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Judgment
The present appeal is directed against the impugned order dated 17.10.2019 passed by the Commissioner (Appeals) whereby the Commissioner (Appeals) has rejected the refund claim of the appellant pertaining to 7 input services amounting to Rs.20,53,480/-.
Briefly the facts of the present case are that the appellant is a 100% (EOU) under the Software Technology Park of India (STPI) Scheme of the Foreign Trade Policy and is primarily engaged in exporting information technology enabled back office support services to Goldman Sachs group companies located outside India. The appellant filed a refund claim being the unutilized CENVAT credit of service tax availed on input services set to have been used for providing output services i.e. Information Technology Software Service and Business Auxiliary Service exported by them as per Rule 5 of CENVAT Credit Rules, 2004 read with Notification No.27/2012-CE (NT) dated 18.06.2012. On scrutiny of the claim, certain discrepancies were noticed and a SCN was issued proposing to reject the refund claim. After following the due process, the original authority vide Order-in-Original dated 04.10.2018 partly sanctioned the refund claim and rejected the balance claim amount of Rs.40,11,213/- on the grounds stated therein. Aggrieved by the Order-in-Original to the extent of Rs.20,53,480/-, the appellant filed the appeal and vide Order-in-Appeal dated 17th October 2019, the Commissioner (Appeals) rejected the appeal thereby confirming rejection of refund of the appellant on following 7 services:
Sr. No.
Description
Amount (in rupees)
1.
Architect
5,74,164/-
2.
Club or Association
1,95,460/-
3.
Event Management
1,88,533/-
4.
General Insurance
6,67,007/-
5.
Health Club
3,18,130/-
6.
Other taxable
1,08,895/-
7.
Outdoor catering
1,291/-
Total
20,53,480/-
Hence, the present appeal.
Heard both the parties and perused the records of the case.
Learned Counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law and the definition of Input Service as provided under Rule 2(l) of CCR, 2004. He further submitted that the appellant explained in detail the usage as well as the nexus of input service with the output service before the authorities below but they have never appreciated the same in the right perspective. He further submitted that in the impugned order in Para 9.4, the Commissioner (Appeals) has based his judgment on the eligibility, on the basis that whether absence of such services would, in any way adversely affect the performance of rendering of output services by the appellant. He further submitted that, in law, this is not the test to be applied for deciding the eligibility rather, the true test for eligibility is whether the input service is used by the provider of taxable service for providing output service and that the input services should not be covered by the exclusion clause. He further submitted that in the present case, the appellant has, indeed, used these input services for providing their output services and are also not covered by the exclusion clause of the definition of the term 'input service' and to this extent, the order has travelled beyond the scope of legislative provisions. He further submitted that the input service viz., Architect Service, Club & Association Service, Event Management Service, General Insurance Service and other taxable services have been specifically held to be input service by various decisions of the Tribunal and the High Courts. He relied upon the following decisions:
Sr. No.
Particulars
Judgments
1.
Architect
· Arm Embedded Technologies Pvt. Ltd. Vs CCE, Bangalore, 2016 (45) STR 133
· Maruti Suzuki India Ltd. Vs CCE, DelhiIII, 2017 (47) STR 273 (Tri. Chand.)
2.
Club or Association
· Arm Embedded Technologies Pvt. Ltd. Vs CCE, Bangalore, 2016 (45) STR 133
· Manhattan Associates (I) Dev. Centre Pvt. Ltd. Vs CST, Bangalore, 2017 (5) GSTL 99 (Tri. Bang.)
· BCH Electric Ltd. Vs CCE, Delhi-IV, 2013 (31) STR 68 (Tri. Del.)
3.
Event Management
· Manhattan Associates (I) Dev. Centre Pvt. Ltd. Vs CST, Bangalore, 2017 (5) GSTL 99 (Tri. Bang.)
· J.P. Morgan Services (I) Pvt. Ltd. Vs CCE, Thane-I, 2016 (42) STR 196 (Tri. Mumbai)
· Monarch Catalyst Pvt. Ltd. Vs CCE, Thane-I, 2016 (44) STR 96 (Tri. Mumbai)
4.
General Insurance
· Anglo French Drugs & Industries Ltd. Vs CCE, Bangalore-II, 2017 (3) GSTL 147 (Tri. Bang.)
· Utopia India Pvt. Ltd. Vs CST, Bangalore, 2011 (23) STR 25 (Tri. Mumbai)
· Reliance Industries Ltd. Vs CCE (LTU), Mumbai, 2015 (38) STR 217 (Tri. Mumbai)
5.
Other taxable
· Manhattan Associates (I) Dev. Centre Pvt. Ltd. Vs CST, Bangalore, 2017 (5) GSTL 99 (Tri. Bang.)
· Apotex pharmachem India Pvt. Ltd. Vs CCE, Bangalore-I, 2017 (50) STR 26 (Tri. Bang.)- installation service
6.
Grant of Interest
· Scribetech India Healthcare Pvt. Ltd. Vs CCT, Bengaluru, 2020 (43) GSTL 245 (Tri. Bang.)
4.1. He also submitted that with regard to certain disputed input services, the Commissioner (Appeals) has concluded that the said input service is excluded from the definition of the Input Service under CENVAT Credit Rules. This conclusion of the Commissioner (Appeals), he submitted, is not the correct conclusion. Club & Association services has been used by the appellant to seek membership of certain professional bodies like NASSCOM or Chamber of Commerce and the membership to these Associations is not for personal benefit of any individual employee but is for the overall business and therefore has not been excluded from the definition of Input Service. Similarly, General Insurance Service was availed to insure people, assets, buildings, property, against risk of fire, burglary and several other contingencies. Further, insurance is also taken in relation to comprehensive commercial liability and not for personal consumption but are for the business purposes. He further submitted that during the period when appellant availed the CENVAT credit on these input services, the same was never objected and it is a settled position in law that there cannot be different yard sticks- i.e. one for eligibility of credit and the other for sanction of refund. Under Rule 5 of CCR, refund is granted of the eligible CENVAT credit hence, once CENVAT credit availed remains unchallenged, the eligibility of input service cannot be put to question at the stage of refund process. For this submission, he relied upon the following:
· Circular No.120/01/2010-ST, dated 19.01.2010
· Commissioner of Central Excise, Delhi & Delhi-III Vs Convergys India Services Pvt. Ltd., 2017 (48) STR 173 (Tri. Chan.)
4.2. Learned Counsel, out of these 7 input services, did not press for the refund in relation to two input services, viz. Health Club and Outdoor Catering and has only prayed the refund of five input services, viz., Architect, Club & Association, Event Management, General Insurance and other taxable services. Learned Counsel also relied upon the decision of this Tribunal in the case of 24/7 Customer Pvt. Ltd., (ST/20259, 20260/2020) Final Order No.20062-20063/2021 dated 08.03.2021.
On the other hand, learned AR reiterated the findings of the impugned order.
After considering the submissions of both the parties and perusal of the material on record as well as the various decisions relied upon by the appellant, I find that the appellants have given detailed justification for each of these 5 services which have been used by the appellant for rendering the output services. Further, I find that the reasoning given by the Commissioner (Appeals) in Para 9.4 of the impugned order is not correct in law. The correct position in law is that the true test for eligibility is whether input service is used by the provider of taxable service for providing output service and the input services should not be covered by the exclusion clause. Further, I find that all the services, of which refund has been rejected, has been consistently held to be input service in various decisions relied upon by the appellant cited supra. Moreover, the Department has not questioned the input service at the time when the CENVAT credit was taken and as per the decision of this Tribunal in the case of K Line Ship Management India Pvt. Ltd. Vs CGST, Mumbai West, 2019-VIL-827-CESTAT-MUM-ST wherein it has been held that the Department is not permitted to question the eligibility of CENVAT credit at the time of claiming refund. Further, in view of clarification given by the Tax Research Unit of CBEC vide their letter dated 16.03.2012, the amended Rule 5 of CCR does not require co-relation between the output service exported and the input service used in such output services exported. This has also been held by the Tribunal in various decisions cited supra.
In view of my discussion above and by following the ratio of the various decisions cited supra, I allow the appeal of the appellant and hold that the appellant is entitled to refund of CENVAT credit in relation to input services of Architect, Club & Association, Event Management, General Insurance and other taxable services which have been used for providing the output services. Hence, the appeal is partially allowed in the above terms.
(Order pronounced in the open court on 10/03/2021)