The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed the appeals filed by M/s Hofincons Infotech and Industrial Services and dismissed the Department’s appeal, holding that CENVAT credit on rent-a-cab and insurance services is admissible and that no reversal under Rule 6(3) of the CENVAT Credit Rules, 2004 is required for services provided to Special Economic Zones (SEZs).
The bench of Ajayan T.V. (Judicial Member) and M. Ajit Kumar (Technical Member ), was adjudicating cross-appeals arising from a common Order-in-Appeal dated November 28, 2016. The dispute pertained to the period April 2009 to September 2011, during which the assessee had availed CENVAT credit on input services such as rent-a-cab and insurance, and had also provided services to SEZ units without maintaining separate accounts.
The Department had alleged that such input services were not eligible for credit and further contended that the assessee was required to reverse credit or pay an amount under Rule 6(3) for providing exempted services, including those rendered to SEZs. Accordingly, demands along with interest and penalties were confirmed by the adjudicating authority.
On appeal, the Commissioner (Appeals) upheld denial of certain credits but set aside the demand under Rule 6(3) in respect of SEZ services and also dropped penalties. Both sides challenged the order before the Tribunal.
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The Tribunal examined the legal position concerning Rule 6(6A) of the CENVAT Credit Rules and the retrospective amendment brought by Section 144 of the Finance Act, 2012. It held that services provided to SEZ units are not to be treated as exempted services for the purpose of Rule 6, and therefore, no reversal of credit or payment under Rule 6(3) is required. The Bench rejected the Department’s argument that the benefit of Rule 6(6A) was restricted only up to February 28, 2011, clarifying that the provision continued to apply thereafter as well.
With regard to credit on rent-a-cab services, the Tribunal accepted the assessee’s contention that transportation facilities were provided to employees working in remote locations, making such services integrally connected to the provision of output services. Similarly, insurance services were held to be eligible input services, particularly where such coverage was mandated under contractual or statutory obligations such as the Employees State Insurance scheme.
The Bench also emphasized that there was no evidence to suggest that these services were used for personal consumption of employees or formed part of their cost-to-company (CTC), which is a key factor in determining eligibility of input service credit.
The Tribunal upheld the decision of the Commissioner (Appeals) to set them aside, noting the existence of interpretational disputes and reliance on judicial precedents including the Supreme Court’s ruling in Maruti Suzuki Ltd., which recognized the complexity and litigation surrounding CENVAT provisions.
Concluding that the assessee was entitled to the disputed credits and that no liability under Rule 6(3) arose for services rendered to SEZs, the Tribunal allowed the assessee’s appeals with consequential relief and dismissed the Department’s appeal as devoid of merit.
Case Details
Case Title: M/s. Hofincons Infotech and Industrial Services Versus Commissioner of GST & Central Excise
Citation: JURISHOUR-1040-CES-2026(CHE)
Case No.: Service Tax Appeal Nos.40856-40857 of 2017
Date: 28.04.2026
Counsel For Petitioner: Radhika Chandrasekar, Advocate
Counsel For Respondent: N. Satyanarayana, Authorized Representative
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