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Judgment
This appeal by the Commissioner of Service Tax (CST) under Section 35G of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 (FA) is directed against the final order dated 3rd February 2015 passed by the Customs, Excise and Service Tax Appellate Tribunal (''CESTAT'') in Appeal No. ST/58883/2013 [ , 2015 (38) S.T.R. 510 (Tri. - Del.)] . The background to the present appeal is that on 22nd October 2009 the Joint Commissioner, Service Tax, New Delhi issued a show cause notice (SCN) under Section 73 of the FA to the Respondent requiring it to show cause as to why it should not be asked to pay Service Tax for wrongly having availed Cenvat credit in the sum of Rs. 39,99,705 during the period 2005-06 and 2008-09, during which period the Respondent was found to have provided ''airport services'' taxable under Section 65(105)(zzm) of the FA. The Respondent had been claiming that it was providing cargo handling services taxable under Section 65(105)(zr) of the FA. The premise of the SCN on this aspect was that during the period in question the Respondent was providing both taxable and exempted services and that the Respondent did not make any separate account of the receipt, consumption and inventory of the input and input services meant for use in providing taxable output services as required by Rule 6(2) read with Rule 6(3)(c) of Cenvat Credit Rules, 2004 (CC Rules). It was alleged that the Respondent had availed Cenvat credit in excess of the permissible limit of 20% of the Service Tax payable on the output services.
The second aspect concerns availing by the Respondent of Cenvat Credit of the Central Excise Duty paid on the Tata Chassis/motor vehicle in the sum of Rs. 4,70,490 during October, 2007 to March, 2008. The allegation here is that as per the definition of capital goods under Rule 2(a)(A) of the CC Rules, the motor vehicle chassis do not qualify capital goods in relation to ''airport services''. Since Rule 2(a)(B) of the CC Rules stipulates that only those motor vehicles registered in the name of output service provider, who should be providing taxable service, would be treated as capital goods.
The stand of the Respondent was that it was providing cargo handling services; that during the relevant period in question it had not provided any exempted services; that cargo handling services were provided for the flights of the German Air Force and not to the German Embassy or its Diplomats enjoying diplomatic status whereas Notification No. 33/2007, dated 23rd May, 2007 only exempts services provided to a foreign diplomatic mission or consular post in India; and that since it was not providing airport services, the claim of Cenvat Credit as regards the toilet cart and water cart deployed by the Respondent for cargo handling services ought to be allowed as they were capital goods.
It must be mentioned at the outset that the Court is not examining the question of maintainability in the present appeal since the matter has been heard on merits.
The Court proposes to examine the following two specific questions urged by the Appellant:
(i) Whether Respondent herein can be allowed utilization of Cenvat Credit for payment of service tax in excess of 20% limit stipulated under Rule 6(3)(c) of the Cenvat Credit Rules, 2004?
(ii) Whether Respondent herein can be allowed availment of credit of Central Excise on goods which are not eligible inputs or capital goods?
Learned counsel for the Appellant has taken the Court through order dated 23rd June 2011 passed by the Joint Commissioner, Service Tax as well as order in appeal dated 29th May 2013 passed by the Commissioner of Central Excise (Appeals) [''CCE(A)''] both of whom have concurrently affirmed the demand as raised in the SCN.
In relation to the first issue concerning the nature of services provided by the Respondent the finding returned by the CCE (A) is that the Respondent had raised bills for services rendered to the German Embassy and payments were also made for such bills by the German Embassy and "therefore, undoubtedly the ground handling services at the airports were provided by the appellants to the German Embassy and the services so provided to the German Embassy were exempted from payment of Service Tax".
The above finding has been overturned by the CESTAT in the impugned order by noticing that "nowhere Revenue has proved that appellant has provided exempted services. In fact in two of the invoices issued by the appellant to German Embassy, the appellant did not charge the Service Tax, does not mean that appellant has provided exempted services".
The Court finds that there is no factual basis for the CCE(A) to have concluded that on account of the bills for providing services having been raised on the German Embassy and the payments having been made by the German Embassy, the nature of services rendered was an exempted service. The Court notices that the specific contention of the Respondent was that cargo handling services were provided by it for the flights of the German Air Force and not to the German Embassy. In the light of that contention, it was incumbent on the Revenue to have placed some material on record to prove that services were provided not to the German Air Force but to the German Embassy. Therefore, the conclusion of the CCE(A) does not appear to have any factual basis.
It may be noticed at this stage that under Section 65(105)(zzm) of the FA as applicable prior to 1st July 2012, a taxable service included a service rendered by "any person, by airports authority or by any other person, in any airport or a civil enclave". The proviso thereto was inserted with effect from 1st July 2010 and stated that Section 65A(2)(a) of the FA which stated that the sub-clause which provides the most specific description shall be preferred to the sub-clauses providing a more general description would not apply "to any service when the same is rendered wholly within the airport or civil enclave." Section 65(105)(zr) defines a taxable service as including a service rendered "to any person, by a cargo handling agency in relation to cargo handling services." This is a more specific entry than Section 65(105)(zm) of FA which seeks to generally apply to all services provided in an airport. Unless the context otherwise requires, the specific definition of a taxable service should be preferred over a general description. In other words, with there being nothing to show that during the period in question the Respondent was not providing cargo handling services at the airport to its customers, it should be held that the Respondent was providing a taxable service within the meaning of Section 65(105)(zr) and not 65(105)(zzm) of the FA.
Since the entire basis of the SCN in relation to both the issues turns on whether the Respondent was providing ''airport services'' and there is nothing shown by the Revenue to the contrary, the Court is of the view that CESTAT rightly overturned the orders of both the Joint Commissioner, Service Tax and CCE (A).
On the second issue the Court is not satisfied that there is anything to show that toilet cart and water cart were not used by the Respondent in the ground handling operations at the airport. It is a fact that the said carts were not having any registration with motor vehicles authority and could not have been used on roads as motor vehicles.
Learned counsel for the Appellant placed reliance on the decision of the Supreme Court in Automotive Manufacturers (P) Ltd. etc. Vs. Government of Andhra Pradesh and Others, etc., , where in the context of the Andhra Pradesh Motor Vehicles Taxation Act 1963, the Court was examining whether a chassis can attract the levy of motor vehicle tax. The finding there was that as long as the chassis can be used on a public road it would attract the levy. The Court, however, was conscious that for being considered a motor vehicle, it must be capable of being adapted for use on roads. It was clarified that a motor vehicle would "not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises".
As pointed out by the CESTAT in the impugned order, the chassis of the motor vehicles were converted into toilet carts and water carts and were not registered under Motors Vehicle Act, 1988. They were used only for the cargo handling services and not on roads. In these circumstances, the finding that they were capital goods within the meaning of Rule 2(a)(A) of the CC Rules, 2004 cannot be said to suffer from any legal infirmity.
Consequently, the Court finds no reason whatsoever to interfere with the impugned order of the CESTAT. The appeal is dismissed, but in the circumstances, with no orders as to costs.