Custom, Excise & Service Tax Tribunal
Bharat Sanchar Nigam Limited vs Cce Chennai-Ii on 29 May, 2026
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. I
Service tax Appeal No.42021 of 2016
(Arising out of Order-in-Appeal No.56/2016 (CXA-II) dated 16.02.2016 passed by
Commissioner of Central Excise (Appeals-II), Chennai)
M/s. Bharat Sanchar Nigam Ltd. .... Appellant
Manjakuppam,
Cuddalore, Tamilnadu.
VERSUS
Commissioner of GST & Central Excise ... Respondent
No.1, Goubert Avenue, Puducherry-605 001.
APPEARANCE :
Ms. Vardini Karthik, Advocate for the Appellant Ms. Anandalakshmi Ganeshram, Authorized Representative for the Respondent CORAM :
HON'BLE MR. M. AJIT KUMAR, MEMBER (TECHNICAL) HON'BLE MR. AJAYAN T.V., MEMBER (JUDICIAL) FINAL ORDER No.40660/2026 DATE OF HEARING : 13.02.2026 DATE OF DECISION :29.05.2026 Per: Shri Ajayan T.V.
BSNL, the appellant herein, has called into question the Order-in-Appeal No.56/2016 (CXA-II) dated 16.02.2016 (impugned order) whereby the Appellate Authority has upheld the Order-in-Original No.74/2014-ST dated 30.06.2014.
2. The relevant facts are that the appellant is a registered provider of Telecommunications Service and avails Cenvat credit on inputs and input services. During verification of the accounts of the appellant, Department noticed that for the period from September 2011 to March 2012, the appellant had availed Cenvat credit on rent a cab service, annual maintenance contract for air conditioners and housekeeping 2 service. The Department issued a Show Cause Notice dated 24.05.2013 alleging that the aforementioned services do not qualify as input services for provision of output service and demanding an amount of ineligible Cenvat credit taken of Rs.12,14,020/- along with applicable interest and proposing to impose penalty under Rules 15(1) of Cenvat credit 2004 (CCR). After due process of law, the Adjudicating Authority vide the OIO dated 30.06.2014 confirmed the duty demand to the extent of Rs.11,69,677/- involved on rent a cab service and housekeeping service while allowing the Cenvat credit pertaining to the annual maintenance contract for air conditioners, and also imposed a penalty of Rs.1,00,000/- under Rule 15 of the CCR. Aggrieved, the appellant preferred an appeal before the Commissioner of Central Excise (Appeals-II). The Appellate Authority however, rejected the appeal and upheld the order of the adjudicator in toto. Hence, this appeal.
3. Ms. G. Vardini Karthik, Ld. Advocate, appearing for the appellant contended that the housekeeping services are in the nature of cleaning of tables, chairs, computers, printers, file racks on a daily basis; cleaning of walls, ceiling terrace, removing cobwebs once in a fortnight, and arranging and re-arranging files in file rack and handling of furniture and other Department items like stationery/store items, regular cleaning of office open space, maintenance of garden and regular watering of plants and cutting of wild bushes by providing manure and pesticides. It was argued that the above services form major part of the house keeping services and plays a pivotal role for the maintenance of the administrative office at Cuddalore, Chidambaram, Neyveli, Vridhachalam, Villupuram and Tindivanam and hence the appellant is entitled to claim input service for availing the Cenvat credit. Reliance was placed on the decisions in CCE, Delhi-III vs Pricol Ltd., 2016 (41) STR 649 (Tri. Del.), Balkrishna Industries Ltd. vs CCE, Aurangabad, 2010 (18)0 STR 600 (Tri. Mumbai), CCE, Chennai vs Rotork Control (India) Pvt. Ltd., 2012 (277) ELT 217 (Tri. Chennai), Rotork Control (India) Pvt. Ltd. vs CCE, Chennai, 2010 (20) STR 684 (Tri. Chennai) and Integra Software Services Pvt. Ltd. vs. CCE, Puducherry, 2017 (48) STR 137 (Tri. Mad). It was 3 submitted that in the light of the said judgments the credit availed on housekeeping services and rent a cab services are licit and was for the appellant to provide its output services and may be allowed.
4. Ms. Anandalakshmi Ganeshram, Ld. Authorized Representative, appearing for the appellant, reiterated the findings in the impugned order. Placing reliance on the decisions in Solar Industries India Ltd. vs CCE & ST, Nagpur-II 2022 (64) G.S.T.L. 257 (SC) and M/s. Sai Life Sciences Ltd. vs. CCE, C & ST, Hyderabad, 2016 (11) TMI 1352-Cestat Hyderabad., Ld. AR argued that the Cenvat credit taken on rent a cab service is to be denied.
5. We have both sides, and perused the material available on record.
6. The issue that arises for determination is the entitlement to cenvat credit taken on input services of housekeeping services and rent-a-cab services during the period from September 2011 to March 2012.
7. What constitutes 'input service' stood defined during the relevant period under Rule 2(l) as under: -
"Input Service" means any service, -
(i) used by a provider of output service for providing an output service; or
(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal;4
but excludes, (A) service portion in the execution of a works contract and construction services including service listed under clause (b) of Section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for-
(a) construction or execution of works contract of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or (B) services provided by way of renting of a motor vehicle, in so far as they relate to a motor vehicle which is not capital goods; or (BA) service of general insurance business, servicing, repair and maintenance, in so far as they relate to a motor vehicle which is not a capital goods, except when used by-
(a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such a person; or
(b) an insurance company in respect of a motor vehicle insured or reinsured by such a person; or (C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee. (emphasis supplied)
8. On an analysis of the above definition, it is seen that the same is broadly in three parts; First part, which is the main part, covers input services used for providing output service or used by manufacturer, directly or indirectly, in relation to manufacture or clearance of final product upto the place of removal; Second part is the inclusive part of the definition which expands the scope beyond the coverage of the first part, the word 'includes' enlarging the scope, 5 without being exhaustive or restrictive, and the Third part covers specific exclusions. The exclusions listed in sub-clause (A), sub-clause (B) and sub-clause (BA) have their exceptions; the service portion in the execution of a works contract and construction services including specified services in sub-clause (A) being permissible when they are used for provision of one or more of the specified services, that is, service listed under clause (b) of Section 66E of the Finance Act, namely the declared services of construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion certificate by the competent authority. The services listed in sub-clause (B), that is services provided by way of renting of a motor vehicle, in so far as they relate to motor vehicle are permissible when they are being provided in cases when the credit on the motor vehicle is available as capital goods. The service of general insurance business, servicing, repair and maintenance, in so far as they relate to a motor vehicle which is not a capital goods, is available when used by a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such a person; or an insurance company in respect of a motor vehicle insured or reinsured by such a person. However, the exclusions in sub-clause (C) are only when such services are used primarily for personal use or consumption of any employee.
9. As regards the first part/main part of the definition, it is pertinent to note the difference in the language employed by the legislature. With respect to output service, it is provided that the input service should be used for providing the output service. The specific reference to taxable service has been removed and it is provided that with respect to output service, the input service should be used for providing the output service. The rationale appears to be that the charging section 66B brought in by Finance Act 2012 now specifies that service tax at the rate specified therein would be levied on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another 6 and for the first time in Section 65B titled 'Interpretations', a definition of "service" was also provided in Section 65B(44), which interalia stipulates that service means any activity carried out by a person for another for consideration, and includes a declared service. Further, the definition of output service in Section 2(p) has also been substituted to state "output service" means any service provided by a provider of service located in the taxable territory but shall not include a service specified in Section 66D of the Finance Act, or where the whole of service tax is liable to be paid by the recipient of the service. Section 65 of the Finance Act 1994 also ceased to apply with effect from 01- 07-2012 vide Notification No.12/2012-ST dated 05.06.2012. However, for manufacture of the final product, it continues to be stipulated in Rule 2(l) that the input service be used either directly or indirectly, in or in relation to the manufacture of the final product. On a plain reading of the same it is evident that in order for a service to qualify as an input service vis a vis an output service provider, it has to be shown that the said service is used for providing the output service, while in the case of a manufacturer, it would suffice to show that the same is used in relation to the manufacture of the final product. The expression 'used for' is relatively narrow in its scope when compared to the expression 'in relation to', which is far wider.
10. To understand the Second part/inclusive part of the definition, it would also be beneficial to advert to the decision of the Honourable Supreme Court in the case of Ramala Sahkari Chini Mills ltd v. Commissioner of C. Ex, Meerut-I, reported in 2010 (260) E.L.T. 321 (S.C.), where the Honourable Apex Court has interpreted the term "include" and has held as follows:
"it is trite that generally the word "include" should be given a wide interpretation as by employing the said word, the legislature intends to bring in, by legal fiction, something within the accepted connotation of the substantive part. (Also see: C.I.T., Andhra Pradesh v. M/s. Taj Mahal Hotel, Secunderabad - (1971) 3 SCC 550, Indian Drugs & Pharmaceuticals Ltd. & Ors. v. Employees' State Insurance 7 Corporation & Ors. - (1997) 9 SCC 71, T.N. Kalyana Mandapam Assn. v. Union of India & Ors. - (2004) 5 SCC 632 = 2004 (167) E.L.T. 3 (S.C.) = 2006 (3) S.T.R. 260 (S.C.), It is also well settled that in order to determine whether the word "includes" has that enlarging effect, regard must be had to the context in which the said word appears. (See: The South Gujarat Roofing Tiles Manufacturers Association & Anr. v. The State of Gujarat & Anr. - (1976) 4 SCC 601, R.D. Goyal & Anr.
v. Reliance Industries Ltd. - (2003) 1 SCC 81, and Philips Medical Systems (Cleveland) Inc. v. Indian MRI Diagnostic and Research Limited & Anr. - (2008) 10 SCC 227."
11. A similar view is forthcoming in the decision in Commercial Taxation Officer, Udaipur v. Rajasthan Tax Chem Ltd, 2007 (209) E.L.T. 165 (S.C.), wherein the Apex Court has laid down as follows:
"The word includes gives a wider meaning to the words or phrases in the Statute. The word includes is usually used in the interpretation clause in order to enlarge the meaning of the words in the Statute. When the word include is used in the words or phrases, it must be construed as comprehending not only such things as they signify according to their nature and impact but also those things which the interpretation clause declares they shall include."
12. It is settled law that the expression "in relation to", used in the said rule, has to be given a wide connotation as has been held by the Apex Court in Collector of Central Excise v. Solaris Chemtech Limited, 2007(214) ELT 481 (SC) and Doypack Systems (Pvt) Ltd v. Union of India, 1988(36) ELT 201 (SC).
13. A constitution bench of the Honourable Supreme court, in State of Karnataka v. Azad Coach Builders Pvt Ltd, 2010(262)ELT 32 (SC), has held thus:
"The expression 'in relation to' are words of
comprehensiveness, which might both have a direct
8
significance as well as an indirect significance, depending on the context in which it is used and they are not words of restrictive content and ought not be so construed."
14. However, given that the legislature has categorically provided for certain services when used for specified activities to be excluded from the definition of 'input services', such specific exclusions, subject to the stipulated exceptions, will always remain out of the purview of the said definition. That is to say, the exclusions stipulated by legislature, subject to the exceptions stated therein, are only from what is otherwise includable in the first part and second part, that is the main part and inclusive part as elucidated supra. In other words, once the legislature has made its intent known by mandating as to what is excluded from the definition of input services, then it shuts the avenue for any contention that such services when used for the specified activities would otherwise qualify as input services since they fall under the main part or inclusive part, and that therefore the availment of credit on these services are licit.
15. Therefore, in so far as the availment of input service credit on Rent-a cab by the appellant is concerned, in view of the specific exclusion provided in sub-clause (B), we are of the considered view that the Ld. Appellate Authority has rightly upheld the demand consequent to the denial of input service credit on the rent-a-cab services and the appellant is not entitled to the cenvat credit on this count.
16. As regards House Keeping Services, we find that the adjudicating authority has rendered a finding that the agreement entered into by the Appellant with the service provider indicates that whilst it covers 25 services, 23 works are general conservancy services of cleaning and upkeep of the premises of the appellant and two items of the agreed work provide for cleaning of exchange equipment such as battery, power plant, engine alternator, compute peripherals, fire extinguishers and cleaning the telecom instruments. The Adjudicating Authority has therefore proceeded to reject the claim of input credit on the finding that the impugned services are predominantly connected to general 9 conservancy work. The appellate authority in the impugned order has noticed that out of the 25 services, 23 relate to general conservancy work and that essentially being housekeeping service is not covered under the aforesaid definition of Rule 2(l). The impugned order also while stating that the inclusive part of the definition mentions activities relating to business, yet has held that it however, cannot be stretched too far to include in its ambit, services such as the one stated above and hence does not merit coverage under the inclusive definition and therefore housekeeping service cannot be treated as "input service".
17. We find that indisputably, it has been found that the appellant is availing the housekeeping services for cleaning of exchange equipment such as battery, power plant, engine alternator, computer peripherals, fire extinguishers and cleaning the telecom instruments. Therefore, even if the agreement lists other activities that are conservancy work, that does not detract from the fact that the said services are essential and indeed being used by the appellant for providing output services, the appellant's services being Telecommunication Service. That part, the authorities below have also failed to appreciate that the inclusive portion of the definition as reproduced supra, includes services used in relation to premises of provider of output service or an office relating to such premises. Therefore, even the details of the housekeeping services availed in relation to the premises of the appellant or office relating to such premises would be covered given the wide import of the expression 'includes' and 'in relation to' as observed supra. Further, such housekeeping services for the upkeep and cleanliness of the premises in compliance of environmental law and for maintaining the premises in an eco-friendly manner cannot be considered inessential for providing output service. Pertinently, there is also no bar on such services in the sub-clauses that detail the exclusions, as has been observed by this Tribunal in Cenza Technologies Pvt ltd v CST, Chennai, 2017 (4) G.S.T.L. 150 (Tri-Chennai), while extending the benefit of cenvat credit claimed on housekeeping services, post 01-04- 2011 holding that they are very much required for the upkeep of the appellant's premises. Therefore, we are of the considered view that the 10 appellant is entitled to take input credit of the service tax paid on housekeeping services, and therefore the impugned order to the extent it denies the benefit of cenvat credit availed on housekeeping services cannot sustain and is liable to be set aside.
18. We are also of the considered view that the appellant being a public sector undertaking, and the period involved being immediate to the introduction of the amendments in Rule 2(l), when rulings under the erstwhile provisions were prevailing and decisions premised on the changed provisions of law were yet to percolate to the knowledge of the assessees, element of confusion prevailing cannot be ruled out. It is settled that when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute, it would be justifiable not to impose any penalty. The decision in Hindustan Steel Ltd v. State of Orissa, 1978 (2) ELT (J159) SC refers in this regard. In these circumstances, we are of the opinion that the penalty imposed requires to be set aside.
19. In light of our aforesaid discussions, the impugned is modified and to the extent it upholds the demand on rent-a cab services along with applicable interest, it is upheld, and to the extent it upholds the demand on housekeeping services as well as the imposition of penalty, it is set aside. Ordered accordingly.
Appeal is partly allowed in the aforesaid terms with consequential relief(s) in law, if any.
(Order pronounced in the open court on 29.05.2026) (AJAYAN T.V.) (M. AJIT KUMAR) Member (Judicial) Member (Technical) vl