Cenvat Credit-mobiles and repair & maintenance of motor vehicles used by officers & employees for business purpose

PJ/Case Laws/2011-12/1345

Case: M/s. FORCE MOTORS LTD. Vs. CCE, PUNE-I

Citation: 2008-TIOL-539-CESTAT-MUM

Issue:- Cenvat Credit on mobile phones and repair & maintenance charges incurred on motor vehicles provided to officers & employees for business related activities – admissibility of – Tribunal found force in assessee’s submissions – stay and waiver of pre-deposit granted.

Brief Facts:- Appellant were engaged in the manufacture of Tractors, Three wheelers motor vehicles parts etc. falling under Chapters 84 and 87 of the First Schedule to the Central Excise Tariff Act, 1985. They incurred repair & maintenance charges on motor vehicles. These vehicles were provided to appellant’s officers and employees. Credit was also availed on mobile phones.

The Adjudicating Authority confirmed the demand of interest and also service tax credit on mobile phones is also not allowed.

The Commissioner upheld the order of the Assistant Commissioner disallowing the service tax credit on the said services. However, the Commissioner (Appeal) reduced the penalty from Rs. 338161/-to Rs. 2000/-.

Appellant filed petition against this order. Application for waiver of pre-deposit and stay is filed.

Appellant’s Contention:- Appellant submitted that with regard to repair and maintenance of Motor Vehicles, appellant contended that the motor vehicles were used for activities pertaining to their business activities of manufacturing of vehicles, tractors and parts thereof as per the terms & conditions of the employment. The appellant maintained that the definition of ‘Input Service’ as per the Cenvat Credit Rule 2 (l) is inclusive. Therefore, it includes all services used in or in relation to manufacture of the final products whether directly or indirectly and clearance of final products from the place of removal.

Reasoning of Judgment:- With regard to service tax credit on mobile phones the Tribunal found that CBEC Circular no. 96/08/2007-ST dated 23.08.2007 clearly stated that service tax credit on mobile phones is admissible. Reliance was also placed on the case of Indian Rayon & Industries Ltd. reported in 2006 (4) STR79 (Tri-Mum.)

With regard to credit on maintenance or repair service of Motor Vehicles, the Tribunal found force in the argument of assessee that the definition of ‘Input Service’ is inclusive and not exhaustive. Therefore, it includes all services, used in manufacture of final products, whether directly or indirectly, and from the clearance of final products from the place of removal. Prima facie case made out for waiver of pre-deposit.

Decision:- Stay granted.

Comment:- This is good decision wherein the credit on repair and maintenance of motor vechile is allowed but under the new definition of “input service” does not allow the credit on such service.

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PJ/Case Laws/2011-12/1345

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