International Pvt. Ltd vs C.S.T.-New Delhi-Iii

[Arising out of Order-in-Appeal No.143/S.Tax/D-II/13/2259 dated 25.06.2013 by the Commissioner of Customs & Central Excise (Appeals), New Delhi].

For approval and signature:

Honble Shri Ashok Jindal, Member (Judicial)

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

2 Whether it should 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 Departmental authorities?

M/s. Agilent Technologies

International Pvt. Ltd .Appellants

Vs.

C.S.T.-New Delhi-III .Respondent

Appearance:

Shri R.K. Sharma, Consultant for the Appellants

Shri. D. Singh, DR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Date of Hearing: 21.01.2015

FINAL ORDER NO. 50268/2015-ST(SM)

Per Ashok Jindal:

Appellant is in appeal against the impugned order rejecting there refund claim of Rs.26,11,022/-.

2. The brief facts of the case are that the appellant is provider of output services and during the impugned period the appellant exported the services and filed the refund claim under Rule 5 of Cenvat Credit Rules, 2004 for the Cenvat Credit lying unutilized in their Cenvat Credit account. The refund claim of Rs.26,11,022/- was denied by both the authorities below on the premises that the services paid on contract services having no nexus with the output services provided by the appellant. Therefore, their claim on refund is not maintainable.

3. The ld. Counsel for the appellant submits that the nature of the services availed by them are of landscaping in their offices. The services of erection of IT cables which was availed for setting up of modernization and renovation of premises and certain aluminum and glass framework and windows for giving better atmosphere for the instrument which was used for providing output services and interior output services which were sought to be denied. In fact all these services are in nature of input services which are in relation to setting of modernization, renovation or repairs of the premises of provider of output services. Therefore they are entitled to avail Cenvat Credit on these services. To support this contention he relied on the decision of this Tribunal in the case of KPMG Vs. C.C.E. New Delhi-2014 (33) S.T.R. 96 (Tri-Del) and in the case of Millipore India Pvt. Ltd. Vs. C.C.E. Bangalore-2012 (26) S.T.R. 514 (Kar). He also relied on the CBEC Circular No. 120/01/2010-S.T. dated 19.01.2010. Therefore, he submits that impugned order is to be set aside and refund claim be sanctioned.

4. On the other hand Ld. AR opposes the contention of the Ld. Counsel and submits that the appellant are registered for providing services namely Business auxiliary services, Consulting engineer services, Scientific and Technical consultancy services, Management Consultant, Business support services and Information Technology Software Services etc. The services availed by the appellant for which refund claim has been denied have no nexus with the output services provided by the appellant. Therefore, they are not entitled to claim refund on account of these services. He also relied on the CBEC circular dated 09.01.2010 to say that the appellant is required to show the nexus and they also needs to be read in harmonious manner. Following test can be used to say whether sufficient nexus exist or not. Therefore she prayed that the appellant is not entitled to take Cenvat Credit and the issue has been examined by the Ld. Commissioner (A) in the impugned order in detail in para 5 as under:

5. I have carefully gone through the facts of the case, grounds of appeal and the submissions made by the appellants at the time of personal hearing. The adjudicating authority has partly rejected the refund claim of the appellants on primarily two grounds Rs.26,11,022/- being CENVAT credit on Works Contract Services, which appeared to be inadmissible for the reason that the invoices raised by the input service provider were for making external development for which Goods were purchased and invoices for supply and erection of IT Cables, which were not covered under the definition of input service in terms of Cenvat Credit Rules, 2004. The appellants in their appeal have contended that any input services used by a provider of taxable service for providing an output service would be input services. Since the definition covers any service, the adjudicating authority has failed to appreciate that no close nexus is required between input services and output services. I note that for admissibility of refund claim under Notification No. 05/2006-CE, C.B.E.C. vide Circular No. 120/01/2010-ST dated 19.01.2010 has clarified as under:

3. The matter has been examined. A the outset it is necessary to understand that the entire purpose of Notification No. 5/2006-C.E. (N.T.) is t refund the accumulated input credit to exporters and zero-rate the exports. Accumulated credit and delayed sanction of refund causes cash flow problems for the exporters. Therefore, the sanctioning authorities are directed to dispose of the refund claims expeditiously bases on the following clarifications to the issues raised above.

3.1 Use of different phrases in rules and notification [para 2(a)]:

3.1.1 The primary objection indicated by the field formation is that the language of Notification No. 5/2006-C.E. (N.T.) permits refund only for such services that are used in providing output services. In other words, the view being taken is that to be eligible for refund, input services should be directly used in the output service exported. As regards, the extent of nexus between the inputs / input services and the export goods / services, it must be borne in mind that the purpose is to refund the credit that has already been taken. There cannot be different yardsticks for establishing the nexus for taking of credit and for refund of credit. Even if different phrases are used under different rules of Cenvat credit rules, they have to be construed in a harmonious manner. To elaborate, the definition of input services for manufacturer of goods, as given in Rule 2(l)(ii) of Cenvat Credit Rules, 2004, includes within its ambit all services used in or in relation to the manufacture of final products and includes services used directly or indirectly. Similarly Rule 2(l)(i) of Cenvat Credit Rules also gives wide scope to the input services for provider of output services by including in its ambit services used for providing an output services. Similar is the case for inputs.

3.1.2 Therefore, the phrase, used in mentioned in Notification No.5/2006-C.E. (N.T.) to show the nexus also needs to be interpreted in a harmonious manner. The following test can be used to see whether sufficient nexus exists. In case the absence of such input / input service adversely impacts the quality and efficiency of the provision of service exported, it should be considered as eligible input or input service. In the case of BPOs/call centres, the services directly relatable to their export business are renting of premises; right to use software; maintenance and repair of equipment; telecommunication facilities; etc. Further, in the instant example, services like outdoor catering or rent-a-cab for pick up and dropping of its employees to office would also be eligible for credit on account of the fact that these offices run on 24x7 basis and transportation and provision of food to the employees to ensure that output service is provided efficiently. Similarly, since BPOs/Call Centres require a large manpower, service tax paid on manpower recruitment agency would also be eligible both for taking the credit and the refund thereof. On the other hand, activities like event management, such as company-sponsored dinners/picnics/tours, flower arrangements, mandap keepers, hydrant sprinkler systems (that is, services which can be called as recreational or used for beautification of premises), rest houses etc., prima facie would not appear to impact the efficiency in providing the output services, unless adequate justification is shown regarding their need.

Admitted position in the present case is that the appellants received Works Contract services for external development of the premises, which can be termed as beautification of premises, referred to in the CBEC circular, cites supra. The appellants have not provided adequate justification regarding the need of the WCS with reference to provision of output services for export and as such I do not find any infirmity in rejection of refund claim to the extent of Rs.26,11,022/- on Works Contract Services.

5. Heard the parties. Considered the submissions.

6. In this case it is not in dispute that appellant has not received the services in question and paid services tax thereon. The reason to deny the refund is that these services having no nexus with regard to the services provided by the appellant. The question came before this Tribunal in the case of KPMG wherein this Tribunal has observed in para 8 & 9 as under:

8. Input service is defined in Rule 2(l) of the Cenvat Credit Rules, 2004 as:-

Input services means any service:-

(i) Used by a provider of taxable service for providing an output service; or

(ii) used by the manufacturer, whether directly or indirectly, in or in a relation to the manufacture of final products and clearance of final products from the place of removal,

And included services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, activities relating to business such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation up to the place of removal.

On true and fair construction of Rule 2(l), insofar as is relevant to the facts on hand, it is clear that any service used by the provider of a taxable service for providing an output service including services used in relation to the setting up, modernization, renovation or repairs of the premises of the provider of output service or for an office relating to such premises, procurement of inputs, activity to business such as inter alia inward transportation of inputs or capital goods and output transportation to the place of removal, would constitute input service. Input service is defined as applicable to either a manufacturer or any other provider of output service.

9. The question whether the categories of input services claimed by the appellant (management, maintenance or repair service, employee mediclaim insurance, cab services and parking services) could legitimately be comprehended as input service for availing Cenvat Credit, is the question that falls for our appellate consideration.

7. Thereafter the input services credit availed by the appellant for various services and after analyzing, this Tribunal held that Cenvat Credit availed by the appellant for common area management, maintenance and repairs, employee management insurance, cab service, car parking are eligible for claim of Cenvat Credit. For Landscaping of factory garden I find that Honble High Court of Karnataka in the case of Millipore India Pvt. Ltd (Supra) hold that the same falls within the concept of modernization, renovation and repairs of the office premises. Therefore, it was held that it was having a nexus with the final product as the service which are availed by the appellant are in nature of modernization and renovation of their premises which gives the better atmosphere for providing output services. Therefore, I hold that these services are having nexus to the output services provided to them. In these circumstances, I hold that as per CBEC circular dated 19.01.2010 appellant are entitled for refund claim which was remained unutilized in their Cenvat Credit account due to export of services.

8. Therefore, impugned order is set aside appeal is allowed with consequential relief if any.

(Dictated and pronounced in the open court)

(Ashok Jindal) Member (Judicial)

Bhanu

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ST/59725/2013-ST(SM)