By TIOL News Service

MUMBAI, DEC 14, 2012: THE appellant is engaged in providing Business Auxiliary Services to their customers who are located abroad. For rendering the aforesaid services, they used various input services such as legal services, market data, payroll processing, customers support activities etc. The appellant filed a refund claim for the service tax paid on input services under Rule 5 of CENVAT Credit Rules, 2004, on the ground that they are unable to utilize the credit inasmuch as all their output services are exported.

The adjudicating authority rejected the claim on the following two grounds namely (i) there is no nexus between input services and output services and (ii) they have not submitted the invoices for the service tax paid on input services.

The lower appellate authority held that the appellant had submitted the invoices but rejected the refund claim on the ground that there is no direct nexus between input services received and output service rendered.

So, the appellant is before the CESTAT and submits that the services on which they availed CENVAT credit have direct nexus and are integrally connected with the output service undertaken by them namely ‘Business Auxiliary Service' for the foreign customers and accordingly they are entitled for the credit. Inasmuch as their entire output service is exported, they are unable to utilize the credit and, therefore, they have filed the refund claim under Rule 5 of the CENVAT Credit Rules, 2004 in respect of input services which have been used in relation to rendering of the output service. Reliance is also placed on the decision in Convergys India Pvt. Ltd. (2009-TIOL-888-CESTAT-DEL).

The Revenue representative did not add much into arguments but reiterated the findings of the lower authorities.

The Bench observed -

“6.1 From the perusal of the input services received by the appellant and the nature of the services received, it is evident that all the services are essential in running the business of rendering the output service ‘Business Auxiliary Service' which is exported. If that be so, all the services come within the purview of Rule 2(1) of CENVAT Credit Rules, 2004 which defines the input service. This Tribunal in the case of Convergys India Pvt. Ltd. cited supra held that when cost of goods and services becomes part of cost of final product or output services, such goods and services should be treated as input or input services for the purposes of CENVAT Credit Rules, 2004. The hon'ble High Court of Bombay in the case of Ultratech Cement Ltd. (2010-TIOL-745-HC-MUM-ST) held that any service which has nexus with the business activity of the appellant, whether it is manufacturing or rendering service, has to be treated as “input service” coming within the purview of Rule 2(1) of the CENVAT Credit Rules, 2004. The ratio of these decisions squarely applies to the facts of the present case. Accordingly, I am of the view that the appellant is rightly entitled for the refund of the service tax paid on input services which have been used in the rendering of output services has been exported.”

In fine, the appeal was allowed with consequential relief.

Now for the refund...Quick...quicker...quickest!

(See 2012-TIOL-1854-CESTAT-MUM)