In a recent ruling, the Madras High Court held that ‘Tour Operator’ and ‘Rent-a-cab’ services are input services and are eligible for Service Tax Credit under the Service Tax law. The decision was rendered in the case of Commissioner of Central Excise, Chennai v. M/s Visteon Automatic India (P) Ltd.
While rejecting the contention of the Revenue that the tour operator and rent a cab services do not fall within the ambit of definition ‘input services’ under the provisions of the Cenvat Credit Rules, 2004, the division bench observed that the assessee is eligible for cenvat credit.
In the instant case, the assessee has availed the Cenvat Credit facility on input services of tour operators for transportation of their employees to the factory and the rent a cab service for official purpose of the company. The department disallowed the cenvat credit and passed an order to recover the same by observing that the tour operator and rent a cab services do not fall within the ambit of definition ‘input services’ specified under Rule 2(1) of the Cenvat Credit Rules, 2004.
On appeal, the assessee contended that the input services of tour operator was received for transportation of their own employees to the factory and the rent a cab services for the official purpose of the company. Further, the employees and workers are engaged in the manufacture and clearance of final products from various places to the factory and that the tour services were availed in relation to manufacture of excisable goods.
The first appellate authority and the Tribunal accepted the claim of the assessee by relying upon the apex Court decision in the case of Ramala Sahkari Chini Mills Ltd. Aggrieved with the orders, the Revenue approached the High Court.
The bench comprising of Justice Huluwadi G. Ramesh and Justice Anita Sumant noted that “According to the department neither the tour operator services nor rent a cab services have any nexus with the manufacture of goods. It is only picking up and dropping the workmen at the factory of the assessee. The department has not stated that the assessee had not made payment on the value of input services and the service tax payable thereon. Reference of this Court is drawn to sub section (i) and (ii) of Rule 2 (l) of the Cenvat Credit Rules, 2004, wherein the ‘input services’ is defined elaborately. It is the finding of the Commissioner (Appeals) that picking up and dropping in the course of production of components and the services extended to the workmen shall also be treated as import services. Accordingly, the exemption is granted explaining the definition of input services including picking up and dropping of workmen.”
“Having noted, availing of such services are necessary to the manufacture and transporting the workers to and fro from the factory is included under input services, in relation to the manufacture of excisable goods. Hence the appellate authorities have held that the services availed has nexus to the manufacture of goods. As such, the extended services define not only input services but includes picking up workmen from Chennai to Chengalpattu. It is part of the services being extended and also when it is noted that the services of the cabs are used for the official purpose of the workers to the factory, the services could be considered as input services that is used in relation to the manufacture of excisable goods.”
Citing a catena of decisions, the Court dismissed the appeal filed by the Revenue and held that the assessee is eligible for the service credit as input services for the tour operator service and rent a cab service.
Read the full text of the Judgment below.