India Pvt. Ltd vs Cce & S.T. Noida

[Arising out of Order-in-Appeal No. 402/ST/Appl/Noida/2013 dated 28.12.2012 passed by Commissioner (Appeals), Customs, Central Excise & Service Tax, Noida]

For Approval and Signature:

Honble Smt. Sulekha Beevi C.S., Member (Judicial)

1. Whether Press Reporter may be allowed to see the Order for Publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy of the order?

4. Whether order is to be circulated to the Department Authorities?

M/s. Computer Sciences Corp.

India Pvt. Ltd. Appellant

Vs.

CCE & S.T.  Noida Respondent

Appearance: Shri Puneet Aggarwal and Shri Pawan Arora, Advocates for the appellant.

Shri R.K. Gupta, Advocate for the respondent

Coram: Honble Smt. Sulekha Beevi CS, Member (Judicial)

Final Order No. 52731/2015

Per: Sulekha Beevi C.S.

The appeal is filed challenging the impugned order which denied refund of CENVAT Credit of Service Tax paid on input services.

1. The appellants are having centralized service tax registration and are engaged in providing services such as Business Auxiliary services, information technology services, management consultancy etc and are primarily engaged in exporting their services. The appellants filed refund claim of service tax paid on various input services used for providing output services pertaining to the period October, 2010 to December, 2010 under Rule 5 of CENVAT Credit Rules, 2004 read with Notification No. 5/2006-CE (NT) dated 14.03.2006.

2. The Adjudicating Authority allowed the refund claim in part against which the appellant filed appeal. The Commissioner (Appeals) allowed refund for some services but upheld rejection of part of refund claim on the ground that invoices do not have complete address, invoice not having PAN based registration number, and service is not eligible as input service to claim credit. It is also seen that vide impugned order the Commissioner (Appeals) has directed the primary authority to recalculate the total admissible credit before sanctioning any refund.

3. Adverting to this direction in the impugned order to recheck/ recompute the CENVAT Credit lying in the account of the appellants, it is urged in the grounds of appeal that the First Appellate Authority has travelled beyond its powers. The unutilized CENVAT Credit has already been verified by the Audit Team of the Department. That records are thoroughly audited upto 2012. Further that there was no dispute regarding the unutilized CENVAT Credit lying in the account of the appellants. I do find force in these contentions. There is no allegation raised in the show cause notice as to the total amount available as unutilized credit in the account of the appellants. In such circumstances, it was not proper for the Commissioner (appeals) to direct to check and verify or recompute the total credit available as unutilized credit. It would result in waste of time and a futile exercise as accounts were already subject to audit and as there is no such allegation raised in the show cause notice. Therefore, this direction in the impugned order is set aside.

4. The main grievance is regarding denial of refund on various grounds. Refund has been denied for the reason that invoices do not contain complete address. It is pointed out by the learned counsel that for refund of Rs. 91,381/- though the invoices contain complete address of the appellant, the authorities below have rejected the claim. Remaining invoices contain the city name in which the premises of the appellant is situated. In addition, the appellants produced the Chartered Account Certificate. The learned counsel relied on Circular No. 120/01/2010-ST dated 19.01.2010 and submitted that it has been clarified in this circular that in the case of incomplete invoices the department should take liberal approach in view of judicial pronouncements by Courts. The learned counsel submitted that issuing of invoice is within the control of service provider upon which the assessee/service recipient has no control and that the assessee cannot be punished for not issuing the invoice properly. In addition to these lapses in invoices, credit has been denied on account of invoices not containing the PAN based Registration Number of the service provider. The learned counsel contended that when the department has accepted the service tax from the service provider on its old registration number, the credit cannot be denied to the service recipient as the appellant has no control over the service provider in directing him to obtain PAN based registration and state the same in invoice. He relied on the decision in Imagination Technologies India (P) Ltd Vs. CCE-Pune-III, 2011 (23) STR 661 (Tri-Mumbai).

5. These arguments were controverted by the learned Departmental Representative who supported the findings in the impugned order. The learned representative contended that sub clause (1) of Rule 9 of the CENVAT Credit Rules provides for the details to be contained in the document. Without these necessary informations, it is possible that the credit may be wrongly availed. When benefit is availed by way of credit, it is important that the invoices should be proper. The service tax registration number helps the department to identify the service provider and cross check the accounts. New PAN based registration number was introduced to facilitate this, and that the rejection of credit is proper.

6. On perusal of records and hearing the submissions of both sides, it is seen that the respondents do not dispute the transactions as per these invoices. So also they do not have a case that these input services/invoices have not been properly accounted. The allegation is that invoices are incomplete for want of complete address of the appellant and absence of PAN based registration number. The invoices show the name of the appellant, and the city in which the appellants premises exist. The full address is not shown. So also the invoices contain the service tax registration number of the service provider. But, the PAN based registration number is not given. Rule 9 (1) of the CENVAT Credit Rules, 2004 speaks about documents on the basis of which credit can be availed. Rule 4A of Service Tax Rules state as to what are the details to be shown in the invoices by the service provider. Further, the proviso to Rule 9 (2) casts a discretion upon the officer to allow credit in the case of defect of documents, if the officer is satisfied that they have been properly accounted. It is no doubt that correct details / contents in the documents will help the department to verify whether such services were availed by the service recipient and also to cross check whether these services were provided at the end of the service provider. The department has no case that in inquiry they found that these transactions are not genuine or that tax was not paid. The appellants have produced the Chartered Account Certificate also. In any case, these are all procedural lapses and in a catena of judgments it has been settled that credit cannot be denied on procedural lapses. In Imagination Technologies India (P) Ltd. Vs. CCE Pune-III 2011 (23) STR 661 (Tri-Mumbai) the CESTAT has held that though the registration number of the input service provider is not stated in the invoice, the credit cannot be denied. For the above reasons, I am of the view that the denial of credit on the ground of incomplete address and invoices not containing PAN based registration number is unjustified. I hold that appellant is eligible for credit on these invoices.

7. It now remains to consider the denial of credit on the ground that services do not qualify as input services as per the definition in CENVAT Credit Rules, 2004. These services are Rent-a-cab services, courier services, guest house services, Power Audit Services, Finite Element Analysis (FEA) services, maintenance of Gym Equipment Services, Medical Services, Renting of Speakers, Mike etc, Hotel expenses & Banquet Charges, Conference charges, cleaning services with outside catering and professional services. It is submitted that rent-a-cab services were availed for transportation of staff/employees. The credit is denied on the ground that these services were also used by employees to visit clients, to go to airports, and that therefore, these services do not have nexus with the output services. The credit on courier services is denied for the reason that these services are utilized for local correspondence and not used in connection with export of services. Credit on guest houses services was denied though guest houses are maintained for the appellants business use and for stay of business executives.

Power audit service was denied stating that it is not essential service. Power audit services were availed by appellant to reduce power consumption. Credit on FEA services was denied stating that that nature of these services is not clear. With regard to FEA services, it is submitted by the appellant that they received a Pilot project from Honda, USA which had both CAD (Computer Aided Design) and FEA (Finite Element Analysis) work. Appellant had skill set of CAD only. So the support of Design spokes was taken to execute FEA work. That these services were used for providing output service. Credit on tax paid on services of renting of equipments like speakers, mikes, podium projectors was denied. According to appellant these services were availed for the various in house training programmes. Professional services were availed for best practice report, filing tax returns, retainership fee etc, and the credit on these services were denied on the ground that these services are not related to output services. The cleaning services (dish washing) and outside lunch (catering) are seen denied even though the primary adjudicating authority allowed credit towards rent of canteen/dining hall observing that the appellant unit is running on 24*7 basis.

Hotel expenses and Banquet charges were denied on the view that these are for recreation of the employees and not integral for output services. Conference charges were denied on the ground that they have no nexus with the output services.

8. The ground for denial of credit as seen from the above discussion is that these services did not qualify as input services under Rule 2 (l) of CENVAT Credit Rules, 2004. The definition of input service, as it stood during the relevant period was very wide as words activities relating to business was contained in the inclusive part of the definition. The leading judgments in Coca Cola India (P) Ltd. Vs. CCE Pune III 2009 (15) STR 657 (Bom) and CCE, Nagpur Vs. Ultratech Cement Ltd. 2010 (20) STR 577 (Bom) have settled the interpretational issues in this regard. The series of judicial pronouncements that followed has held that during the relevant period (prior to 1.4.2011) the impugned services are eligible for credit as input services, if the services are relating to the business of the assessee. The activities in relation to business can cover all activities relating to functioning of a business. Thus, any service used by a provider of taxable service which is commercially required for the purpose of carrying on the business of output service provided will be covered by the expression activities relating to business. Applying the ratio laid in the above judgments I am of the view that appellants are eligible for refund of credit in regard to all the impugned input services except medical services. Medical services (Rs. 9270) being in the nature of personal consumption cannot be said to be related to business activity of the appellant.

9. From the above, the impugned order is set aside and modified to the extent of allowing-

(i) refund of credit on defect invoices (incomplete address, no PAN based registration number of service provider)

(ii) refund of credit on rent-a-cab services, courier services, guest house services, power audit, FEA services, maintenance of gym equipment, service of renting of speakers, mike, podium, etc., Hotel expenses & Banquet Charges, Conference Charges, cleaning of plates and outside catering services. The disallowance of refund of credit on medical services is sustained.

The appeal is allowed in part accordingly.

(Sulekha Beevi C.S.)

Member (Judicial)

Ritu

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