The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench comprising of CS Sulekha Beevi, Judicial Member and Vasa Seshagiri Rao, Technical Member held that Cenvat Credit is allowable on Staff Welfare Expenses.
M/s. ETA Travel Agency Pvt Ltd, is the appellant in the present appeal.
The issue in the appeals pertain to eligibility of Cenvat Credit on input services such as Car hire charges, Insurance charges, Staff welfare expenses and Travelling expenses. As per Rule 3 of Cenvat Credit Rules, 2004, provider of taxable service shall be allowed to take Cenvat credit paid on any input service received.
In terms of Rule 3 of CCR, 2004 read with Rule 2 (i), Cenvat credit can be availed by the service provider on the input service used for providing output service.
Appearing for the department, Sridevi Taritla contended that the Staff Welfare expenses such as insurance, employee’s gratuity fund, Group Insurance Mediclaim, car hire charges, travelling expenses, staff welfare expenses on which the assessee availed the credit of service tax paid, were in no way connected for the provision of output services which are Air travel agent service and Business Auxiliary Services (BAS) and so the appellants were denied input services credit legally and correctly.
The Counsel for the appellant contended that they are eligible for the credit of input services as these expenses are incurred necessarily and essential for providing their output service and they were used in or in relation to the business.
During the period covered in the impugned notices, denial of Cenvat credit on input services such as Car hire charges, Insurance charges, Travel expenses and Staff welfare expenses is not legally maintainable in terms of Rule 2 (1) of CCR, 2004, as all these services are input services considering the sweep and depth of definition of input service as per Rule 2 (1) of CCR, 2004.
Input service covers not only services directly, in or in relation to the manufacture of final product but also various services used in relation to the business of manufacture whether prior to manufacture or after manufacture. The definition of „input service‟ not only covers services which fall in the substantial part of Rule 2 (1) of CCR, 2004 but also covers services which are covered under inclusive part.
The Coram observed that “The inclusive part of the definition of input service is only illustrative and not exhaustive. In the absence of any intention of the legislature to restrict the definition of „input service‟ to any particular class or category of services used in the business.”
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