February 20, 2026 : The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that rent-a-cab services are not eligible for CENVAT credit under the amended definition of “input service” post 01 April 2011, while remanding other disputed issues for limited factual verification.

The ruling came in a batch of nine appeals filed by Godrej and Boyce Mfg. Co. Ltd. against the Commissioner of GST and Central Excise, Chennai North. The appeals arose from Order-in-Appeal No. 405/2017 dated 24.11.2017.

The coram comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) delivered Final Order Nos. 40264–40272/2026 on 19.02.2026.

Background of the Dispute

The appellant, engaged in the manufacture of steel furniture at Ambattur, Chennai, had availed CENVAT credit during April 2011 to October 2015 on various services including commissioning and installation, air travel, rent-a-cab, purchases sub-contract, loading/unloading and manpower hiring.

The Department issued multiple show cause notices alleging irregular availment of credit amounting to ₹1.94 crore on the ground that:

• Certain services were excluded under the amended Rule 2(l) of the CENVAT Credit Rules, 2004 (w.e.f. 01.04.2011), and
• Some services were common input services used for both dutiable manufacturing and exempt trading without compliance under Rule 6.

The adjudicating authority disallowed credit of ₹1.71 crore, allowed ₹23.24 lakh, and imposed interest and penalty. The Commissioner (Appeals) upheld the order, leading to the present appeals.

Commissioning and Installation: Remanded for Verification

On commissioning and installation services, the Tribunal noted that even after the 2011 amendment, Rule 2(l) continues to cover services used directly or indirectly in or in relation to manufacture, unless specifically excluded. Commissioning and installation are not expressly mentioned in the exclusion clause.

The appellant relied on earlier decisions in its own cases where such credit had been allowed when installation formed an integral part of composite supply obligations.

However, since relevant contracts and purchase orders were not produced in the present appeals to establish whether installation was intrinsically linked to manufacture and clearance, the Tribunal remanded the issue for limited verification of contractual documents.

Rent-a-Cab: Credit Rejected

On rent-a-cab services, the Bench took a firm view. It observed that the amended Rule 2(l) introduced specific exclusions and that judicial precedent has settled the position against assessees in respect of employee transportation.

Relying on the Supreme Court’s ruling in Solar Industries India Ltd. v. CCE, Nagpur-II, the Tribunal held that transportation of employees through rent-a-cab services has no direct nexus with manufacture and falls within the exclusion clause post 01.04.2011. Accordingly, CENVAT credit on rent-a-cab services was held to be inadmissible for the disputed period.

Air Travel and Tour Expenses: Business Nexus to Be Examined

As regards air travel and tour expenses, the Tribunal clarified that the exclusion clause applies specifically to vacation-related benefits such as Leave Travel Concession and does not automatically cover business travel.

Since the records did not conclusively establish whether the air travel expenses were incurred wholly for business purposes, the matter was remanded for limited verification of business nexus.

Common Services and Rule 6: Proportionate Reversal Required

With respect to purchases sub-contract, loading/unloading and manpower hiring services, the Tribunal observed that mere engagement in trading activity does not automatically disentitle an assessee from availing credit.

However, where common input services are used for both dutiable manufacture and exempt trading, Rule 6 mandates proportionate reversal. As the extent of common usage was not properly quantified, the matter was remanded for recomputation strictly in terms of Rule 6, without denying the entire credit.

Interest and Penalty

Since substantive issues were remanded, the Tribunal held that interest and penalty would be consequential and subject to fresh adjudication. All nine appeals were disposed of by way of remand.

Key Takeaway

The ruling reinforces that after 01.04.2011, CENVAT credit claims must strictly conform to the narrowed definition of “input service” under Rule 2(l). Employee-related services such as rent-a-cab are clearly barred, while business-related services require clear documentary proof of nexus with manufacture.

Cause Title: M/s. Godrej and Boyce Mfg. Co. Ltd. v. Commissioner of GST and Central Excise
Case No.: Excise Appeal Nos. 40450–40454 & 40456–40459 of 2018
Coram: P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member)
Decision Date: 19 February 2026