Availability of Cenvat Credit on various input services

PJ/CASE LAW/2016-17/3088

Case:MAHINDRA CASTING LTD. Vs COMMISSIONER OF CENTRAL EXCISE, PUNE-I

Citation: 2016 (41) S.T.R. 831 (Tri. - Mumbai)

Brief Facts:The issue involved in this case is denial of Cenvat credit of service tax paid on the following services :-
(a)        Agency Charges
(b)        Tour Operator Service
(c)        Other Welfare Expenses
(d)        Catering services (On the amount collected by the appellant from their employees)
Reasoning of Judgment:-As regards the “agency charges” and “tour operator charges” they find that law has been settled by the judgment of the Hon’ble High Court of Gujarat in the case of CCE v. Mundra Port & Special Economic Zone Ltd. - 2011 (21)S.T.R. 361 (Guj.) wherein it was clearly held that the services rendered by the cargo handling services and the service tax paid thereof is eligible to be availed as Cenvat credit and the same view has been expressed by various decisions of the Tribunal. Accordingly Cenvat credit availed on agency services is eligible to be availed as Cenvat credit.
As regards the service tax paid on tour operator service, it was submitted by the learned Consultant that the services of “tour operator” was engaged for transportation of their employees to the residence and vice versa. They find that the Hon’ble High Court of Karnataka in the case of CCE v. Stanzen Toyotetsu India (P) Ltd. - 2011 (23)S.T.R. 444 (Kar.) has clearly held that these services are for transportation of employees and credit of tax paid is eligible as input service. Since the issue has already been settled by the Hon’ble High Court of Karnataka, CENVAT credit of service tax paid on tour operator service is allowed.
As regards “other welfare service”, they find that the service tax paid on the services of purchase of gift and setting up of mandap in the factory premises for celebrating Dussera festival is not eligible to be held as credit as this seems to be not connected with the business of the appellant, hence the Cenvat credit on this services is upheld as incorrectly availed and needs to be reversed by the appellant.
As regards Cenvat credit availed on “catering services” by the appellant is in respect of service tax paid on the amounts collected from the employees. Hon’ble High Court of Bombay in the case of Ultratech Cement has already settled the issue as to that the service tax paid on the employees’ contribution cannot be availed as Cenvat credit. This judgment is reported at 2010 (20)S.T.R. 577 (Bom.) = 2010 (260)E.L.T. 369 (Bom.). Accordingly the credit availed by the appellant on “other welfare expenses” and the “catering charges” collected from the employees are ineligible and was correctly denied by lower authorities. Appellant is directed to reverse the said amount along with interest, in accordance with law.
In sum, Cenvat credit of service tax paid on “agency service” and “tour operator service” are allowed and the service tax credit on “other welfare charges” and “catering charges” are denied.

Decision: Appeal disposed of.

Comment: The gist of the case is that the credit is available on agency service and tour operator service for transportation of employees. However Cenvat credit is available in respect of mandap services used for celebrating festival and catering services provided to employees are not available.

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PJ/CASE LAW/2016-17/3088

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