Custom, Excise & Service Tax Tribunal
M/S. Honda Motorcycle & Scooter India ... vs Cce, Delhi-Iii on 23 May, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH-160017 DIVISION BENCH COURT NO.1 Appeal No.E/57328/2013-EX(DB) [Arising out of the OIO No.24/SA/CCE/2013 dated 11.2.2013 passed by the CCE, Delhi-III) Date of Hearing/Decision: 23.05.2016 For Approval & signature: Honble Mr.Ashok Jindal, Member (Judicial) Honble Mr.Raju, Member (Technical) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3. Whether their Lordships wish to see the fair copy of the order? seen 4. Whether order is to be circulated to the Department Authorities? Yes M/s. Honda Motorcycle & Scooter India Pvt. Ltd. Appellant Vs. CCE, Delhi-III Respondent
Appearance Ms.Krati Somani, Advocate- for the appellant Shri R.K.Mishra, AR- for the respondent CORAM: Honble Mr.Ashok Jindal, Member (Judicial) Honble Mr.Raju, Member (Technical) FINAL ORDER NO 60151/2016 Per RAJU:
The appellants M/s Honda Motorcycle & Scooter India Pvt. Ltd.were denied the credit on certain services and the demand was confirmed. The appellants are challenging the following demands raised against them:
(i) Commercial and industrial construction service, works contract service and architect service used for design, construction and structure for marshal conveyor project.
2. The credit was denied relying on the circular dated 4.1.2008 and on the decision of the Tribunal in the case of Vandana Global Ltd.2010 (253) ELT 440. The Commissioner observed that services are used to bring civil structure which is immoveable property and therefore the credit of such service cannot be allowed.
2.1. Learned Counsel argued that their case is covered by the decision of Honble High Court of Punjab and Haryana in the case of Bellosonica Auto Components India Pvt.Ltd.-2015-VIL-300-P&H-ST wherein the Honble High Court has observed as follows:
6.?The department contended that the said services were not eligible for Cenvat credit and accordingly issued show cause notice for recovery of the credit along with interest and for imposition of penalty. The Commissioner confirmed the demand along with interest and imposed penalty. The Commissioner held as follows. Though the definition of input service is wide, it does not cover services that remotely or in a roundabout way contribute to the manufacture of the final products; that any and every connection however remote and indirect it may be is not contemplated by the definition of input service and that a line has to be drawn somewhere to avoid undue extension of the phrases directly or indirectly and in or in relation to by adopting a common sense approach. Immovable property is neither service nor goods and, therefore, input credit cannot be taken. Although civil construction work is a taxable service under the Finance Act, 1994, it is basically civil in nature relatable to the immovable property not chargeable to central excise duty. Immovable property is neither service nor goods. Input credit is not available to them. Commercial or industrial construction service or works contract service is an input service for immovable property which is neither subjected to central excise duty nor to Service tax. In this regard, the Commissioner referred to a C.B.E&C. Circular, dated 4-1-2008. The Commissioner also held that the Service tax paid on lease rentals is not covered under the input service as the same is not remotely connected to the manufacturing activity and that the nexus thereof with the manufacture of the final product is far-fetched as the same is not used directly or indirectly in or in relation to the final product i.e. metal-sheet.
7.?We are entirely in agreement with Mr. Amrinder Singhs submission on behalf of the respondents, that the Cenvat credit taken of the tax paid in respect of the said input services can be utilized by the respondents in accordance with the Cenvat Credit Rules. Mr. Amrinder Singh rightly analysed Section 2(l) by dividing it into two parts terming them the mean part and the includes part and that the present case would fall under both the parts of the definition as the phraseology is wide enough to cover the said services, the same being directly or indirectly or in any event in relation to the manufacture of the respondents final product.
8.?The land was taken on lease to construct the factory. The factory was constructed to manufacture the final product. The land and the factory were required directly and in any event indirectly in or in relation to the manufacture of the final product and for the clearance thereof up to the place of removal. But for the factory the final product could not have been manufactured and the factory needed to be constructed on land. The land and the factory are used by the manufacturer in any event indirectly in or in relation to the manufacture of the final product, namely, metal-sheets. The respondents case, therefore, falls within the first part of Rule 2(l) aptly referred to by Mr. Amrinder Singh as the means part. 2.2. We find that the issue at hand is squarely covered by the decision of jurisdictional High Court. Following the ratio of the same, the credit on Commercial and industrial construction service, works contract service and architect service used for design, construction and structure for marshal conveyor project is allowed.
(ii) The Event Management services:
3. The appellants were denied the credit on event management services used for sale promotion event on the ground that the participants in the race organized by the appellants are already owners of bike and therefore, this cannot be considered as sale promotion exercise.
3.1. Learned Counsel for the appellants argued that event organized for the participant of the race but also for the people who come to see such event and get incentive to purchase their motorcycles, therefore, it can be considered the sole promotion activity. She also relied on the decision of the Tribunal Castrol Pvt.Ltd.-2013 (291) ELT 469.
3.2 Learned AR relied on the impugned order.
3.3 We have considered the rival submissions. We find that the arguments of the Commissioner in the impugned order to the effect that since the participants of the race already owners of bike, it cannot be considered as sale promotion event is absurd to say the least. The event is witnessed by number of people and therefore is clearly sale promotion exercise which is squarely covered within the definition of input service. The appeal on this ground is therefore allowed and the credit on the event management service availed for promotional activites in the race organized by the appellants is allowed.
(iii) The medical insurance and life insurance service:
4.1 The credit on the medical insurance and life insurance service was denied to the appellants relying on the circular No.843/4/2011-Cx dated 29.4.2011 wherein it has been held that the credit is not allowed on the services used primarily for welfare of the employees.
4.2 Learned Counsel argued that the insurance is for the employees welfare and is required in terms of section 38 of Employees State Insurance Act. She argued that the scope of insurance taken is same as required under insurance of ESI Act. She also relied on the decision of Honble Karnataka High Court in the case of Sanzen Toyotetsu India (P) Ltd.-2011 (23) STR 444 (Kar) wherein the Honble High Court has observed as follows:-
14.?In so far as Insurance coverage to the employees is concerned in the course of employment if the employees suffer injury or dies, there is a vicarious liability imposed on the employer to compensate the employee. If the employer employs its own transportation facility in order to cover the risk which also includes the risk of workers who are covered in that statutory establishment. He has to take the insurance policy without which the vehicle cannot go on the road. Under the Workmens Compensation Act he has to obtain the Insurance Policy covering the risk of the employees. The employees State Insurance Act takes care of the health of the employees also and casts an obligation on the employer to provide insurance services. Under these circumstances, this Group Insurance Health Policy though is also a welfare measure is an obligation which is cast under the Statute that the employer has to obey. Section 38 of the Employees State Insurance Act, 1948, mandates that subject to the provisions of the Act, all employees in factories or establishments to which this Act applies shall be insured in the manner provided by this Act. May be the employees also have to contribute but the employer is under an obligation to take an insurance policy and contribute his share. Therefore, the said Group Insurance Health Policy taken by the assessee is a service which would constitute an activity relating to business which is specifically included in the input service definition.
4.3 Learned AR argued that apart from insurance the employees are also availing the medical allowances and therefore medical insurance risk coverage is nothing but welfare of the employees.
4.4 We have considered the rival submissions. Learned Counsel has argued that the insurance is strictly in terms of section 38 of ESI Act. In terms of the decision of Honble Karnataka High Court (supra), so long as the insurance is in terms of section 38 of ESI Act the credit of the service tax paid is allowed. The appeal on this count is allowed.
(iv) The Outdoor catering service:
5.1. The appellants have admitted the liability of service tax on outdoor catering service, however, have disputed that the finally demand confirmed by the Commissioner as the Commissioner failed to given credit of certain amount which they have already paid. Since there is dispute in the figures which needs verification, on this ground, the impugned order is set aside and the matter is remanded to the Commissioner for verification of the figures.
(v) Supply of Tangible Goods:
6.1 The demand for supply of tangible goods was raised in respect of cars taken on lease for the appellants officials. The appellants have admitted the liability of Rs.6,438/-. However, they have challenged the demand of Rs.6,19,767/-. The demand was confirmed on the ground that the cars used by the employees who were not involved in the manufacturing of the goods. It was argued that the appellants have reversed the credit for service tax in respect of man power recruitment services availed for hiring the drivers as some drivers were used for non-official purposes which proves that these cars were used for non official purposes.
6.2 Learned Counsel admitted that after 1.4.2011, the credit on these services cannot be availed. However, she argued that prior to 1.4.2011 such credit could have been availed. She relied on the decision of Honble Karnataka High Court in the case of Sanzen Toyotetsu India (P) Ltd. (supra). She argued that these cars have been used for facilitating the business of the appellants.
6.3 We find that the exact nature of use of the cars and purpose for which they have been used has not been examined and certain bald statements have been made by both sides in respect of such use. Therefore, to determine the exact use, the matter is remanded to the original authority for determination of the facts and re-adjudication.
(vi) Business support service:
7.1 The credit on business support service used towards data entry of records of the company has been denied on the ground that the data entry service has been used for host of activities which may not be related to the manufacture.
7.2 We find that the accounting is specifically covered within the definition of input service and therefore the credit on business support service of data entry availed is allowed.
(vii) Manpower recruitment or supply agency service:-
8.1 The credit on Manpower recruitment or supply agency service availed for hiring the drivers has been denied on the ground that the same are used by the directors for personal consumption. While the appellants have admitted that part of the service has been used for private purposes and they voluntarily reversed the credit of the same. It is seen that the appellants have claimed that the credit of the said services in respect vehicle used by the directors, deputy directors, advisors, vice president. The appellants relied on the decision of the Tribunal in the case of Utopia India Pvt.Ltd.-2011 (23) STR 25 (Tri.) and Brakes India-2010 (19) STR 524 (Tri.-Bang.).
8.3 We find that both the decisions has been squarely covers the issue. We find that the impugned order does not record any evidence or finding to the effect that the directors and also the employees who used the said services were not involved directly or indirectly in the manufacturing activity. In view of above, the demand on this count is not sustainable and the same is set aside.
(viii) Renting of immovable property:
9.1 The demand in respect of renting of immovable property was raised in respect of storage of goods required for providing output service of commercial use of exploitation of event service. The credit was denied as the said service was not used in relation to manufacture of goods.
9.2 Learned Counsel for the appellant argued that the service was availed for Chennai and they were registered in Chennai as service provider. The service was availed for providing output service for Chennai office and therefore availing the credit by the appellant was merely a technical error. She clarified that the appellants were also registered as input service distributors in the Manesar. Therefore, the credit was availed by them in respect of service used in respect of taxable service provided at Chennai and they could have availed the credit as ISD.
9.3 We find that this argument has not been taken at any stage in the lower level. It is not in dispute that the said service has not been availed in respect of manufacture of goods at Manesar. This is only an alternate argument which is not examined at the lower level.
9.4 In view of above, the demand on this count is set aside and the matter is remanded to the Commissioner to examine this aspect at his level.
(ix) Convention services:
10.1 The notice also seeks to recover the credit taken on Convention services used for meeting the technicians and mechanics who provide after sale service on the ground that it has no relation with the manufacturing of the goods. After sale service is post manufacturing activity provided from the dealers premises and after sale service are provided to the customers on payment of certain amount. In such circumstance, it cannot be said that the said services are in relation to manufacture of goods.
10.2 It was argued that by the learned Counsel that such after sale service added to the value of the goods and the value of such after sale service are included in the assessable value.
10.3 Learned Counsel also pointed out that in the appeal memo they have clarified Convention services was in respect of training of technicians and mechanics who work with the appellants dealers. While before the Commissioner, they have erroneously submitted as technicians and mechanics was in relation to business. We find that the facts were not correctly presented before the original authority and therefore, we set aside the impugned order in respect of this service and remand the matter to the Commissioner for reconsideration.
10.4 Learned AR relied on the impugned order.
(x) Photography services:
11.1 The credit of services of Photography services used for taking pictures of manufactured products for use of advertisement and R&D was denied on the ground that it has no relation with the manufacturing activity.
11.2 Learned Counsel argued that the said services were used in the product development and improvement of products and therefore, integrally part of the input service definition.
11.3 We find that the services are clearly used for development and improvement of manufactured products and therefore the credit of the same is admissible to the appellants.
(xi) Hotels, inns, club or guest house services:
12.1 The credit on Hotels, inns, club or guest house services used by the company for stay of employees when they are travelling for the purposes of sales promotion was denied relying on the circular No.843/2011 dated 29.4.2011 wherein it has been clarified that the credit is not available when the services are used primarily for personal consumption of the employees.
12.2 We find that the assertion of the appellants that the said service are used for stay of employees when they are travelling for the purposes of sales promotion has not been challenged and therefore the credit of the same cannot be denied as the activity of sale promotion falls within the definition of input service.
(xii) Manpower recruitment or supply service:
13.1 The credit of service taken on Manpower recruitment or supply service of caretaker of the guest house was denied and the appellant reversed the entire amount. The appellants have challenged the order only on the ground that they have reversed the entire amount of credit, therefore, no demand should be confirmed. This fact needs verification. In view of above, we set aside the impugned order and remand the matter to the Commissioner for fresh adjudication.
14. The impugned order is modified on the above terms and the appeals is disposed of accordingly.
(Dictated & pronounced in the open court)
(Raju) (Ashok Jindal)
Member (Technical) Member (Judicial)
mk
1