Eligibility of credit on insurance and authorised station service availed for vehicles maintained by manufacturer.

PJ/Case Law/2013-14/2083

Case:- M/s BIRLA CORPORATION LTDVs COMMISSIONER OF CENTRAL EXCISE, BHOPAL

Citation:- 2014-TIOL-05-CESTAT-DEL

Brief facts:-The appellant is common in both the appeals and is a company engaged in the business of manufacture of excisable goods, cement and cement clinker. The appellant availed cenvat credit on inputs, input services and capital goods under Cenvat Credit Rules, 2004 (2004 Rules). During audit of the appellants, Revenue observed that it availed cenvat credit of service tax during the periods April 2007 to August 2009; September 2009 to March 2010; April 2010 to December 2010; and January 2011 to September 2011, on the basis or several bills of invoices issued by service providers for Business Auxiliary Service (commission agent); Insurance Auxiliary Service (towards motor vehicle insurance) and authorised service station service (motor vehicles).
Consequently four show cause notices were issued covering the periods April 2007 to August 2009 and September 2009 to March 2010; and April 2010 to December 2010 and January 2011 to September 2011. After due process, the adjudicating authority dropped demand of service tax, interest and penalty in so far as the appellant had availed cenvat credit in respect of the input pertaining to Business Auxiliary Service (commission agent). The authority however assessed liability to service tax, interest and penalties on other input services in respect of which the show cause notices were issued, namely insurance auxiliary service (motor vehicle insurance) and authorised service station service (motor vehicle repair). The appellant as part of its business as a manufacturer of cement and allied products owns several vehicles and gets the vehicles serviced with authorised service station/other service stations. Insurance auxiliary service and authorised service station are taxable services. The appellant therefore availed these input services and had remitted the component of service taxes payable by those service providers to Revenue. It availed cenvat credit of the tax component remitted in relation to these input services, of insurance and authorised service station services. This was disallowed by the adjudicating authority.
The adjudicating authority disallowed cenvat credit in respect of the aforesaid two input services on the ground that the appellant failed to establish any nexus between its output and the two services. For this conclusion the authority relied inter alia on the decision of Supreme Court in Maruti Suzuki Ltd. vs. CCE - 2009 (240) ELT 641 (SC) = (2009-TIOL-94-SC-CX) and assumed that the use of the input service should be integrally connected with the manufacture of the final product.

Appellant’s contention:-The appellant contented that any service used by the provider of a taxable service or excisable goods manufactured, used in relation to getting miscellaneous repairs of the premises of the provider of output service or for an office relating to such premises, procurement of inputs, activity relating to business such as inter alia inward transportation of inputs or capital goods and output transportation to the place of removal, would constitute input service.

Respondent’s contention:-The respondent reiterated the findings of the lower authorities.

Reasoning of judgment:- The tribunal observed that this issue came to be considered in several judgments of this Tribunal. In KPMG vs. CCE, New Delhi - 2013-TIOL-761-CESTAT-DEL(CESTAT- DEL), the ambit of Rule 2(l) of the 2004 Rules was considered. This Tribunal held that on a true and fair construction of the definition of input service in Rule 2(l), it is clear that any service used by the provider of a taxable service or excisable goods manufacturer, used in relation to getting miscellaneous repairs of the premises of the provider of output service or for an office relating to such premises, procurement of inputs, activity relating to business such as inter alia inward transportation of inputs or capital goods and output transportation to the place of removal, would constitute input service.
"Input service" is broadly defined, as any service used for providing an output service or any service used by the manufacturer, whether directly or indirectly, or in relation to the manufacture of final products and clearance of final products from the place of removal. In this context of the statutory definition of input service, the conclusion is irresistible that the vehicles owned and used by the appellant for efficient execution of its business of manufacture of cement and allied products and the expenditure incurred in the legitimate use of such vehicles i.e. by obtaining statutory insurance for the vehicles and expenditure incurred for their maintenance i.e. for periodical service of the vehicles, would be inputs and wherever the service providers, of insurance of the vehicles or for maintenance of such vehicles are compensated in respect of the service tax payable by those entities for having provided the taxable services, those amounts could lawfully be treated as input services on which cenvat credit could be availed.
On the aforesaid premises the impugned order was held unsustainable and is accordingly quashed. The common adjudication order dated 25.09.2012 passed by the Commissioner, Central Excise & Service Tax, Raipur order-in-original Nos. 43 & 44/Comr/CEX/ADJ/STN/2012 dated 25.09.2012; was quashed. The appeals are allowed as above but in the circumstances without costs.

Decision:-Appeal allowed.

Comment:- The substance of this case is that input services includes any service whether directly or indirectly used for providing an output service or any service used by the manufacturer, whether directly or indirectly, or in relation to the manufacture of final products and clearance of final products from the place of removal and hence credit for all such inputs and input services is admissible. In the present case, as the vehicles were maintained by the manufacturer that facilitated in better transportation of goods, the credit of service tax paid for insurance and authorised service station services was allowed to them.

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PJ/Case Law/2013-14/2083

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