Commissioner of Central Excise, Commissionerate vs T.G. Kirloskar Automotive (P.) Ltd.

Ravi Malimath, J.—This appeal is by the revenue being aggrieved by the order of the Tribunal holding that the Assessee is entitled to avail CENVAT credit on the service tax paid on the transportation services rendered to the staff of the Assessee.

The Assessee is a manufacturer of motor vehicles parts and is availing CENVAT credit of duty paid on inputs and capital goods used in or in relation to the manufacture of the final products. The Assessee had availed and utilized input service tax credit relating to transportation services provided to the staff for pickup and drop from their residence to the factory and vice versa. Accordingly, they availed CENVAT credit for the same. A show-cause notice was issued on the ground that the Assessee had wrongly availed the CENVAT credit since the definition of ''transport service'' is not covered under the definition of input service under Rule 2(1)(ii) of the CENVAT Credit Rules and asking the Assessee to show cause as to why the input service tax availed and utilized on Transportation Services of Rs. 4,53,470 (ST) and Education Cess of Rs. 9,069 should not be treated as wrongful availment and utilization of input service tax credit. The Assessee replied to the show-cause notice stating that the service of transportation was used exclusively for the transportation of the staff of the Assessee from the residence to the factory and vice versa and it is nothing but a welfare measure which in turn would directly affect the manufacturing activities and the quality of the final products. The Assessing Authority rejected the plea and confirmed the demand and interest. The same was challenged in appeal before the Commissioner of Central Excise by the Assessee. The Commissioner rejected the appeal and confirmed the order in original. Aggrieved by the same, the Assessee approached the Tribunal. The Tribunal while placing reliance on its earlier decision in the case of 2009 (14) S.T.R. 316 allowed the appeal by holding that the Assessee is entitled to avail CENVAT credit on the service tax paid on transportation services rendered to the staff of the Assessee. Aggrieved by the said order, the revenue has filed the present appeal.

This appeal was admitted to consider the following substantial question of law:

Whether the transportation services, provided in the factory of the M/s. T.G. Kirloskar Automotive Pvt. Ltd. to their staff for pickup and drop from their residence to the factory and vice versa, was an input service, in or in relation to manufacture, whether directly or indirectly, of the final products, within the meaning and comprehension of Rule 2(1) of the CENVAT Credit Rules, 2004?

In an identical circumstances, this Court by its order in CCE v. Stanzen Toyotetsu India (P.) Ltd. CEA No. 96 of 2009, dated 8-4-2011] and connected matters were dealing with the identical situation with regard to the availment of the CENVAT credit for service tax paid on the services rendered for the conveyance of the employees of the Assessee. This Court was of the view that the providing transportation to the employees is a basic necessity to ensure that the work force comes on time at the work place and hence, the employers have taken this measure which has a direct bearing on the manufacturing activity. It therefore held that providing of transportation services would amount to activity ''relating to business''. It is further came to the view that even though the transportation services are not expressly mentioned in the definition of input service, it cannot be said that they do not constitute input service and the Assessee is not entitled to the benefit of CENVAT credit.

The question involved in the present appeal having since been answered by the order of the Division Bench as mentioned herein above, this appeal is disposed off in the same terms. Accordingly, the substantial questions of law are answered in favour of the Assessee and against the revenue.