[2016] 96 VST 441 (CESTAT) [CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL] (MUMBAI BENCH) Commissioner of Service Tax, Mumbai-II V. WNS Global Services RAVINDRAN M. V. JUDICIAL MEMBER AND MATHEW C. J. TECHNICAL MEMBER April 13,2016 HF Assessee, including dealer (Registered or Unregistered) SERVICE TAX CENVAT CREDIT INPUT SERVICE DEFINITION SERVICE TAX PAID ON INPUT SERVICES IN RELATION TO BUSINESS ACTIVITY UNDERTAKEN BY ASSESSEE ELIGIBLE FOR CENVAT CREDIT CENVAT CREDIT RULES, 2004, R. 2(L) NOTIFICATION NO. 5/2006-C. E. (N. T.), DATED MARCH 14, 2006. The assessee was an exporter of under the category of business auxiliary and availed of Cenvat credit of service tax paid on various input used by it for providing such output. These were for issuing recruitment, advertisements in newspaper and on internet in relation to advertising agency s, visa/ticket charges in relation to air travel agent, processing of the payments, collecting export receivable in relation to banking and other financial, support availed in relation to business auxiliary, support for documentation in relation to providing food coupons to employees in relation to business support, handling of imported goods in relation to cargo handling service, compliance with various statutes in relation to chartered accountant, cleaning of office premise in relation to cleaning, clearing of imported goods in relation to clearing and forwarding agent s, repairs of building premises outside the office in relation to construction of commercial or industrial building, providing training for employees in relation to commercial training and coaching, repair of the internal office premises in relation to construction of complex service, sending essential documents for export and domestic courier in relation to courier, clearing imported goods in relation to custom house agent service, erection, commissioning or installation of any equipment or structure, installation of any electrical and electronic devices, air condition ventilation, fire proofing, water proofing, etc., in relation to erection, commission and installation, entertainment of employees in relation to event management, excise duty paid in relation to excise, maintenance/insurance of asset and premises and staff insurance in relation to general insurance, representation of instructions, data sound or image of a computer or an automatic data processing machine or any other device or equipment in relation to information technology software, maintenance/insurance of asset and premises in relation to insurance auxiliary, consultancy or technical assistance in relation to planning, designing of spaces, etc., in relation to interior decorators, internet/telephone purpose in relation to internet telecommunication, consultancy with respect to business operation in relation to management or business consultants, repairs of building premises outside the office in relation to maintenance or repair, temporary occupation of a mandap for organizing official function, business promotion and planning function, etc., in relation to mandap keeper, recruitment of employees for business purposes in relation to manpower recruitment and supply agency, finding out market trends in relation to market research, communicating with their customers, employees, service providers, etc., in relation to online information and database access, leased, lunch/dinner of the staff on 24x7 basis in relation to outdoor catering, to arrange for new office premises at Nasik and Pune in relation to real estate agency, hired premises for providing medical transcription service in relation to renting of immovable property, security to office premises in relation to security/detectives, storage of old documents in relation to storage and warehousing, consultancy with respect to business operation in relation to technical inspection and certification, internet/telephone purpose in relation to
telecommunication, pickup of employees from resident and client place in relation to tour operator s service, use for shifting of household articles of staff in relation to transport of goods by road in relation to video shoot for business meeting and interview in relation to video tape production. It filed various refund claims in accordance with the provisions of rule 5 of the Cenvat Credit Rules, 2004 in respect of accumulated Cenvat credit of the input used for providing export of under business auxiliary. The adjudicating authority allowed part refund claim and rejected the refund claim partly. The assessee preferred appeals. The first appellate authority allowed the appeals and directed the adjudicating authority to grant refund but disallowing the refund wherein input service invoices were not available. The Department appealed contending that the input service on which Cenvat credit was availed of had no nexus with the output : Held, that the input were in relation to the business activity undertaken by the assessee. The first appellate authority had come to the correct conclusion that the assessee was eligible for Cenvat credit and the refund claim needed to be allowed. Commissioner of Central Excise v. Ultratech Cement Ltd. [2010] 36 VST 505 (Bom); [2011] 6 GSTR 103 (Bom) followed. Commissioner of Central Excise v. Ultratech Cement Ltd. [2010] 36 VST 505 (Bom); [2011] 6 GSTR 103 (Bom) (paras 5, 8) and Maruti Suzuki Ltd. v. Commissioner of Central Excise [2010] 1 GSTR 200 (SC) (para 8) referred to. Order Nos. A/ 87580, Order Nos. A/ 87581, Order Nos. A/ 87582, Order Nos. A/ 87583, Order Nos. A/ 87584, Order Nos. A/ 87585, Order Nos. A/ 87586, Order Nos. A/ 87587, Order Nos. A/ 87588, Order Nos. A/ 87589, Order Nos. A/ 87590, Order Nos. A/ 87591, Order Nos. A/ 87592, Order Nos. A/ 87593, Order Nos. A/ 87594, Order Nos. A/ 87595, Order Nos. A/ 87596, Order Nos. A/ 87597, Order Nos. A/ 87598, Order Nos. A/ 87599, Order Nos. A/ 87600, Order Nos. A/ 87601, Order Nos. A/ 87602, Order Nos. A/ 87603, Order Nos. A/ 87604, Order Nos. A/ 87605, Order Nos. A/ 87606, Order Nos. A/ 87607, Order Nos. A/ 87608, Order Nos. A/ 87609, Order Nos. A/ 87610, Order Nos. A/ 87611, Order Nos. A/ 87612 of 16/STB, Appeal Nos. ST/ 89046, Appeal Nos. ST/ 89047, Appeal Nos. ST/ 89048, Appeal Nos. ST/ 89049 of 13, Appeal Nos. ST/ 88703, Appeal Nos. ST/ 88704, Appeal Nos. ST/ 88705, Appeal Nos. ST/ 88706, Appeal Nos. ST/ 88707, Appeal Nos. ST/ 88708, Appeal Nos. ST/ 88709, Appeal Nos. ST/ 88710, Appeal Nos. ST/ 88711, Appeal Nos. ST/ 88712, Appeal Nos. ST/ 88713, Appeal Nos. ST/ 88714, Appeal Nos. ST/ 88715 of 13 decided on April 13,2016 A. B. Kulgod, Assistant Commissioner (Authorised Representative), for the Department Mihir Deshmukh with Abhijeet Singh, Advocates, for the assessee Cases referred to : Commissioner of Central Excise v. Ultratech Cement Ltd. [2010] 36 VST 505 [2011] 6 GSTR 103 (Bom) Followed Commissioner of Central Excise v. Ultratech Cement Ltd. [2010] 36 VST 505 [2011] 6 GSTR 103 (Bom) Referred to Maruti Suzuki Ltd. v. Commissioner of Central Excise [2010] 1 GSTR 200 (SC) Referred to -------------------------------------------------- ORDER M. V. RAVINDRAN (Judicial Member). All these appeals are filed by the Revenue against the Orders-in-Appeal Nos. 107 to 118 and 118(A)/BPS/ MUM/2013 dated March 26, 2013 and 166 to 169/BPS/MUM/2013, dated April 18, 2013 passed by the Commissioner of Central Excise and Service
Tax (Appeals), Mumbai-I. As also Orders-in-Original No. AC/R-34/DIV.V/ DPS/09-10, dated May 25, 2010, AC/135/DIV.V/DPS/09-10, dated January 21, 2010, AC/R-141/DIV.V/DPS/09-10, dated January 28, 2010, ST/DIV.V/ R-110/AAA/10-11, dated October 29, 2010, ST/DIV.V/R-114/AAA/10-11, dated November 12, 2010, ST/DIV.V/R-157/AAA/10-11, dated January 19, 2011, ST/DIV.V/R-161/AAA/10-11, dated February 21, 2011, ST/DIV.V/R- 32/AAA/10-11, dated June 15, 2011, ST/DIV.V/R-94/AAA/10-11, dated September 14, 2011, ST/DIV.V/R-130/AAA/10-11, dated December 28, 2011, ST/DIV.V/R-129/AAA/10-11, dated December 28, 2011, ST/DIV.V/R- 217/AAA/10-11, dated March 31, 2012, ST/DIV.V/R-316/AAA/10-11, dated June 29, 2012, ST/DIV.V/R-315/AAA/10-11, dated June 29, 2012, ST/DIV.V/ R-314/AAA/10-11, dated June 29, 2012 and ST/DIV.V/R-313/AAA/10-11, dated June 29, 2012. The respondent-assessee has also filed cross-objection in respect of appeals filed by the Revenue. The issue involved in these cases is regarding refund claim filed by the respondent before the lower authorities. The respondent is an exporter of under the category of "business auxiliary ". They were availing of the Cenvat credit of service tax paid on various input Page No: 443 used by them for providing such output, filed various refund claims as per provision of rule 5 of the Cenvat Credit Rules, 2004 in respect of accumulated Cenvat credit of the input used for providing export of under "business auxiliary ". The adjudicating authority has allowed part refund claim and rejected the refund claim partly. Aggrieved by such an order the respondent-assessee had preferred appeals before the first appellate authority. The first appellate authority after following due process of law allowed the appeals filed by the respondent/assessee and directed the adjudicating authority to grant refund based upon the finding in the impugned order. In the impugned order the first appellate authority has disallowed the refund claim wherein input service invoices were not available. Respondent is not in appeal against such disallowance by the authority. The learned Departmental Representative would submit that the view taken by the learned Commissioner (Appeals) is contrary to the explicit provisions of the Cenvat Credit Rules, 2004. He would submit that the input service on which Cenvat credit was availed of has no nexus with the output. As an example he would submit that the Cenvat credit availed on technical and analysis, public which are not having any direct nexus with the output service exported. Hence, the impugned order needs to be set aside. It is his further submission that the refund is permissible in respect of actually used for the export of goods/ and which would mean that there has to be direct and immediate nexus between the input and export. It is also his submission that the first appellate authority has incorrectly applied the formula mentioned in Notification No. 5/2006-C. E. (N. T.). He would submit that objective of the formula is to allocate the input credit between the export turnover and the domestic turnover which would mean that details needs to be produced from the Cenvat credit availed. The formula adopted by the refund sanctioning authority was correct and in accordance with the formula prescribed in the Notification No. 5/2006-C. E. Learned counsel appearing on behalf of the respondent-assessee would
take us through the various on which Cenvat credit was availed of during the period in question. It is his submission that the on which Cenvat credit was availed of were in respect of the input which are utilised for the business activity of the appellant which is exported under "business auxiliary ". He would submit that the issue is no more res integra as the honourable High Court of Bombay in the case of Commissioner of Central Excise, Nagpur v. Ultratech Cement Ltd. [2010] 36 VST 505 (Bom); [2011] 6 GSTR 103 (Bom); [2010] 260 ELT Page No: 444 369 (Bom) has settled the law as to what is input and any activities in relation to business and held activities which are connected with the business of assessee, Cenvat credit needs to be allowed. We have considered the submissions made at length by both sides and 6 perused the records. The issue involved in the appeals filed by the Revenue whether the respondent-assessee is correct in claiming the refund of the service tax paid on various input which are utilised by them for rendering output that are exported or whether these are not integrally connected with the respondent-assessee as claimed by the Revenue. The respondent-assessee is an exporter of under the category of "business auxiliary " is not disputed. The respondent has his business premises at Vikhroli and registered with authorities as such for providing "business auxiliary ". The appellant has claimed the refund of the service tax paid on the following input used by them in their business premises. Category Usage Service tax including cess Advertising agency's Issuing recruitment, advertisements in 36,050 newspaper and on internet Air travel agent Visa/ticket charges 2,53,422 Banking and other financial Processing of the payments, collecting 39,650 export receivable Business auxiliary Support availed 2,39,287 Business support Support for documentation 13,30,075 Providing food coupons to employees 78 Cargo handling service Handling of imported goods 1,05,602 Chartered accountant Compliance with various statutes 1,12,064 Cleaning Cleaning of office premise 11,79,311 Clearing and forwarding agent's Clearing of imported goods 64,601 Construction of commercial or Repairs of building premises outside the 16,027 industrial building office Commercial training and coaching Providing training for employees 1,74,352 Construction of complex service Repair of the internal office premises 61,009 Courier For sending essential documents for export 3,82,426 Page No: 445
Domestic courier 1,17,872 Custom house agent Clearing imported goods 13,818 Erection, commission and Erection, commissioning or installation of any 2,38,617 installation equipment or structure, installation of any electrical and electronic devices, aircondition ventilation, fire proofing, water proofing, etc. Event management For entertainment of employees 89,915 Excise Excise duty paid 7,891 General insurance Maintenance/insurance of asset and 89,162 premises For staff insurance 24,87,851 Information technology software Insurance auxiliary Interior decorators Representation of instructions, data sound or 9,98,922 image of a computer or an automatic data processing machine or any other device or equipment Maintenance/insurance of asset and 9,497 premises Consultancy or technical assistance relation 5,134 to planning, designing of spaces, etc. Internet/telephone purpose 72,209 Internet telecommunication Management or business Consultancy with respect to business 12,54,242 consultants operation Maintenance or repair Repairs of building premises outside the 48,24,839 office Mandap keeper Temporary occupation of a mandap for 24,642 organizing official function, business promotion and planning function, etc. Manpower recruitment and supply Recruitment of employees for business 24,57,133 agency purposes Market research For finding out market tends 50,213 Online information and database For communicating with their customers, 1,07,986 access, leased employees, service providers, etc. Outdoor catering For lunch/dinner of the staff on 24 x 7 basis 4,17,112 Real estate agency To arrange for new office premises at Nasik 14,294 and Pune Renting of immovable property Hired premises for providing medical 45,10,930 transcription service Security/detectives Security to office premises 15,24,580 Storage and warehousing For storage of old documents 3,087 Technical inspection and Consultancy with respect to business 1,74,322 certification operation Telecommunication Internet/telephone purpose 28,42,967 Tour operator's service Pickup of employees from resident and 31,01,308 client place Transport of goods by road Use for shifting of household articles of staff 894 Video tape production Video shoot for business meeting and 16,609 interview Total 2,85,99,994 Page No: 446
It can be seen from the above reproduced category of input, these are in relation to the business activity undertaken by the respondent-assessee which cannot be disputed, as casual perusal of the on which Cenvat credit was availed of and for the purpose of which have been utilised as mentioned in the order-in-original would clearly indicate that these were in relation to the business activity of the respondent-assessee. In our view, the first appellate authority has come to a correct conclusion that the respondent-assessee is eligible to Cenvat credit and claim of the refund claim needs to be allowed. The claim of Revenue that input do not have direct nexus to the business activity of the respondent-assessee is a hollow claim. This ratio of the honourable High Court of Bombay in the case of Ultratech Cement Ltd. [2010] 36 VST 505 (Bom); [2011] 6 GSTR 103 (Bom); [2010] 260 ELT 369 (Bom) in paragraph No. 27 of the judgment has clearly stated that what would be the meaning of "input " as per rule 2(l) of the Cenvat Credit Rules, 2004 which we respectfully reproduced (page 514 in 36 VST): "27. The definition of 'input service' as per rule 2(l) of the 2004 Rules (insofar as it relates to the manufacture of final product is concerned), consists of three categories of. The first category, covers which are directly or indirectly used in or in relation to the manufacture of final products. The second category, covers the which are used for clearance of the final products up to the place of removal. The third category, includes, namely:- Page No: 447 (a) Services used in relation to setting up, modernization, renovation or repairs of a factory, (b) Services used in an office relating to such factory, (c) Services like advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, (d) Activities relating to business such as, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit relating, share registry and security, inward transportation of inputs or capital goods and outward trans portation up to the place of removal. Thus, the definition of 'input service' not only covers, which fall in the substantial part, but also covers, which are covered under the inclusive part of the definition." Applying the abovesaid ratio, we find that in the case in hand, the first appellate authority was correct in allowing the refund claims on inputs as they are utilised for activity of the business. We find that the honourable High Court has been even considered the judgment of the honourable Supreme Court in the case of Maruti Suzuki Ltd. v. Commissioner of Central Excise [2010] 1 GSTR 200 (SC); [2009] 240 ELT 641 (SC) and came to a conclusion, in paragraph No. 34 which we respectfully reproduce (para 35, page 518 in 36 VST): "34. Therefore, the definition of 'input service' read as a whole makes it clear that the said definition not only covers, which are used directly or indirectly in or in relation to the manufacture of final product, but also includes other, which have direct nexus or which are integrally connected with the business of manu-
facturing the final product. In the facts of the present case, use of the outdoor catering is integrally connected with the business of manufacturing cement and therefore, credit of service tax paid on outdoor catering would be allowable." In short the view of the honourable High Court squarely covers the input used by the appellant in this case. In view of the foregoing, we reject the appeals filed by the Revenue, the cross-objection are also disposed of and hold that the first appellate authority has correctly applied the formula mentioned in Notification No. 5/ 2006-C. E. The appeals filed by the Revenue are rejected and cross-objection filed by the appellant are also disposed of. Page No: 448