CESTAT Denies CENVAT Credit on Rent-a-Cab Services, Due to Non-Compliance with Rule 2(l) [Read Order]

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Chandigarh Bench has upheld the denial of CENVAT credit for availing input tax credit on Rent-a-Cab services, while granting partial relief on other disputed demands. The tribunal confirmed that the company wrongly claimed credits on these services, which are explicitly excluded under the CENVAT Credit Rules, 2004.

CBRE South Asia Pvt. Ltd., a provider of Real Estate Agent and Consulting Engineer services, had appealed against multiple orders issued by the Commissioner of Service Tax, Delhi-IV, and other authorities. The disputes centered on wrongful availment of CENVAT credit on Rent-a-Cab services, exemption claims for services provided to SEZ units, and credits on Professional Indemnity Insurance. The tribunal examined these issues across four separate appeals covering financial years from 2010-11 to 2017-18.

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On the Rent-a-Cab service issue, the tribunal ruled that CBRE was ineligible to claim CENVAT credit as the service falls under the exclusion clause of Rule 2(l) of the CENVAT Credit Rules. The company had argued that the vehicles hired for clients formed part of their capital goods, but the tribunal rejected this claim, noting that the vehicles were neither registered in CBRE’s name nor booked as capital expenditure. The bench cited the Bombay High Court’s decision in Solar Industries India Ltd., affirmed by the Supreme Court, which held that such services do not qualify for credit.

Regarding the exemption for services provided to SEZ units, the tribunal found that CBRE failed to submit sufficient documentary proof to establish that the services were indeed rendered to SEZ developers or units. However, acknowledging precedents in CBRE’s own earlier cases, the tribunal remanded this issue back to the original authority for verification of invoices and documents.

For the period 2010-11 to 2011-12, the tribunal upheld the demand of Rs. 22,23,514 along with interest of Rs. 7,97,043, which CBRE had already paid before the show-cause notice was issued. However, it set aside the penalty, accepting the company’s argument that the issue was interpretational and lacked mens rea. Similarly, the demand of Rs. 20,04,759 was confirmed, but no penalty was imposed.

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On the Professional Indemnity Insurance issue, the tribunal ruled in favor of CBRE, allowing the CENVAT credit. It relied on earlier decisions, including the tribunal’s own order in CBRE’s case, which held that such insurance is integral to the provision of consultancy services and qualifies as an input service.

CESTAT Bench comprised of S S Garg (Judicial Member) and P Anjani Kumar (Technical Member) dismissed the Revenue’s invocation of the extended period of limitation, noting no evidence of intent to evade taxes. It confirmed demands for other periods, including Rs. 1,91,82,534 for 2013-14 to 2014-15, Rs. 1,41,12,379 for 2015-16, and Rs. 2,64,44,500 for 2016-17 and 2017-18 (up to June 2017). However, all penalties across the appeals were set aside.

To Read the full text of the Order CLICK HERE

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