By TIOL News Service

MUMBAI, AUG 14, 2014: THE appellant is registered with the department as they are providing the following services:-

(1) Training and Coaching

(2) Management Consultants

(3) Convention Services

They are also availing the benefit of CENVAT credit under the provisions of CCR, 2004.

During the course of scrutiny of records, it was observed by the Revenue that the appellant had availed CENVAT Credit in respect of the following services viz. (a) Maintenance of pond and garden (b) Extension of Road (c) Brokerage amount on account of purchase/lease of flats for faculty (d) Fabrication, fencing of compound (e) Jogging Track repairs.

Taking a view that these services do not appear to be input services for the output services rendered by the appellant a SCN was issued for recovery of CENVAT credit of Rs.2.01 lakhs & by invoking the extended period of limitation.

The adjudicating authority held that the services qualify as input services in terms of rule 2(l) of the CCR, 2004 and, therefore, there was no infirmity in the availment of CENVAT credit. The SCN was also held to be time barred.

It seems that the Revenue was not pleased with this order insofar as the admissibility of credit on the “services of brokerage for purchase/lease of flats for faculty members” and, therefore, filed an appeal before the Commissioner (Appeals). Forceful reliance is placed on the decision by the Authority for Advance Rulings in the case of M/s VMT Spinning Company Ltd. 2008-TIOL-05-ARA-CX where it is held that provision of building for housing, schooling, recreation etc. for workers is a welfare measure having no nexus with manufacture and, therefore, not an “Input service”. The Revenue prayed before the Commissioner (A) for modifying the o-in-o by disallowing the CENVAT credit of Rs.15,940/- (Service Tax) and Rs.319/- (E. Cess) availed on the said brokerage service.

As the Commissioner (A) allowed the Revenue appeal to the said extent, the appellant assessee is before the CESTAT.

The appellant submitted that no training can be imparted without the faculty being available and it was necessary to house the faculty members and so the “services of brokerage for purchase/lease of flats” is an Input service. Moreover, they were engaged in providing Training and Coaching service which is their output service. Reliance is placed on the decisions in Toyota Kirloskar Motor Pvt. Ltd. 2011-TIOL-941-HC-KAR-ST & Ultratech Cement Ltd. 2010-TIOL-745-HC-MUM-ST. It is also submitted that in view of the decision in Zee Telefilms Ltd. 2006-TIOL-945-CESTAT-MUM the Rulings of Advance Authority are binding only on parties concerned and are not a precedent on persons not a party therein.

The Revenue representative had nothing new to contribute except reiterate the AAR ruling.

The CESTAT observed –

++ The expenses incurred for input service by the appellant by way of brokerage for finding accommodation for its faculty is related to its output service of providing training.

++ The appellant cannot provide the output service of training without having the faculty available for the same.

The order of the lower appellate authority was set aside and the appeal was allowed with consequential relief.

(See 2014-TIOL-1504-CESTAT-MUM)