The Chandigarh Bench of Customs Excise & Service Tax Appellate Tribunal ( CESTAT ) ruled that clearing & forwarding agents, bungalow rent, and maintenance in tire manufacturing are input services and it was entitled to Central Value Added Tax ( CENVAT ) Credit.
Good Year India Ltd., the appellant involved in the manufacture of tires and operates depots across India. The appellant availed CENVAT credit on inputs and input services during the relevant period.
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Upon audit, the department alleged wrongful availment of CENVAT credit for services such as Clearing and Forwarding ( C&F ) agents, bungalow rent, Brokerage charges for arranging residential accommodations, Rent of office/godown post-sale, Maintenance of computers and air conditioners.
The audit led to two Show Cause Notices for Rs. 1,46,18,691 covering two periods ( December 2005 to May 2011 ) along with interest and penalties.
The appellant filed a detailed reply to the Show Cause Notices. However, the Commissioner of Central Excise disallowed the CENVAT credit and confirmed the department’s demand for recovery of the alleged wrongful credit availed, along with interest and penalties.
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Aggrieved by the Commissioner’s decision, the appellant appealed before the Chandigarh Bench of CESTAT arguing that the services of clearing, forwarding, and storage were integral to the distribution of goods and should be treated as input services under CCR, 2004.
The appellant’s counsel referred to previous favorable orders for subsequent periods ( 2014-16 ), which settled similar disputes in their favor based on identical facts. Further, the counsel contended that there was no suppression of facts or mala fide intent and they had fully disclosed credit details in their returns, making the invocation of an extended period legally untenable.
On the contrary, the department’s counsel submitted that the services in question did not have a sufficient nexus with the manufacturing process or the clearance of goods and were ineligible for Cenvat credit.
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The two-member bench comprising S. S. Garg ( Judicial Member ) and P. Anjani Kumar ( Technical Member ) noted that in subsequent periods ( 2014-16 ), the same audit objections had been raised, but the Commissioner had allowed CENVAT credit for the very same services. Since the department chose not to appeal those decisions, they became final.
The tribunal further noted that the department could not adopt inconsistent positions on the same issue for the same assessee across different periods, as this would undermine consistency and fairness in its proceedings.
The tribunal referred to various judicial precedents supporting the treatment of C&F services as input services used in the distribution of finished goods. For Brokerage Charges and Maintenance & Repairs of Computers and Air Conditioners, the tribunal accepted that these services were covered under the “input services” definition of CCR, 2004 based on judicial precedents.
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The tribunal found that the appellant had disclosed all relevant information in their returns, negating any intention to suppress facts. Thus, the extended period of limitation was not applicable. Therefore, the tribunal set aside the Commissioner’s order and allowed the appellant’s appeal with consequential relief as per the law.
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