Eligibility of Cenvat credit in respect of Service Tax paid on the bus transport service provided to the staff of the factory of the assessee.

PJ/Case Law/2014-15/2191

Case:- HINDALCO INDUSTRIES LTD. Vs COMMISSIONER OF C. EX., BELAPUR

Citation:- 2014 (33) S.T.R. 433 (Tri. - Mumbai)

Brief facts:- The stay application was filed by the applicant for seeking waiver of pre-deposit and stay of recovery of Rs. 1,97,283/- confirmed by both the lower authorities.
The issue involved in the appeal was eligibility of Cenvat credit in respect of Service Tax paid on the bus transport service provided to the staff of the factory of the assessee.

Appellant’s contentions:- The learned Advocate appearing for the applicant submitted that bus services were being used for taking their employees from their residence to the factory and the expenses incurred were wholly and exclusively covered by the terms of agreement in relation to business. He further submitted that they were having a contract with the contractor of the service provider who submitted the bills on monthly basis. From the bills it was clearly seen that majority portion of the transportation expenses were used for commuting their employees and a small portion was used for other purposes. He also submitted that in their own case, for the earlier period the Commissioner (Appeals) had dropped the demands in respect of this service. To support his contention the learned Advocate relied on the decision of the Hon’ble High Court of Karnataka in the case of CCE, Bangalore-III v. Stanzen Toyotetsu India (P) Ltd. - 2011 (23) S.T.R. 444 (Kar.).

Respondent’s contentions:- The learned Dy. Commissioner (AR) appearing for the Revenue submitted that the bus services were also being used by the applicant for social gathering, marriage, picnic, etc. which could not be said to have relation to the business activity of the applicant. He also submitted that the bus services were also being used for carrying children to their school which activity was also not a part of the business activity of the applicant. Therefore, the demand had rightly been confirmed by the lower authorities.

Reasons of judgment:- After hearing both the sides, Hon’ble judge found that the Hon’ble High Court of Karnataka in the case of Stanzen Toyotetsu India (P) Ltd. (supra) had held that for providing transport service for taking the employees to the factory, Cenvat credit on the transport service was available to the assessee. However, he found that the activities involving social gathering, marriage, picnic and taking children to the school will not fall in the category of business activity. Accordingly, the applicant was directed to deposit Rs. 20,000/- (Rupees twenty thousand only) within four weeks and report compliance on 19-10-2012. On such compliance, there shall be stay of recovery in respect of balance amount during the pendency of the appeal.

Decision:- Stay partly granted.

Comment:- The analogy drawn from the case is that the provision of (Bus Transport Service) Rent-a-cab shall become eligible if services of Bus are used for other purposes also in addition to transport of staff to factory. Since the services of bus in the case above are used for activities involving social gathering, marriage, picnic and taking children to school, thus it will not fall in category of business activity and thus Cenvat shall remain ambiguous.

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PJ/Case Law/2014-15/2191

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