement and sales prom .....

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ltimate consumer and not by any intermediary i.e. manufacturer or service provider. In order to avoid the cascading effect, the benefit of cenvat credit on input stage goods and services must be ordinarily allowed as long as a connection between the input stage goods and services is established. Conceptually, as well as a matter of policy, any input service that forms a part of the value of the final product should be eligible for the benefit of Cenvat Credit. 38. Service tax therefore, paid on .....

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t will defeat the very basis and genesis Cenvat i.e. value added tax. 21. The Court held that it was not necessary that the contents of the advertisement must be that of the final product manufactured by the person advertising. As long as the manufacturer can demonstrate that the advertisement services availed have an effect or impact on the manufacture of the final product and establish the relationship between the input service and the manufacture of the final product, the manufacturer could a .....

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ering services are covered under the inclusive part of the definition of input service . Answering in the affirmative it was held definition of input service is very wide and covers not only services, which are directly or indirectly used in or in relation to the manufacture of final products but also includes various services used in relation to the business of manufacture of final products, whether, prior to the manufacture of final products or after the manufacture of final products. It was o .....

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ement, sales promotion, market research etc.) and includes services rendered in relation to business such as auditing, financing etc. Thus, the substantive part of the definition input service covers services used directly or indirectly in or in relation to the manufacture of final products, whereas the inclusive part of the definition of input service covers various services used in relation to the business of manufacturing the final products. In other words, the definition of input service is .....

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ed in relation to the business of manufacturing the final product. 34. Therefore, the definition of input service read as a whole makes it clear that the said definition not only covers services, which are used directly or indirectly in or in relation to the manufacture of final product, but also includes other services, which have direct nexus or which are integrally connected with the business of manufacturing the final product. In the facts of the present case, use of the outdoor catering ser .....

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t only services used prior to the manufacture of final products, subsequent to the manufacture of final products but also services relating to the business such as accounting, auditing…. etc. Thus, the definition of input service seeks to cover every conceivable service used in the business of manufacturing the final products. Moreover, the categories of services enumerated after the expression Rs. such as in the definition of input service do not relate to any particular class or categor .....

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nclusive part of the definition of input service is only illustrative and not exhaustive. Accordingly, we hold that all services used in relation to the business of manufacture of cement, credit of service tax paid out on catering services has been rightly allowed by the Tribunal. 36. The argument of the Revenue that the expression Rs. such as in Rule 2(l) of 2004 Rules is restricted to the categories specified theein, runs counter to the C.B.E.C. Circular No.97 dated 23rd August, 2007. In that .....

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e services specifically enumerated in the definition of Rs. input service but also cover all services which are used in relation to the business of manufacturing the final products. Therefore, the argument of the revenue which runs counter to stand taken by the C.B.E.C. cannot be accepted. 23. In view of the aforesaid wide and expansive interpretation of the term 'input service' we find the Mandap Keeper Services used to organize meetings and events for promotion of their products such a .....

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purpose of travelling required for business meetings, visits to the dealerships, visits to the vendor sites, dealers meet, business promotion activities, vehicles launch, conferences etc. is a an expenditure in relation to business being incurred by the respondent in order to promote the sales and for efficient running of the business for which they are entitled to avail CENVAT credit. 25. Further, as argued by the Ld. Counsel for the respondent, as the cost of services of Rent-a-Cab and Mandap .....

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, Chandigarh-II vs. Federal Mogul Goetze (India) Ltd., 2015(39) S.T.R. 735 (P&H), the question was whether the CESTAT was correct in holding that the service of transportation of employees of the factory to the factory was an input service within the definition of input service in Rule 2(l) of the 2004 Rules. This Court affirmed the finding of the Tribunal that the transportation of the employees from their residence to the factory premises is related to their manufacturing activities and wi .....

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As is clear from the definition any service used by the manufacturer whether directly or indirectly in or in relation to the manufacture of final products constitutes input service. Various services are set out in the definition expressly, as constituting input service. It also includes transportation of inputs or capital goods and outward transportation upto the place of removal. Therefore, the test is whether the service utilized by the assessee is for the manufacture of final product. Such se .....

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ervice tax paid on such service is claimed as Cenvat Credit, the question is what are the ingredients that are to be satisfied for availing such credit. If the credit is availed by the manufacturer, then the said service should have been utilized by the manufacturer directly or indirectly in or in relation to the manufacture of final products or used in relation to activities relating to business. If any one of these two tests is satisfied, then such a service falls within the definition of inpu .....

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y the employees in fixing the price of the final product. By no stretch of imagination can it be construed as a welfare measure. It is a basic necessity. To ensure that the work force comes on time at the work place, the employers have taken this measure which has a direct bearing on the manufacturing activity. At any rate it is an activity relating to business. This judgment has been followed in Commissioner of C.Ex., Bangalore-III vs. TATA Auto Comp. Systems Ltd., 2012(277) E.L.T. 315 (Kar.), .....

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ough such service had no relation to the manufacturing process or any business activity of the assessees who were manufactures of metal sheets components for motor vehicles. They had availed CENVAT credit for service tax paid on civil work of constructing a plant/factory in the premises, namely for the manufacturing and for rental value of the immovable property leased by them on which the plant was erected. The Revenue contended that though the definition of input service was wide, it did not c .....

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edit thereof could not be taken. Although civil construction work is a taxable service under the Finance Act, 1994, it is basically civil in nature relatable to the immovable property not chargeable to Central Excise Duty. 30. The aforesaid contentions did not find favour with the Court, which, on the other hand agreed, with the submissions of the assessee that CENVAT credit taken on the tax paid in respect of the said input services could be utilized by the assessee in accordance with the CENVA .....

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quired directly and in any event indirectly in or in relation to the manufacture of the final product and for the clearance thereof up to the place of removal. But for the factory the final product could not have been manufactured and the factory needed to be constructed on land. The land and the factory are used by the manufacturer in any event indirectly in or in relation to the manufacture of the final product, namely, metal-sheets. The respondents case, therefore, falls within the first part .....

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of a provider for input service relating to such a factory fell within the definition of 'input service'. As the amendment was not retrospective, it was held not to cover the case of the assessee, which related to the period 2007-08 to 2009-10, prior to the amendment. The question was thus answered against the revenue and availing of CENVAT credit was upheld. 32. For the same reason, as the rent-a-cab service has been excluded from the definition of 'input service' by the 2011 am .....

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