×
Headlines

Providing Transport Facility to Workers is only a Welfare Measure, Not ‘Input Service’: CESTAT denies Credit [Read Order]

Transport Facility - Taxscan

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad bench has ruled that providing transport facility to workers from their residence to the factory would not fall within the scopeof ‘input service’ as the same would constitute a welfare measure.

In the instant case, the assessee- appellants, Andhra Organics Ltd, had availed credit of tour operator services used for transporting their employees from their residence to the factory. However, the department denied the same by holding that the Bus Hire charges are in the nature of rent a cab operator service.

The bench noted that input services on which credit is allowed have to be used by manufacturer whether directly or indirectly in or in relation to the manufacture of final products and clearance of final products up to the place of removal as per Section 2 (l) of the CENVAT Credit Rules, 2004.

It was observed that bringing the workers to the factory from homes cannot be termed as an input service is in relation to the manufacture of final products.

The bench further relied on the Bombay High Court’s decision in the case of Manikgarh Cement and observed that “Every activity undertaken by a business can have some remote relation to their business. The question is where you draw the line to decide whether it is used in or in relation to the manufacturer. In my opinion, the line can be drawn at the factory. Once the workers come into the factory their services are used in relation to the manufacture of final products. But bringing workers to the factory or providing accommodation to them outside the factory or providing any other welfare measures for the workers or their families have no nexus with the manufacture of the final products, although they are welfare measures meant for the general well-being of the workers who manufacture the goods. Thus, in this case, I find that the assessee is not entitled to the credit of service tax paid on the buses hired to bring workers to their factory.”

To Read the full text of the Order CLICK HERE
CLOSE
CLOSE
Top