The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that CENVAT credit is admissible on services such as rent-a-cab, housekeeping, and business promotion when these services are used in relation to the business.
L & T Arun Excello Reality Private Limited, the appellant, is engaged in the construction of residential complexes and is registered under the Works Contract Service. During an audit, the department alleged that the appellant had wrongly availed of CENVAT credit of Rs. 4,39,857 on various input services, including rent-a-cab, housekeeping, and business promotion. A show cause notice was issued invoking the extended period under the proviso to Section 73(1) of the Finance Act, 1994, and also proposing the imposition of a penalty under Section 78.
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In adjudication, the lower authority confined the demand to Rs. 72,150 and refrained from imposing any penalty, exercising its discretion under Section 80 of the Finance Act. The appellant paid the tax and interest, treating it as closure of the issue.
The department filed an appeal before the Commissioner (Appeals) challenging the dropping of the penalty. The Commissioner (Appeals), while allowing the department’s appeal, imposed the penalty and simultaneously rejected the cross-objections filed by the appellant, stating that the Finance Act did not permit cross-objections in such cases.
Aggrieved, the appellant filed an appeal before CESTAT, arguing that their cross-objections were filed in response to an invitation from the appellate authority and ought to have been adjudicated. The appellant’s counsel further argued that the extended limitation period was wrongly invoked, as there was no evidence of suppression or willful misstatement.
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They relied on the Bombay High Court’s decision in CCE Nagpur v. Ultratech Cement Ltd. and other Tribunal decisions, which upheld the admissibility of such services as input services.
The two-member bench comprising Ajayan T.V. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) held that the cross-objections were indeed maintainable and should have been adjudicated, especially since the appellate authority had invited them. The tribunal observed that there was no evidence in the show cause notice to justify invoking the extended period of limitation.
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The tribunal observed that services such as rent-a-cab, housekeeping, and business promotion had been consistently held to be eligible input services when used in the course of business. The tribunal set aside the Order-in-Appeal and held that the appellant’s cross-objections were wrongly dismissed, the demand was time-barred, the CENVAT credit was rightly availed, and no penalty was sustainable. The appeal was allowed in full with consequential relief.
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