By TIOL News Service

NEW DELHI, SEPT 19, 2015: THE appellants are providing 'Business Auxiliary Service' to their overseas clients and availing Cenvat Credit of Service Tax paid on input services.

They filed a refund claim of Rs.2.45 crores for the period October 2010 to December 2010.

The original authority disallowed the claim of Rs.54.84 lakhs and in appeal the Commissioner(A) allowed a major portion of the same but rejected an amount of Rs.7.53 lakhs.

Against the rejection of this quantum, the appellant is before the CESTAT.

The appellant is not contesting an amount of Rs.4381/- but seeks relief of an amount of Rs.7.49 lakhs only.

This amount, the appellant submits, comprises of the following services which have not been considered as Input services by the lower authorities. The justification offered for claiming these as being Input services and the stand taken by the Bench is as below -

1. Rent-a-cab service - Rs.76,463/- : Allowed

Appellants are a BPO Company and these services are utilized for the purposes of transportation of its employees to and from the workplace and their homes and also for business meetings. Further, that for the safety of lady employees the vehicles are used and plied in the night also. The appellants being a BPO Company the odd working hours and transportation of employees, especially the lady employees is a service necessary and indispensable for the activities in which the Company is engaged. By an amendment in the definition of input services w.e.f. 1.4.2011 the same excludes Rent-a-Cab services. But the department vide Circular No. 943/04/2011-CX dated 29.4.2011 has clarified that the credit on such services shall be available if its' provision had been completed before 1.4.2011 and in their case the period is October 2010 to December 2010. Case laws cited Stanzen Toyotetsu India (P) Ltd 2011-TIOL-866-HC-KAR-ST & KPMG 2013-TIOL-761-CESTAT-DEL.

Held: The appellants being a BPO, where the employees have to work in shifts even during night hours, I cannot agree with the view of the authorities below that the such services have no nexus with the output services provided . The refund on these services is allowed.

2. Courier Service - Rs.6,670/- : Allowed

Refund has been denied for the reason that these were used for dispatch within India where as appellant is engaged in export of services. That therefore these services has no nexus with the output services. The appellants submitted that courier services are used for dispatch of the appellants documents to various offices, units etc. which are necessary for running the day to day business of the appellant. The important documents have to reach the destination in time for which it is not possible to hand deliver them, and that these services are extremely necessary for the business of the appellant.

Held: To carry out the domain activity of exports, the appellants may require to send documents and such other to Offices, units within the country. Merely because the courier service was utilized within the country it cannot be assumed that the services does not have nexus with output services.

3. Management, Maintenance & Repair Service - Rs.37,048/- : Allowed

Refund denied for the reason that such services were used for painting and mica finishing work and that these services do not have nexus with the provision of output service. Case laws cited Lupin Ltd. - 2012-TIOL-2099-CESTAT-MUM, L'Oreal India Pvt. Ltd. 2011-TIOL-95-CESTAT-MUM.

Held: What needs to be seen is whether the said service can be considered to be an activity relating to business rather than testing whether it is used in manufacture or for providing output service. The service in question, according to appellants was received for maintaining its' business premises from where the activities of output service are carried out. Following the ratio laid in the above judgments I find that appellants are entitled to credit.

4. Manpower Recruitment Services- Rs.91,958/- : Allowed

The credit is disallowed on the ground that these services have no nexus with the provision of output services. That the absence of such services would not affect the provision of output service. The appellants contended that the appellant received services from various service providers, who provide support staff and nurses to the appellant on temporary basis. Such services have integral nexus with providing output services. Case laws relied Lupin Ltd. - 2012-TIOL-2099-CESTAT-MUM & Utopia India Pvt. Ltd. - 2011-TIOL-1080-CESTAT-BANG .

Held: ‘Recruitment and quality control' is specifically mentioned as a service in the inclusive part of the definition of input services under activities related to business. The appellant has availed the services of man-power recruitment and supply agency's service for hiring nurses for its' employees and also for hiring administrative and support staff which is required for carrying out its' day to day business activities. Therefore I find that the denial of refund on Manpower Recruitment Service, is unjustified.

5. Security Agency Services - Rs.37,548/- : Allowed

According to appellants being a Call Centre and BPO, their employees have to work and also leave office at odd hours. The security service was used to provide safety to employees. The Commissioner (Appeals) has rejected the claim holding that the invoices show security guard for pickup and drop of employees and has no nexus with output service.

Held: Applying the ratio laid in the judgment Utopia India Pvt. Ltd. - 2011-TIOL-1080-CESTAT-BANG I am of the view that appellants are entitled to credit/refund on these services.

6. Cleaning services of Guest house : Allowed

Guest houses are being maintained for use by employees of the appellants who travel from one place to another for business purposes. Lupin Ltd - 2012-TIOL-2099-CESTAT-MUM & Paper Products - 2012-TIOL-2011-CESTAT- MUM relied upon.

7. Business Support Services - Rs.8240/- : Allowed

Summits were conducted which helped them improve their clientele. That such Summits helps the Company to meet potential clients and promote its' business and gain knowledge.

Held: I cannot differ with the submissions made as such 'summits' do help the Company to promote and develop its' business. The credit and refund denied on these services in my view, is unjustified. The same is allowed.

8. Legal Consultancy Services - Rs.6,180/- : Allowed

Appellants were denied refund holding that these services have no nexus with the output services. Appellants submitted that the service was utilized for drafting reply and appeal papers. The First appellate authority has held that to file an appeal is not a mandatory requirement under law and, therefore, has no nexus with the output service.

Held: The rejection of claim on the ground that filing of appeal or reply is not mandatory requirement is baseless. Legal consultancy services are indispensable for any business to satisfy proper compliance of legal requirements. Therefore, I hold appellants are eligible for refund of credit on these services.

9. Chartered Accountancy Services : Allowed

Appellants submitted that these services were utilized for compliance of industrial and Labour Laws and also for statutory compliances under Income Tax Act, 1961 and Companies Act, 1956, and for services availed for filing of refund claims.

Held: The definition of 'input services' during the relevant period was very wide so as to include all activities relating to business. I am of the view that appellants are entitled to refund claimed for these services.

10. Renting of immovable property (Rs.52,413/-) : Denied

The appellants have claimed credit on service tax paid for stay in hotel as renting of hotel/renting of immovable property. The appellants have claimed credit of tax paid by persons for stay in hotels in the guise of the heading 'Renting of Immovable Property'. Therefore the denial of credit/refund on these services, is correct and, therefore, sustained.

11. Design Services - Rs.753/- : Denied

Appellants supplied coffee mugs bearing the logo of the appellant Company and claimed ST credit towards these services naming it as Design services. It is not shown by the appellants as to why these mugs were supplied or the category of persons to whom these mugs were supplied. I fail to understand how these would qualify as input service related directly or indirectly to the output service. The Commissioner (Appeals) has rightly rejected the claim of refund which calls for no interference.

12. Deficiency in invoice - Credit of Rs.1,69,346/- : Partly allowed

Refund denied on the ground that the invoices did not contain PAN based service tax registration number of the service provider/name and address of consignee is not proper or the address mentioned is not registered with the service tax department.

Held: It is not disputed that tax was paid for the services utilized; so also there is no dispute that the services were utilized in the taxable output services. It has been settled in a catena of decisions that non-mentioning of registration number of the service provider is only a procedural lapse and Credit cannot be denied on account of procedural lapse when substantive entitlement itself is not disputed. Further, the proviso to sub clause (2) of Rule 9 of Cenvat Credit Rules, provide that if documents do not contain full particulars the DC/AC has powers to condone the defects after satisfying whether properly accounted. In view thereof, the rejection of claim for the defects alleged in invoices is incorrect.

Conclusion: Refund claim for Rent-a-Cab Services, Courier Services, Management, Maintenance & Repair Service, Manpower Recruitment Service, Security Services, Cleaning Services, BSS Services (Summit), Legal Consultancy Services, Chartered Accountancy Services, are allowed. The refund claim on improper/defective invoices pertaining to services other than Telecommunication Services and Renting of immovable property are allowed.

In summation, the appeal was partly allowed.

(See 2015-TIOL-1977-CESTAT-DEL)