TRANSPORTATION SERVICE PROVIDED TO EMPLOYEES TO REACH FACTORY PREMISES FROM HOME  (IN FAVOUR OF ASSEESSE)

In its judgment dated 14^th April  HIGH COURT OF KARNATAKA in the case of Commissioner of Central Excise, Bangalore-I vs.  Graphite India Ltd., held that transportation service provided to employees from home to factory premises and vise versa is directly link with manufacturing activity and qualify the test for input service and the manufacturer is eligible to avail Cenvat credit of the same.

Issue for Consideration

The issue arises here is whether:-

• the transportation services provided by the assessee to their staff to pick up from the residence to the factory and vice versa was input service in or in relation to the manufacturing activity whether directly or indirectly of the final products and;

• the assessee is eligible for availment and utilization of the Cenvat credit towards the same.

Facts of the Case

• The assessees is engaged in the manufacture and clearance of excisable goods namely, graphite electrodes, nipples and graphite products.

• During the scrutiny of the records it appears that the assessee had availed credit of service tax on catering, pick up service and mobile telephone services.

• Hence, the assessee was issued with a show cause notice for the irregular Cenvat credit availed on the ineligible services for the period from 2005-06 and 2006-07 along with interest and penalty.

Observation of the Commissioner

• Aggrieved by the same, an appeal was filed before the Commissioner who modified the said order and allowed the appeal, with consequential relief to the extent of credit availed on catering service and mobile service.

• However, the demand to the extent of credit availed on Rent-a-cab-service was confirmed.

Observation of the Tribunal

• Aggrieved by the same, the assessee preferred an appeal to the Tribunal.

• The Tribunal while placing reliance on the judgment in the case of Stanzen Toyotetsu India (P.) Ltd. v. CCE held that the assessee is entitled for credit on the input service with relation to a Rent-a-Cab service and therefore the assessee was legitimately admissible towards the same.

Judgment

The identical questions of law came up for consideration before this Court in the case of CCE vs. Stanzen Toyotetsu India (P.) Ltd.

•     This Court held that the transportation/Rent-a-Cab service is provided by the assessee to their employees in order to reach their factory premises in time which has a direct bearing on manufacturing activity. 

•     In fact, the employee is also entitled to conveyance allowance which would form part of his  condition service.

•     While so holding the Court was of the view that if the credit is availed by manufacturer then the question is what are the ingredients that are to be satisfied for availing such a credit. That the said service should have been utilized by the manufacturer directly or indirectly in or in relation to the manufacture of final products or used in relation to activities relating to business.

 If any of the tests is satisfied then the service falls under input service and the manufacturer is eligible to avail Cenvat credit.

Regards

CA. Mona Singhal

Partner

Arpit Gupta & Associates

Chartered Accountants

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