"Input Service" No Longer Includes Services For Personal Use Or For The Employee Post April 1, 2011: CESTAT
Mariya Paliwala
10 March 2022 6:43 PM IST
The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that the definition of input service as it stood prior to April 1, 2011, in which the phrase "activities relating to business" was included, which had a very wide ambit and would include almost all services used for the activities of business, however, after the amendment the services for personal...
The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that the definition of input service as it stood prior to April 1, 2011, in which the phrase "activities relating to business" was included, which had a very wide ambit and would include almost all services used for the activities of business, however, after the amendment the services for personal use or for employees has been excluded from the definition of "input services".
The single-member bench of Sulekha Beevi C.S. (Judicial Member) observed that the input service tax credit cannot be availed on rent-a-cab services, and supply of manpower for outdoor catering and gardening services after April 2011.
The appellants/assessee in the business of manufacture of various types of industrial safety devices such as isolating interface unit, intrinsic safety barriers, etc.
On scrutiny of accounts of the appellant by the Internal Audit Group of the department, it was noticed that the appellant had availed of input service tax credit on various input services, namely, supply of manpower for outdoor catering services, gardening services, and rent-a-cab services for transportation of its employees and customers during the periods from August 2008 to October 2010 and November 2010 to August 2011, which, according to the department, was not eligible for credit.
Counsel for the appellant submitted that the major part of the demand was prior to April 1, 2011, when the definition of "input service" had a wide ambit and included the phrase "activities relating to business".
Counsel further contended that appellant-factory cannot operate without maintaining a green belt as this is a requirement as directed by the Pollution Control Board. To maintain such green belt, the appellant has procured the services of Manpower Supply for maintaining the garden or green belt; the Service Tax paid for such services is, therefore, eligible for credit.
On the other hand, the counsel for the department submitted that referred to the definition of 'input service' after the amendment with effect from April 1, 2011.
As per the amended definition the "Input Service" means any service used by a provider of output service for providing an output service; or used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products, up to 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 up to 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 up to the place of removal.
The definition of "input service" excludes services 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 on leave or home travel concession, when such services are used primarily for personal use or consumption of any employee.
Counsel for the department urged that for the period after April 1, 2011, the appellant was not eligible for credit in respect of Rent-a-Cab Services unless it is established that the vehicles are capital goods for the service provider. The appellant has not produced any document and therefore, the credit was rightly disallowed.
The ITAT relied on the decision of the Supreme Court in the case of M/s. Toyota Kirloskar Motor Pvt. Ltd. v. Commissioner of Central Tax in which it was held that the definition of "Input Service" post 1.4.2011 is very clear on the outdoor catering services used primarily for personal use or consumption of any employee is held to be excluded from the definition of "Input Service".
Case Title: M/s. MTL Instruments Private Limited Versus Commissioner of G.S.T. and Central Excise
Citation: Excise Appeal No. 40588 of 2019
Counsel For Appellant: Consultant Nischal Agarwal
Counsel For Respondent: Authorized Representative Sridevi Taritla
