1. Brief facts are that the appellants are engaged in the manufacture of crushing machines and screening machines. During the course of verification, it was noticed that they have availed CENVAT Credit of service tax paid in respect of hiring of cabs (Rent-a-Cab Services). It appeared to the Department that the said services are not eligible for credit as it falls within the exclusion Clause of the definition of input services. Show Cause Notice was issued proposing to disallow the credit and for recovery of the same along with interest and for imposing penalty. After due process of law, the Original Authority confirmed the demand, interest and imposed penalties. In appeal, the Commissioner (Appeals) upheld the same. Hence, this appeal.
2. On behalf of the appellant, Ld. Counsel Ms. D. Naveena, submitted that the period involved is from 2015-16. She argued that Rent-a-Cab Services were availed for the purpose of picking up and dropping the employees and these are integrally connected to the manufacturing activity of the appellant. However, that the lower authorities have wrongly interpreted the exclusion clause and has disallowed the credit stating that the Motor Vehicles used for providing Rent-a-Cab Services are not capital goods for the appellant and, therefore, credit is not eligible. She adverted to the definition of capital goods contained in Rule 2 (C) and also the exclusion clause contained in (B) and submitted that the exclusion would apply only if the motor vehicles are not capital goods for the service provider. She submitted that the appellant would be able to furnish documents to establish that the motor vehicles are capital goods for the service provider who has provided the service of Rent-a-Cab to the appellant. She, therefore, requested remand of the matter. She relied upon the decision of the Tribunal in the case of M/s. Sundaram Clayton Ltd. v. Commissioner of Central Excise, Chennai-II vide Final Order No. 41952/2018 dt. 09.07.2018.
3. The Ld. AR, Shri K.P. Muralidharan, supported the findings in the impugned order. He submitted that the impugned services fall within the exclusion clause and, therefore, is not eligible for credit.
4. Heard both sides.
5.1 The issue for consideration is whether the appellants are eligible for credit on Rent-a-Cab Services after 01.04.2011, whereby the exclusion in clause (B) has been introduced in the definition of input services. For better appreciation, the relevant portion of the definition of input services is reproduced as under:
"Input Service means:-
(i) services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India where service tax is paid by the manufacturer or the provider of output service being importer of goods as the person liable for paying service tax for the said taxable services and the said imported goods are his inputs or capital goods; or
(ii) any service used by a provider of output service for providing an output service; or
(iii) any service used by a manufacturer, whether directly or indirectly or, in or in relation to the manufacture of final products and clearance of final products upto the place of removal,
and includes services used in relation to modernisation, 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, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal;
[(A) service portion in the execution of a works contract and construction services including service listed under clause (b) of Section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for-
(a) construction or execution of works contract of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods,
Except for the provision of one or more of the specified services; or]
[(B) services provided by way of renting of a motor vehicle, in so far as they relate to a motor vehicle which is not a capital goods"
5.2 From the above, it can be seen that the services of Rent-a-Cab will not qualify as input service and will not be eligible for credit if the motor vehicle is not a capital good for the service provider. The definition of capital goods contained in clause (C) of Rule 2 of CCR, 2004 is noticed as under:
"(C) Motor vehicle designed to carry passengers including their chassis, registered in the name of the provider of service, when used for providing output service of -
(i) transportation of passengers; or
(ii) renting of such motor vehicle; or
(iv) imparting motor driving skills"
5.3 It can be seen from the definition of capital goods that when the motor vehicle which is used for transporting of the passengers or for renting of vehicles, is registered in the name of the service provider, the same would be a capital good for the service provider. Thus, if the motor vehicles are capital goods for the service provider who is providing service of Rent-a-Cab/renting of cabs, then the said services would be eligible for credit. The said fact as to whether these vehicles are capital goods for the service provider requires verification. The matter, thus, requires remand to the adjudicating authority for consideration of the issue whether the motor vehicles are capital goods for the service provider.
5.4 The adjudicating authority has erred in observing that the credit is not eligible because the motor vehicles are not capital goods for the manufacturer/service recipient/appellant. The Tribunal in the case of M/s. Sundaram Clayton Ltd. vide Final Order cited supra, has discussed the issue in detail. The relevant portion is reproduced as under:
"6. As per Clause (B) of the definition of 'input service', only when the services provided by way of renting of a motor vehicle insofar as they relate to motor vehicle, which is not capital goods for the service provider, would stand excluded. If the motor vehicle are capital goods for the service provider, then they would fall within the definition of input services. In other words, if the motor vehicle is not a capital goods for the service provider, who is providing rent-a-cab service, then such service will not fall within the definition of input services.
7. As seen from the definition of capital goods, if the motor vehicle is designed to carry passengers and is registered in the name of the service provider, for being used for providing output service of transportation of passengers or for renting of vehicle, then the said motor vehicle will fall within the definition of 'capital goods'. So if the motor vehicle is registered in the name of the service provider and used to render the services of rent-a-cab service, the said services would qualify as input services. In the present case, the department has not alleged that the motor vehicles are not registered in the name of the service provider. In fact, there is no allegation that the motor vehicle which was used for providing rent-a-cab service was not capital goods for the service provider. When the definition of input services makes an exclusion specifying the category of vehicles/service provider, which does not fall within the definition, it is incumbent upon the department to examine whether the impugned services fall within such exclusion or not before disallowing the credit. As the show cause notice does not raise any allegation with regard to the category of motor vehicle/service provider, which is excluded as per clause (B), the disallowance of credit stating that the services fall within the exclusion clause is not correct. The appellant in page 42 of the appeal paper book has produced certificate issued by the service provider namely Sri Bhagyalakshmi enterprises (Staff Bus Operators), wherein it is stated that the vehicle rented out to the appellants are capital goods in their books of accounts. Similar declaration
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s issued by other cab operators like KP Cabs, Raagav Tourist Service etc. are also furnished by appellant. These documents would go to show that the motor vehicles are capital goods for the service provider. Then the services provided by use of such motor vehicles which are capital goods for service provider would not fall within the exclusion clause. The Tribunal, in the appellant's own case as well as in Marvel Vinyls Ltd. (supra), has allowed the credit. By judicial discipline, the same is applied, the facts being same." 5.5 From the above discussions, I am of the view that if the motor vehicles are capital goods for the service provider, the appellant would be eligible for credit. For the purpose of verification of the same, the matter is remanded to the adjudicating authority who shall give opportunity to appellant to furnish documents necessary to establish their case. 6. The impugned order is set aside. The appeal is remanded.