Service tax credit on transportation of employees from their residence to factory.

PJ/CASE LAW/2015-16/2808

Case:-COMMR. OF C. EX., CHANDIGARH-II VERSUS FEDERAL MOGUL GOETZE (INDIA) LTD.

Citation:- 2015 (39) S.T.R. 735 (P & H)

Brief Facts:-Respondent-company is engaged in manufacturing of I.C. Engine Parts and has been availing Cenvat credit on inputs/input service and capital goods under Cenvat Credit Rules, 2002. Respondent availed the Cenvat credit of Rs. 3,41,738 and Rs. 2,13,607/- on the strength of invoices issued by the tour operator i.e. bus ferrying the employees of the assessee.

Appelants Contention:-Revenue has sought following substantial question of law as having arisen from the order passed by Customs, Excise & Service Tax Appellate Tribunal, New Delhi (for short the “Tribunal”) on 20-10-2010 :-

“Whether the CESTAT was correct in holding that the service of transportation of employees of a factory to the factory was an ‘input service’ under the ambit of definition of ‘input service’ as given under Rule 2(l) of the Cenvat Credit Rules, 2004 and consequently the credit of service tax paid on such service was allowed to be taken as credit under the said Rules of 2004.”

As per the department, the services provided by the tour operator for ferrying employees was not covered under the definition of input service and therefore credit claimed is not admissible. The Adjudicating Authority confirmed the demand as stated above but the Commissioner (Appeals) vide the order dated 28-1-2009 set aside the order which has been affirmed by the Tribunal. Learned counsel for the appellant has vehemently argued that the Revenue is in appeal against the judgment rendered in Coca Cola’s case (supra) before the Hon’ble Supreme Court. Therefore, the judgment rendered in Coca Cola’s case (supra) cannot be made basis of the decision by the Tribunal.

Respondents Contention:-None appeared for the respondent.

Reasoning of Judgement:-The Tribunal, inter alia, returned a finding that the transportation of the employees from their residence to the factory premises is related to their manufacturing activities, as without coming to factory, the production cannot be started. The provision of transportation facility to the employees increases efficiency and increases the production capacity of the manufacturing unit itself. The Tribunal has relied upon a judgment of Bombay High Court reported as 2009 (242)E.L.T.168 (Bombay), Coca Cola India Pvt. Ltd. v. Commissioner of Central Excise, Pune-III. They do not find any merit in the said argument. Hence, the pendency of the appeal does not bar this Court to examine the issue. And, they respectfully agree with the findings recorded by the Bombay High Court in Coca Cola’s case (supra). The judgment rendered in Coca Cola’s case (supra) has also been followed in Semco Electrical Pvt. Limited v. CCE, Pune- 2010 (18) S.T.R. 177 (Tri.-Bom.). The reasoning given by the Tribunal is a possible reasoning which does not give rise to any substantial question of law.

Decision:- Appeal dismissed.

Comment:- The analogy in the case is that according to Rule 2(l) of the Cenvat Credit Rules, 2004 the service of transportation of employees from their residence to the factory premises is treated as input service and consequently credit of service tax paid can be taken by the assessee. This view was supported by the remarkable decision given in the case of Coca Cola India Pvt. Ltd. v. Commissioner of Central Excise, Pune-III and inSemco Electrical Pvt. Limited v. CCE, Pune. Moreover, mere filing of appeal against the order of the High Court cannot lead to Tribunal not placing reliance on the decision of the High Court unless and until there is stay on the order by the Supreme Court or contrary decision of the Supreme Court.

Prepared By:- Neelam Jain

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PJ/CASE LAW/2015-16/2808

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