Commissioner Of Central Excise, Nagpur vs M/S Sunil Hi-Tech Engineers Ltd

(Arising out of Order-in-Appeal No. NGP/EXCUS/000/APP/649/13-14 dated 9.7.2013 passed by the Commissioner of Central Excise (Appeals), Nagpur).

For approval and signature:

Honble Shri Anil Choudhary, Member (Judicial)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy : Seen of the order?

4. Whether order is to be circulated to the Departmental : Yes authorities? ======================================================

Commissioner of Central Excise, Nagpur Appellant

Vs.

M/s Sunil Hi-Tech Engineers Ltd. Respondent

Appearance: Shri S.R. Nair, Examiner (AR) for Appellant

Shri Ganesh K.S. Iyer, Advocate for Respondent

CORAM: SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL)

Date of Hearing: 01.05.2015

Date of Decision: 01.05.2015

ORDER NO.

Per: Shri Anil Choudhary

The Revenue is in appeal against order of the Commissioner (Appeals) whereby the CENVAT Credit in respect of the input services  Air Travel Agent, which was disallowed vide Order-in-Original, has been held as allowable. Further, the security services which was received for the purpose of security at the residential premises being outside the registered premises, the Commissioner (Appeals) has erred in allowing the CENVAT Credit of the same.

2. The brief facts of the case are that for the period 2005-06 to 2010-11 (upto Sept. 2010) vide show-cause notice dated 20.4.2011, it was alleged that the respondent assessee have availed CENVAT Credit, the input service being Air Travel Agent, security services. On the verification of the bills of the Air Travel Agent, it appeared that the invoice issued by the service providers pertain to booking of air ticket, rail tickets in the name of the personnel of the assessee.

2.1 As regards the security service, it was found that the same was provided at the residential premises and Cenvat amount of Rs.41,181/- is not admissible. In the statement recorded of Shri D.S. Jaiswal, Authorized Signatory of the assessee, it has been stated that Air Travel Agent expenses are incurred for traveling by the personnel of the assessee to different locations in relation to work at site and their headquarter where output services are being rendered. Further, security expenses incurred in the Corporate office, Civil Line office etc. have been incurred. It was further stated that the security services is common input services for the premises at civil lines being an amount in question is included in the registration certificate dated 29.10.2010 for which application has been made for adding on 8.3.2010. As the Revenue felt that the assessee have availed inadmissible CENVAT Credit in respect of Travel Agent Services and Security Services which incurred in the Civil Line premises, the assessee was required to show cause as to why the CENVAT Credit totally Rs.9,06,022/- be not disallowed and recovered under Rule 14 of Cenvat Credit Rules read with Section 11A of the Central Excise Act and further why not interest be recovered and also why not penalty be imposed under Rule 15 of Cenvat Credit Rules, 2004.

2.2 The respondent assessee contested the show-cause notice stating therein that Air Travel agent Services have been availed for issue of tickets in the name of personnel of the assessee, wherein the bills for the services are in the name of the assessee company. The bills contained the name of the personnel who has traveled for the business purposes of the assessee company. It was further stated that the traveling is held for the business purposes and CENVAT Credit is eligible on the input service of Air Travel Agent. Further, reliance was placed on the ruling of this Tribunal in the case of M/s Heartland Bangalore Transcription Ser. (P) Ltd. Vs. Commissioner of Service Tax, Bangalore  2011 (21) STR 430 (Tri-Bang), wherein the refund of CENVAT Credit with respect to the input services of Air Travel Agent was claimed under Section 5 of Cenvat Credit Rules, 2004. It was held that the service of Air Travel Agent has been received for traveling of Executive to different locations to meet client for canvassing and for training and also called marketing and promoting business and accordingly, the assessee was held to be eligible for CENVAT Credit. Further, it was stated that there is no allegation in the show-cause notice that the traveling undertaken by the personnel of the assessee was for non-business purposes.

2.3 So far the issue of providing security services to unregistered premises situated at Civil Line, residential premises, it was urged that it is not in dispute that the bills for the services issued in the name of the assessee and the security expenses was incurred by the assessee for his administrative office and not for the residential premises, which is situated adjacent to the administrative office and the mention of the residential premises is only the typographical error on part of the service provider. It was further stated that administrative office situated at Civil Line is already included in the registration certificate as one of the offices of the assessee. The delay in inclusion of the same in the registration certificate is only a procedural lapse and the same does not called for denial of credit as long as the assessee is registered under the centralized registration procedure. However, the proposed demand was confirmed by the Order-in-Original along with interest and further penalty of equal amount was imposed under Section 78 of the Finance Act, 1994.

2.4 Being aggrieved, the respondent have preferred appeal before the Commissioner (Appeals), who vide the impugned order was pleased to allow the credit of Rs.8,64,841/- availed in respect of Air Travel agent service and was pleased to disallow the credit of Rs.48,141/- in respect of security services with respect to Civil Line premises at Nagpur. Further, penalty imposed under Rule 15 of Cenvat Credit Rules, 2004 read with Section 78 was accordingly reduced to Rs.48,181/- and the appeal was allowed in part. The relevant findings have been recorded in para 7 of the impugned order which is reproduced herein for ready reference: -

7. Regarding credit of Service Tax paid on booking of air ticket, the appellants have vehemently contended in their appeal that the lower authority held that the service on which credit has been taken must be in nexus with output service is prima facie incorrect, because travel is made for the business purpose. The officers of the company are required to travel for such important activities, such as, visit to the various companies and meet the representatives of the purchaser, visiting the plant for installation and repairs, negotiations, settling disputes, verification of quality of products etc. These are all activities closely related to business of the appellant. I find that the issue, whether credit could be availed only in respect of service provided within the business premises is no more res-integra, having been settled by the Hon'ble Bombay High Court in the case of Coca Cola India Pvt. Ltd. Vs. Commissioner of Central Excise, Pune-III  2009 (242) ELT 168 (Bom). I also find that, the service tax paid on booking of air tickets for the company officers for sales promotion to all destinations, as per policy laid down and the use of such business trips by designated officers is undeniably in relation to the business of the appellant and there is no justification for denial of the said credit. Further, the lower authority has denied the credit on another ground that the invoices on the basis of which credit has been availed are not in the name of appellant but in the name of companys officers. I find from input service invoices produced by the appellant that the invoices are in the name of appellant and passengers name also appeared on the said invoices who were the officers of the company. I find that the appellant has produced sample copies of invoices even before the lower authority while replying to the show-cause notice but he has denied the credit with a pre-determined mind without verifying the invoices, which is not correct. Therefore, I hold that the said decision of the Hon'ble High Court of Bombay is squarely applicable to the present case. The availement of CENVAT Credit of Rs.8,64,841/- on the said service is thus in order. There are also catena of decisions on this issue supporting appellants plea, delivered by the Honble CESTAT.

3. Being aggrieved, the Revenue is in appeal against allowance of CENVAT Credit in respect of Air Travel Agent service on the ground that the invoice raised by the service provider pertain to tickets issued in the name of personnel of the assessee. Accordingly the assessee is not entitled to avail CENVAT Credit of the same, since the said input service was not rendered to the assessee and hence did not qualify as input service in view of Rule 2(l) of Cenvat Credit Rules, 2004. It is further urged that the Commissioner (Appeals) has erred in relying on the ruling of the Hon'ble Bombay High Court in the case of Coca Cola India Pvt. Ltd. Vs. Commissioner of Central Excise, Pune-III  2009 (242) ELT 168 (Bom). In the Coca Cola case, the questions before High Court were that  (a) whether services of Advertising and Marketing procured by assessee in respect of advertisement for aerated waters are covered under the definition of the words input services as defined under Rule 2(l) of the Cenvat Credit Rules, when admittedly the assessee concentrates exclusively used for the manufacture of the respective aerated waters which are advertised by the assessee?, and (b) whether the advertisement of sales promotion of aerated waters undertaken by manufacturer of concentrate is covered by the inclusive part of the definition of input service contained in Rule 2(l) of the Cenvat Credit Rules, 2004? The Hon'ble High Court after examining the issue in detail held that there is clear link between the concentrate and the beverages made from that.

The Explanatory Notes under HSN to Heading 21.06 proves the integral link between concentrate manufactured by the assessee and the beverage (aerated water) manufactured by the bottler from it. Further the explanation also explains the rational for business being arranged in this industry in a particular manner. This method of doing business avoids unnecessary transport of large quantity of water. In addition, the bottles and the crates have to be collected back from the shop keepers or dealers and taken back to the factory for filling the fresh batch on a constant basis. At all times, quality of beverage, marketing support of the beverages is done by the brand name holder-cum-concentrate manufacturer. Thus, what follows from the above discussion is that the credit is availed on the tax paid on the input service, which is advertisement and not on the contents of the advertisement. Thus it is not necessary that the contents of the advertisement must be that of the final product manufactured by the person advertising, as long as the manufacturer can demonstrate that the advertisement services availed have an effect of or impact on the manufacture of the final product and establish the relationship between the input service and the manufacture of the final product.

The manufacturer thereby can avail the credit of the service tax paid by him. Once the cost incurred by the service has to be added to the cost, and is so assessed, it is a recognition by Revenue of the advertisement services having a connection with the manufacture of the final product. Accordingly, it was held that the manufacturer-assessee Coca Cola is entitled to CENVAT Credit in respect of advertisement expenses for beverages (aerated waters) manufactured out of the concentrate so manufactured by the assessee.

4. The learned Counsel for the respondent-assessee states that in addition to the ruling in the Coca Cola India Pvt. Ltd. (supra), the issue of input tax credit have been dealt in detail by the Hon'ble Bombay High Court in the case of Commissioner of Central Excise, Nagpur Vs. Ultratech Cement Ltd.  2010 (20) STR 577 (Bom), where in para 29 of the judgment, the Hon'ble High Court had held that the expression activities in relation to business in the definition of input service postulates activities which are integrally connected with the business of the assessee. If the activity is not integrally connected with the business of the manufacture or final product, the service would not qualify to be a input service under Rule 2(l) of the 2004 Rules. The Hon'ble High Court also referred to its earlier judgment in the Coca Cola case and also referred to the Larger Bench ruling of this Tribunal in the case of GTC Industries Ltd.  2008 (12) STR 468 (Tri-LB). He, accordingly, prays for upholding the impugned order as CENVAT Credit in respect of Air Travel Agent Service has been rightly held to be relevant to the business of the assessee.

5. Having considered the rival contentions and in view of the nature of the business of the assessee being mainly works contract, wherein the works are situated at different places, the personnel of the assessee are required to travel for business purposes between various works site from Head Office to work site and from work site to Head Office and also have various other means including resolution of dispute tax balance etc. The adjudicating authority has erred in holding that although the bills are raised in the name of the company, the traveling tickets are in the name of the personnel as the company being an artificial judicial person, cannot travel itself as it exists only on paper in the eyes of law. It is only the personnel of the company, who travel for the business of the company and the CENVAT Credit in respect of Air Travel Agent service is rightly allowed by the impugned order. Thus, the appeal of the Revenue is dismissed. The respondent assessee will be entitled to consequential benefit, if any, in accordance with law.

(Pronounced in Court)

(Anil Choudhary) Member (Judicial)

Sinha

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