Cenvat Credit on Air Travel Agent's service & Tour Operator service

PJ/Case Laws/2010-11/1059

Case: Sachins Impex v/s Commissioner of Central Excise, Belapur

Citation: 2011-TIOL-82-CESTAT-MUM

Issue:- Whether Air Travel service and Tour Operator service are input services on which cenvat credit will be admissible under CCR, 2004?

Brief Facts:- Assessee are engaged in the manufacture of excisable goods falling under Chapter 73 & 76 and are availing Cenvat credit on inputs, capital goods and service tax paid on various input services. They availed Cenvat credit on Air Travel Agent services and Tour Operator services. Department initiated proceedings against the assessee on the ground that they are not eligible for Cenvat credit on Air Travel services and tour operator services. The Lower Adjudicating Authority confirmed the demand and imposed equal amount of penalty.

In appeal, the Commissioner (Appeal) denied credit of service tax on account of air travel agent service and allowed cenvat credit in case of tour operator service.

Both Assessee and Revenue are in appeal before the Tribunal.

Assessee’s Contentions:- Assessee contented that the air travel service is essential for development of their products and their representatives to have visit abroad to see the requirements and progress in their products and in this way there is nexus with the manufacture of their products and they are entitled for cenvat credit of the service tax paid on this service. In support of their contention they placed reliance upon the decision of the Tribunal in the Case of CCE, Ahmedabad vs. Fine Care Biosystems [2009-TIOL-1352-CESTAT-MUM] and Semco Electrical Pvt. Ltd. vs CCE, Pune [2010-TIOL-162-CESTAT-MUM].

Regarding tour operator service, the assessee pointed out that the service tax paid in this regard is used in transporting the employees of the assessee and the Commissioner (Appeals) has rightly allowed them the Cenvat credit. Reliance placed on the case on Santansen Toyotetsu India Pvt. Ltd vs CCE [2009 (14) STR 316 (Tri. Bang)] and CCE Nasik vs. Cable Corporation of India Ltd [2008-TIOL-1180-CESTAT-MUM].

Revenue’s Contentions:- In case of Cenvat Credit on tour operator service, the contention of the department is that there is no nexus of the services in or in relation to the manufacture of the goods. They also pointed out that in the case of Tribunal’s decision in the case of Cable Corporation of India Ltd., the department has not accepted the decision and they have filed the appeal and it has not reached finality.

Reasoning of Judgment:- With regard to admissibility of credit on Air travel agency service, the Tribunal relied upon the ratio laid down in the case of Fine Care Biosystems wherein it was held that as air travel performed for purpose of company business, the credit is admissible and, accordingly, decided in favour of the assessee. Reliance was also placed on judgment given in Semco Electrical Pvt Ltd. Accordingly, it was held that the order of the Commissioner (Appeal) is not maintainable. Cenvat credit was admissible on Air Travel agent service.

As regard the Cenvat credit on Tour Operator service, the Tribunal noted that the assessee had contented that what is being considered for tour operators service is in fact transportation of their employees to their factory. The above fact is not disputed by the department. It was noted that the Tribunal in the case of Cable Corporation of India Ltd had allowed Cenvat credit on Rent-a-cab service used for bringing employees to work in the factory for manufacture of goods. It has to be considered as being used indirectly in relation to the manufacture or as a part of business activity. To this Revenue had pointed out that the decision has not reached finality, since the department is contesting it. However, he could not produce any order modifying or staying the operation of the said order. The above decision is applicable to the facts of the Assessee’ case. Therefore, there is no infirmity in the order of the Commissioner (Appeal). No merit in the appeal filed by the Revenue. Revenue’s appeal dismissed.

Decision:- Appeals are disposed of in the above manner. Cross objections are also disposed of.

Comment:- This is very important decision. The audit is disallowing this credit to the manufacturers. But the High Courts have also held in case of Coca cola as well as in case of Ultratech Cement that the credit will be allowed on every business expenditure. Even it has distinguished that the Apex Court decision in case of Maruti Suzuki will not be applicable in case of input services. It will be applicable only on inputs. Even in case of inputs also, the matter has been referred to Larger Bench by Apex Court in case of Ramala Sahkari Chini Mills Limited, U.P. v/s Union of India.

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PJ/Case Laws/2010-11/1059

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