By TIOL News Service

MUMBAI, FEB 20, 2018: IN this appeal filed against the order passed by the CST, Mumbai-II, the following issues require a decision -

(i) Whether the service provided to World Bank and International Finance Corporation is eligible for exemption Notification No. 16/02-Service Tax dated 2.8.2002, which provides exemption to the services provided to United Nations or an International Organization.

(ii) Whether the appellants are entitled for CENVAT Credit in respect of input services namely, credit of Insurance Auxiliary Service, Outdoor Catering Service and Mandap Keeper Service for the period prior to 1.4.2011.

(iii) Whether the appellant is entitled to utilize CENVAT Credit more than 20% as provided under rule 6(3)(c) of CENVAT Credit Rules, 2002 in the subsequent period when in the previous period the appellant have utilized credit less than 20% of the total tax liability. In other words, whether the short utilization of CENVAT Credit against the eligible 20% can be carried forward in the subsequent month and such carried forward amount can be utilized, which comes to more than 20% of the total tax liability in the subsequent month.

The appellant submits as below –

(i) World Bank and International Finance Corporation are organizations which are part of the United Nations, therefore, service provided to these organizations is clearly exempted under Notification No. 16/2002-ST.

(ii) Prior to 01.04.2011, CENVAT credit is admissible on insurance services, outdoor catering services and Mandap Keeper service as these are used in or in relation to overall business activity of the appellant. [Ultratech Cement Ltd. - 2010-TIOL-745-HC-MUM-ST relied upon]

(iii) As per Rule 6(3)(c) of CCR, 2004, there is no condition that if 20% credit is not utilized in a particular month, the same cannot be utilized in the subsequent month. In absence of such condition, overall credit utilized is within the limit of 20%, the same cannot be denied. [Vijayanand Roadlines Ltd. - 2007-TIOL-614-CESTAT-BANG, Idea Cellular Ltd. - 2009-TIOL-387-CESTAT-DEL, Indian Hotels Co. Ltd. - 2014-TIOL-1801-CESTAT-BANG relied upon]

The AR reiterated the findings of the impugned order.

The Bench observed –

++ We find that as per organization structure of United Nations, World Bank and International Finance Corporation are enlisted as United Nations entities, therefore, it is clear that the World Bank and International Finance Corporation are part of the United Nation Organization.

++ From the reading of the notification [16/2002-ST] and explanation thereof, it is seen that the definition of international organization as provided therein all the entities of United Nations are covered in the exemption. Therefore, if any entity falls under the umbrella of United Nations, all those entities are covered under the explanation in the exemption notification and apart from those entities, if there are other entities which may or may not part of United Nation, but listed in schedule of Section 3 of the United Nation (Privileges and Immunities) Act, 1947, those entities will be covered under International organization. Therefore, the schedule of Section 3 of the Act applies only in respect of any international organization. However, as regards the entities, which are undisputedly fall under the overall organization of the United Nations, it is covered under the exemption. Therefore, in the present case, World Bank and International Finance Corporation are part of United Nations. Therefore, there is no need to resort to the definition of International Organization for extending the benefit of notification. In this scenario, we hold that the services provided to World Bank and International Finance Corporation being entities of United Nation, exempted under Notification No. 16/2002-ST.

++ Insurance Auxiliary service is used for indemnification of the officials such as Directors, employees, who play key role in providing the output service. The mandap keeper service used for conducting interviews for hiring employees, therefore, it is directly related to the overall providing of output service. Outdoor catering service is provided to the employees and clients of the appellant and the cost of the outdoor catering is incurred by the appellant. Therefore, it qualifies as input service and the credit is admissible. The exclusion clause was introduced on 1.4.2011. In the present case, the period involved is prior to that date. Therefore, there is no dispute for allowing the credit on the aforesaid services. The issue of admissibility of CENVAT Credit is covered by the judgment cited by the appellant.

++ We are of the view that if in a particular month against the liability of 20% if the appellant utilized less than 20% the remaining amount is available to the appellant for utilization in subsequent month. On considering overall period, the total utilization remains within 20% ceiling irrespective in some month utilization is less than 20% and in subsequent month, the utilization is more than 20%, the conditions of Rule 6(3)(c) of CENVAT Credit Rules, 2002, in our view stand complied with. [Vijayan and Roadlines - 2007-TIOL-614-CESTAT-BANG relied upon]

In fine, the appeal was allowed.

(See 2018-TIOL-605-CESTAT-MUM)