Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  The GSTN has issued an Advisory dated 21.04.2026 about the introduction of an Offline Tool for the Invoice Management System (IMS)  *  CBIC extends due dates for filing of FORM GSTR 3B  for the month of April 2026 *  Interest cannot be imposed in adjudication order, if not demanded/quantified in show cause notice : Allahabad HC *  Wheelchairs with toileting facility eligible for exemption: CESTAT affirms customs duty exemption to importer *  Industries urge GST council to allow inverted duty refunds on input services *  Tamil Nadu GST dept introduced virtual hearing facility for GST appeals under under section 107 of the TNGST act: detailed guidelines  *  CIC urges authorities to implement GST evasion complaint tracking system *  Even if the assessee opts "NO" for personal hearing in form DRC-06 ,The mandatory requirement under section 75(4) to grant opportunity of hearing cannot be waived:Gujarat High Court  *  Glufosinate imports curbs imposed by govt *  Government extends Re-import period for exported cut & polished diamonds *  CIC flags lack of tracking system for tax evasion complaints,urges GST authorities to improve transparency *  No Custodial Interrogation needed in GST fraud case based on documentary evidence already in Department's Possession : Chattisgarh HC *  Orders under section cannot be sustained if passed without considering the taxpayer's objections and without granting a personal hearing:Gujarat High Court *  Mere cancellation of supplier's registration cannot,by itself,justify denial of ITC or cancellation of the recipient's registration:Bombay High Court *  High Court sets aside GST notice citing factual errors and natural justice violations *  Provisional Bank Attachment under Section. 110 of Customs Act Unsustainable Beyond Statutory period without Extension order: Bombay HC orders to defreeze accounts *  Post Clearance MRP Alteration by Distributor Does not attract Differential Customs Duty: CESTAT *  DGFT Expands scope of 'Screws' classification under RoDTEP Scheme  *  E-way bills surze to all time high of 140.6 million in March *  GST Exemption Allowed on Pure Labour Services for Standalone Houses: AAR  *  GST Payable Only on Margin in Second-Hand Car Sales, Subject to Strict Conditions and No ITC Claim: AAR *  DGFT rolls out procedure for allocation of calcined coke *  GST portal update : Pre-deposit amount now editable in Appeals *  J&K HC declared TMT scrap a 'Specified Good' eligibile for GST refunds under Support Scheme  *  Pigmy agents are employees of banks; no GST can be levied on commission  paid to them : Karnataka HC *  DGFT Revises HS Code Description for Screws Under RoDTEP *  GST Registration Cancellation Invalid Without Proper Service of Notice: Allahabad High Court. *  Bengaluru CGST | GST Backlog Appeals Deadline Fixed at June 30, 2026 *  No Time Bar on Refund of Service Tax for Services Not Rendered: CESTAT  Remands Indiabulls Case for Unjust Enrichment Check. *  Supreme Court Holds Renewable Energy Incentive Must Benefit Generators, Not Be Adjusted in Tariff
Subject News *   Delhi HC Quashes Order, Says Reminder Cannot Validate Improperly Served GST SCN *  KARNATAKA HIGH COURT REMANDS GST SHORTFALL MATTER DUE TO ABSENCE OF PERSONAL HEARING   *  CESTAT cancels confiscation and penalties on imported computer cabinet cases: Custom duty restricted to 111 surplus units *  Deposit of tax during search or investigation cannot be treated as 'Voluntary Payment' : Bombay High Court *  Section 76 of the CGST cannot be invoked where the tax has already been duly deposited, even if through another registration of the same entity: Madras High Court *  Sec 74 allows use of material regardless of source; illegality or flaws in section 67 search do not vitiate valid adjudication: HC *  Inter-State transfer of ITC on Amalgamation permissible as given under section 18(3) read with rule 41 of the CGST rules, 2017: Gujarat High Court *  HC: No GST on commisson paid to Pigmy Agents *  IGST refund denial on illegible bill of lading invalid absent chance to furnish docs; merit reconsideration in appeals directed: HC *  ITC is not admissible on GST paid on leasehold rights of land used fpr setting up an air seperation plant: AAAR,Tamil Nadu *  GST: No penalty under Section 74 after voluntary ITC reversal due to non-existent supplier : High Court *  TN AAAR denies GST ITC on Land Lease under Sec. 17(5)(d) for setting up plant and machinery *  GST proceedings quashed as notices sent to old address, despite updated address in registration *  Importer Can’t Be Penalised for Alleged IGCR Procedural Lapses Without Evidence of Departmental Error: CESTAT *  Structured Healthcare Training Not ‘Charitable Activity’, 18% GST Payable: AAR  *  CESTAT As The Appellate Authority For Central Sales Tax Disputes: A Paradigm Shift Under Finance Act, 2023 *   Rs. 25K Cost Imposed On SGST Joint Commissioner for Attaching Bank  Accounts Without Forming Mandatory “Opinion”: Bombay HC *   Ex-Parte GST Order Without Hearing Violates Natural Justice: Karnataka  High Court Quashes Adjudication and Bank Attachment.  *   Retrospective GST Cancellation Can’t Invalidate Genuine Transactions:  Jaipur Commissioner (Appeals) Quashes Rs. 95,670 ITC Demand. *   GST Pre-Deposit Non-Compliance: Allahabad High Court Allows Appeal  Subject to Rs. 30 Lakh Balance Deposit, Recognises Offline Filing. *  Documentary Nature of Evidence: Allahabad High Court Grants Bail in Rs. 32.66 Crore Fake ITC Fraud Case *  Supreme Court Flags Systemic Bias in Army’s Permanent Commission Process for Women Officers *  Re-Determination of Land Compensation Can Be Based on Appellate Court Awards, Clarifies Scope of S. 28-A: Supreme Court. *  Supreme Court Imposes Rs. 5 Lakh Costs On Rent Authority Officer For Acting Beyond Jurisdiction. *  DGGI Meerut | Court Denies Bail to Accused in Claiming Fake ITC And Export Refunds *  Denial of GST Rate Revision Benefit to Contractor Violates Article 14: Rajasthan HC *  GST Registration Cancellation for Non-Filing of Returns: Gauhati High Court Directs Restoration on Compliance. *   Supreme Court Quashes FEMA Adjudication Orders, Revives Proceedings at  Show Cause Stage. *   Higher Rank, Harsher Punishment Justified: Supreme Court Restores Dismissal  of Bank Manager in Misappropriation Case. *   Limitation for Export Refund to Be Counted from Foreign Exchange Realisation,  Not From Export Invoices Issuance: CESTAT  

Comments

Print   |    |  Comment

PJ/Case Law/2013-14/1854

Whether credit admissible on Rent a Cab and Telephone Services used exclusively at corporate officeof the company?

Case:-THIRU AROORAN SUGARS LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, TIRUCHIRAPALLI
 
Citation:-2013-TIOL-1270-CESTAT-MAD

Brief Facts:-The appellant is a manufacturer of excisable goods and they avail benefit of Cenvat Credit Rules, 2004. The dispute involved in this appeal is Cenvat credit taken by the appellant on (i) Rent a Cab Services, (ii) Telephone Services and (iii) Contract Bus Services for the period 2006-07 to 2010-11. The amount that is demanded is Rs. 1,84,920/- along with interest. Further, a penalty of Rs. 1,84,920/- is imposed on the appellant under section 11AC of the Central Excise Act read with Rule 15 (2) of Cenvat Credit Rules, 2004.
The credit in question is taken by the corporate office at Chennai in their capacity as "input service distributor" as envisaged in Rule 2 (m) of Cenvat Credit Rules, 2004 and passed on to their factory at Papanasam, Thanjavur for utilization for payment of excise duty.
 
Appellant Contentions:-The Counsel for appellant relies on the definition of input service at Rule 2 (l) of Cenvat Credit Rules, 2004 which reads as under:
 
"input service" means any service, -
(I) used by a provider of taxable service for providing an output service, or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal,
and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal;'
 
The Counsel argues that an input service being intangible cannot be seen in the final product unlike in the case of most of the inputs. He argues that their corporate office is managing their business but for which the manufacturing activity cannot go on. No business can run by just manufacturing goods. That is the reason for including "activities relating to business" in the definition of input service. The illustrations given after the expression "such as" are activities usually done by the corporate office. So the argument that services availed by corporate office cannot be considered as input service runs contrary to the plain meaning of the definition.
He relied on the following decisions:
·         CCE Vs. Stanzen Toyotetsu India (P) Ltd - 2011 (23) STR 444 (Kar) = 2011-TIOL‑ 866-HC-KAR-ST
·         CCE Vs. Beekay Engg. & Castings Ltd - 2009 (16) STR 709 (Tri-Del) = 2009-TIOL‑ 1376-CESTAT-DEL
·         Heartland Bangalore Transportation Ser (P) Ltd Vs. CST - 2011 (21) STR 430 (Tr-Bang) = 2010-TIOL-1764-CESTAT-BANG
·         J. K. Sugar Ltd Vs. CCE - 2011 (270) ELT 225 (Tri-Del) = 2011-TIOL-1091-CESTAT‑ DEL .
Respondent Contentions:-The adjudicating authority held that the definition of "input service" in Cenvat Credit Rules can extend only to services which have a proximate nexus to manufacturing activity; the definition cannot be extended to the services received at corporate office for officers and executives working in that office which is the situation in this case; providing rent-a-cab services to executives to come to office is only a welfare activity and not activity relating to manufacture.
It is further argued that the scope of the inclusive portion of the definition at Rule 2 (l) gives illustrative services and the services in question do not fall within the category illustrated by the list following the expression "such as" in the definition. It is argued that unless it is demonstrated that the manufactured product cannot emerge without the service in question the service cannot be considered as an input service. The adjudicating authority relied on the following decisions:-
(i)  CCE Vs. Manikgarh Cement - 2010 (20) STR 456 (Bom) = 2010-TIOL-720-HC-MUM­-ST
(ii)CCE Vs. Sundaram Brake Linings - 2010 (19) STR 172 (Tri-Chennai) = 2010-TIOL‑ 863-CESTAT-MAD
 
However, the finding on fact as seen recorded by the adjudicating authority towards the end of para 11 reads as under:

"Therefore, I hold that Service tax paid on 'Rent-a-Cab service, telephone service and contract services which is used exclusively for officers and Executives for Administrative purpose at their Corporate Office located at Chennai does not satisfy the requirement under the main definition for "Input Service" under the Cenvat Credit rules, 2004"

On appeal filed with Commissioner (Appeal), he rejected the appeal for more or less for the same reasons as given by adjudicating authority. Para 4.2 and 4.3 of the order is re-produced below:
"4.2 Rent a cab, telephone and Contract bus services are used by the officers and executives at their corporate office of the company and the appellants did not produce any evidence either direct or corroborative to show that such service used by the officers and executives is in or in relation to manufacturing activity. Therefore, it is clear that the claim made by appellants is not authentic as the impugned services for officers and executives was purely for personal reasons like comfort & is a welfare measure only as a part of the employment. On the other hand, the appellants failed to prove that providing of such service resulted either in completion of the manufacturing activity at a faster pace OR in enhancement of quality of manufacturing activity. It is also not a case of the appellants that these services have been utilized by the executives only in relation to procurement of raw materials, sale of finished goods and connected business activities. Nor any official purposes like establishing nexus with business of manufacture is established. Thus the nexus of service with the claim made by them clearly falls short of any cogent reason. When the services of Rent a Cab and Contract Bus Services, if provided to workers to reach the factory premises in time, then it could be said that the same is having a direct bearing on the manufacturing activity or at any rate activity relating to business. On the other hand provision of these services to executives of corporate office at Chennai, by no stretch of imagination can be considered to have any bearing on the manufacturing activity. Rent a cab service used for bringing employees to work in the factory of manufacture of goods alone can be considered as an activity in relation to the manufacture of goods or as activity relating to business. Consequently, the services claimed to be used by appellants are not in relation to the manufacture of final products and hence, such input service credit availed by the appellants, is ineligible read with the definition of input service under Cenvat Credit Rules, 2004.”
 
In the case of Hindustan Coca Cola (P) Ltd Vs CCE Hyderabad 2010 (18) STR 57 Tri-Bang = 2010-110L-48-CESTAT-BANG  credit on rent a cab services and outdoor catering services were allowed when it was not in dispute that the services were received in the factory premises. Contrary to this the services pertaining to the appellants were not received in the factory premises. In the case of Commissioner of C.Ex Nasik Vs Cable Corporation 2008 (12) STR 598 = 2008-110L-1180-CESTAT-MUM, only when Rent a cab service used for bringing employees working in the factory for manufacture of goods, the said service was considered to be used indirectly in relation to manufacture or as part of business activity. In the case of Commissioner of C.Ex., Jaipur II Vs. J.K. Cement Works, 2009 (14) STR 538 = 2009-110L-411-CESTAT-DEL  citing on the above case law of C.Ex Nasik Vs Cable Corporation, the respondents therein explained the use of hired tax is in relation to manufacture of cement and the tribunal allowed credit. The impugned services in the case in our hands are not related to the manufacture of Sugar and other excisable products manufactured by the appellants. It is not disputed that transporting of employees to the factory and back, has a direct nexus with the assessee's business of manufacture of final product, as without the employees being present in the factory, manufacture cannot take place as held in the case of Sundaram Fasteners Ltd Vs Commissioner of C.Ex., Chennai 2011 (271) ELT 318 (Tri-Chennai) = 2011-TIOL-1050-CESTAT-MAD but the impugned services/ activities viz. Rent a cab, telephone bills and contract bus services used exclusively by officers and executives to transport them from residential area at Chennai to Corporate office at Chennai and other touring can no stretch of imagination can be considered as having direct nexus with the appellant's business of manufacture of final product."
 
On the other hand the Ld A. R. for Revenue relies on the following decisions:

·         CCE Vs. Manikgarh Cement - 2010 (20) STR 456 (Bom) = 2010-TIOL-720-HC-MUM-­ST
·         CCE Vs. Cadila Healthcare Ltd. - 2013 (30) STR 3 (Guj) = 2013-TIOL-12-HC-AHM-ST
·         CCE Vs. Gujarat Heavy Chemicals Ltd. 2011 (22) STR 610 (Guj) = 2011-TIOL-383- HC-AHM-ST
·         Disa India Ltd. Vs. CCE - 2011 (24) STR 507 (Tri-Bang) = 2011-TIOL-1128-CESTAT‑ BANG .
 
Reasoning Judgment:-After going through the large number of decisions relating to rent a cab-service it is seen there is a uniformity in view of the Courts and Tribunal that has emerged that rent-a-cab services utilized to bring workers or executives to factory is covered bydefinition at Rule 2 (l). The argument of the Revenue is that decisions in respect of transportation from residence to factory and back will not apply to transportation of executives and employees from residence to corporate office and back. This argument is almost like the argument that a factory worker may take during wage negotiation that the entire business depends on them which is not correct. If there is no management by the corporate office, a manufacturing organization cannot survive - finance cannot be procured, raw materials cannot be purchased, manufactured goods cannot sold and so on. So the argument to separate the corporate office from manufacturing activity, for the purpose of deciding eligibility to Cenvat credit on services received, is flawed especially having regard to the fact many services usually received by corporate office is listed specifically in the inclusive portion of the definition of input service. The concept of "input service distributor" as defined in Rule 2 (m) of the Cenvat Credit Rules, 2004 also implies allowing credit of services availed by an office which cannot utilize the credit as in the case of a corporate office. In the first place as per the definition "input service" means service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products. The scope of this expression is further expanded by an inclusive portion mentioning specific services to remove any ambiguity in the definition in respect of these services. Such inclusive part has one expression reading "activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods". Here again the listing within this category cannot be taken to be exhaustive but only illustrative. Against such legal frame work it is to be decided whether the impugned service will fall within the definition when received at the corporate office. In the matter of extending Cenvat credit to these three services Tribunal do not see any distinction that can be made between the factory and corporate office going by the provisions in Cenvat Credit Rules, 2004. It is already decided by Karnataka high Court that such services will qualify to be input service within rule 2(l).

Further it was noted that the decisions relied upon by the Ld. A. R. for Revenue are in relation to services availed in residential colonies of assessees and not corporate office. Tribunal find no reason to extend this distinction made in respect of residential colonies to services received in corporate office.

Though the matter is examined above with reference to rent-a-cab service similar logic should apply to contract bus service and telephone service. In the case of telephone service the clarification issued by Ministry vide para 8.3 of Circular No. 97/8/2007-S.T., dated 23-8- 2007 is very relevant. However the Commissioner (Appeal) has recorded that the appellant has not produced evidence to show the nexus between the manufacturing activity and the services in question. It is not understood what sort of nexus is being asked for. Is it necessary to show what was talked in each call through each of the telephone in respect of which Cenvat credit is claimed? Demand for such demonstration can only lead to meaningless harassment to assessees. Where the expenditure is incurred by the company in its books of accounts there is a presumption in favour of the appellant that the service is availed in relation to their business. So long as Revenue has not proved anything to the contrary Tribunal do not see any merit in the argument of Revenue.

So Tribunal sets aside the impugned order and allows the appeal.
 
Decision:-Appeal allowed.

Comment:-The essence of this case is that credit is admissible even of the input services availed in the corporate office that is managing business as no business can run by just manufacturing goods. Accordingly, credit pertaining to rent a cab services and telephone services used in corporate office cannot be denied on the contention that the same are not directly related to the manufacturing activities conducted at the factory premises.  
 

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com