Ness Technologies (India) Private ... vs Commissioner Of Service Tax Division V, ...

APPEAL NOs. ST/89857, 89858, 89860, 89861, 89862, 89863, 89864 & 89873/14

(Arising out of Order-in-Appeal No. 668-675/PD/14 dtd. 26/6/2014 passed by the Commissioner of Central Excise & Service Tax, (Appeals-IV), Mumbai-I]

For approval and signature:

Honble Mr Ramesh Nair, Member (Judicial)

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1. Whether Press Reporters may be allowed to see : No 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 : seen of the Order?

4. Whether Order is to be circulated to the Departmental: Yes authorities? =======================================================

Ness Technologies (India) Private Limited : Appellants

VS

Commissioner of Service Tax DivisionV, Mumbai : Respondent

Appearance

Shri. Mihir Deshmukh, Advocate for the Appellants Shri. A.B. Kulgod, Asstt. Commissioner (A.R.) for the Respondent

CORAM:

Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 8/6/2015 Date of decision: /2015

ORDER NO.

Per : Ramesh Nair

These eight appeals are directed against common Order-in- Appeal No. 668-675/PD/14 dtd. 26/6/2014 passed by the Commissioner of Central Excise & Service Tax, (Appeals-IV), Mumbai-I, wherein Ld. Commissioner (Appeals) upholding the orders in original rejected the appeals of the appellant. The details of the appeals are as under:

Sr. No. Period of dispute Period of dispute Appeal against order-in-original

Amount in dispute(INR) 1 ST/89857/14-MUM Apr-09 ST-II/Div. IV/214-R/2010-11 dated 31 Dec 2010 Rs. 71,726

2. ST/89858/14-MUM Jan-09 ST-II/Div. IV/255-R/2010-11 dated 21 January 2010 Rs. 2,45,757/-

3. ST/89873/14-MUM Feb-09 ST-II/Div. IV/221-R/2010-11 dated 31 Dec 2010 Rs. 1,75,892/-

4. ST/89860/14 Sep-10 ST-II/Div. IV/205-R/2011-12 dated 18 Nov 2011 Rs. 2,45,426/-

5. ST/89861/14 Oct to Dec 2010 ST-II/Div. IV/299-R/2010-11 dated 30 March 2012 Rs. 4,18,268/-

6. ST/89864/14-MUM Jan to Mar 2011 ST-II/Div. IV/46-R/2011-12 dated 29 May 2012 Rs. 2,96,423/-

7. ST/89863/14-MUM Apr to Sept 2011 ST-II/Div. IV/218-R/2012-13 dated 30 January 2013 Rs. 4,64,523/-

8. ST/89862/14-MUM Jan to Mar 2012 ST-II/Div. IV/15-R/2013-14 dated 26 April 2013 Rs. 5,35,152/-

2. The facts of the case is that the appellant M/s. Ness Technologies (India) Private Limited holding service tax registration No. AAACA9649LST001 for providing taxable output services under category of Business Auxiliary Service, Business Support Service, Management consultant and information technology software service and had been availing Cenvat Credit of the service tax paid on various input service used by them in providing output service. They have been providing information technology software services falling under chapter 65(105)(zzze) of the Finance Act, 1994, and had exported the same to M/s. Ness Global Services, U.K., Ness USA, Inc., Ness Canada Inc. & Retalix Ltd., Israel. They filed refund claim for the period February 2010, April 2009, January 2010, September 2010, October 2010-December 2010, January 2011- March 2011, April 2011-September 2011 and January 2012 to March 2012 respectively before the Asstt./Dy. Commissioner, Division IV/V, Service tax II, under Rule 5 of the Cenvat Credit Rules, 2004 read with notification No.5/2006-CE(NT) dated 14/3/2006 in respect of the accumulated Cenvat Credit on the ground that the output services provided under the category of information technology software services during the period as stated above under the export of services Rules, 2005 had been exported and that they were not in a position to utilize the Cenvat credit availed on the said input services. The adjudicating authority on the said refunds passed order in original No. ST.II/Div.IV/135-R/12-13 dated 29/9/2012 which was challenged by the appellant before the Bombay High Court in writ petition No. 10923 of 2012 the Honble High Court has set aside the order in original dated 29/9/2012 and directed the adjudicating authority to pass a fresh order. The adjudicating authority in view of the direction of the Honble High Court passed eight different orders in original wherein against the various refund claim of the appellant partly allowed and partly disallowed as detailed in para 1. Aggrieved by the portion of the orders by which the refund was rejected the appellant filed appeals before the Commissioner (Appeals) upholding the orders in original and rejected the appeals of the appellants on the following grounds:

(a) There is no direct nexus of input services with the output services provided by the appellant and exported.

(b) It was also contended in the impugned order that certain invoices which were found not related to output services exported as same were found pertains to earlier period and not against taxable services provided during the relevant period in terms of Notification dated 14/3/2006 and which were used for personal use. The part of the rejected claim was on account of reimbursement of expenses reimbursed by the Foreign Service recipient to the appellant. On this issue the Ld. Commissioner (Appeals) contended that this reimbursement charges not to be part of gross amount of taxable service. The matter was referred to the larger bench in the case of Bhagwati Traders. The part of the refund was rejected on the ground that appellant claimed refund on account of invoices not been submitted which is in respect of services which was received from out side India and the service tax paid on reverse charge basis. Charge of the Ld. Commissioner (Appeals) is that appellant have not satisfactorily proved their intention. The part of the refund was also rejected on tele communication services on the ground that the said services are utilized for personal purpose, as on the bill of such service the name of companys employee appeared though the same was paid by the company and booked expenditure in the books of companys account.

3. Shri. Mihir Deshmukh, Ld. Counsel for the appellant submits that as regard the nexus of input services with the export service, Ld Commissioner in his finding in one hand categorically held that services viz. Professional Consultancy fess, Chartered Accountant fees, Telephone charges, rent charges, Internet communication services, Repairs & Maintenance, Cleaning & Housekeeping, Security, manpower Recruitment & Supply serices, Information Technology, rent a cab, commercial Training & Coaching Services, computer network services (Online information & database access or retrieval services) Information Technology Software services, Telecommunication, scientific & Technical consultancy services are covered within the definition of input services under Rule 2(l) (i) if they are used in providing any output service and also contended that there seems to be no dispute regarding admissibility of Cenvat credit on service tax paid on the said service. It is also recorded in the impugned order except for the fact that it was not considered as input service as there was no direct nexus with output service provided by the appellant and exporter.

It is his submission that as per the findings of the Ld. Commissioner Services are qualified as input service but refund was rejected only on the ground that there is no nexus of these services with out put services. He submits that almost 100% services are exported out of country; therefore nexus need not to be established as all the services used are only for services which are exported. Therefore the contention of the Ld. Commissioner is not correct. He also submits that small portion of the services was provided domestically in respect of which the appellant have not filed any claim, therefore issue of nexus raised by the original authority as well as Ld. Commissioner (Appeals) is merely on the basis of assumption and presumption. As regard the refund in respect of reimbursement received from foreign based service recipient, he submits that the judgment of Bhagwati Traders has no relevance in the present case for the reason that the said case involved issue whether the cost of reimbursement is includible in the taxable value or otherwise. Whereas in present case the payment has been realized on account of export of services from the service recipient in convertible foreign exchange, therefore refund of the same should be granted.

He submits that there is specific clause in the contract with the Foreign Service recipient that the appellant shall be paid reimbursement of certain expenses incurred in the course of exporting the service. In view of this undisputed facts the export is not only of the services of information technology but also services against which reimbursement have been received. In view of this fact the appellant is entitled for the refund of service tax paid on reimbursement. As regard the telecommunication services, he submits that though the invoices of the telephone bill is in the name of the employees of the company, but the name of the company is also mentioned in the invoices and payment of telephone charges was made by company and the same has been booked as expenditure in the books of account, therefore recipient of services is company even though the name of the employee mentioned in the invoices. Telephone/mobile in relation to manufacture and business activity of the company, therefore the same is input services for providing out put service which has been exported hence the refund is clearly admissible.

4. Shri. A.B. Kulgod, Ld. Asstt. Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He submits that Ld. Commissioner (Appeals) found that even though the services are input service, nexus need to be established of such input services with output service exported. The Ld. Commissioner (Appeals) has rightly upheld the rejective of the refund claim ordered by the adjudicating authority. As regard the telecommunication services, he submits that telephone/mobile have been used by the employees of the company and bills are for same also in the name of the employees. Therefore, the telecommunication services were used by the employees for their personal use, hence the same is not admissible for Cenvat credit and consequently the same is not qualified for refund. As regard the refund claim in respect of service tax on reimbursement, he submits that services for which reimbursement has been received, cannot be said to have been used for providing export services, therefore refund was rightly rejected.

5. I have carefully considered the submissions made by both the sides and perused the record.

6. I am not going through the actual quantification of the refund to be admissible or otherwise in respect of each claim, however I am giving my findings on merit. As regard the refund claim on services such as Professional Consultancy fees, Chartered Accountant fees, Telephone charges, rent charges, Internet communication services, Repairs & Maintenance, Cleaning & Housekeeping, Security, Manpower Recruitment & Supply services, information technology, rent a cab, commercial Training & Coaching Services, computer network services (Online information & database access or retrieval services) Information Technology Software services, Telecommunication, scientific & Technical consultancy service, I observed that Ld. Commissioner in his findings observed as under:

17. I find that the appellants have been availing CENVAT credit of service tax paid on input services viz. Professional Consultancy fees, Chartered Accountant fees, Telephone charges, Rent charges, Internet Communication services, Repairs & Maintenance, Clearing & Housekeeping, Security, Manpower Recruitment & Supply services, Information Technology, Rent-a-Cab, commercial Training & Coaching services, computer network services (Online information & database access or retrieval services), Information Technology Software Services, Internet Telecommunication, Scientific & Technical consultancy services.

18. All the above mentioned services shall be covered within the definition of an input service under Rule 2(l)(i) (main definition), if they are used in providing any output service. It is worthwhile to note that, out of the input services as mentioned in the foregoing para, there seems to be no dispute regarding admissibility of CENVAT Credit of service tax paid on the said services as also recorded by the Respondent in the impugned orders except for the fact that it was not considered as input services, as there was allegedly no credit nexus with the output service provided by the Appellants and exported.

From the above observations, it is clear that there is no dispute even by the Original authority as well as the Commissioner (Appeals) that all these services covered under the definition of input services therefore Cenvat Credit is admissible. However, the refund was rejected on the said services on the ground that appellant could not establish nexus of these services with output services. In this regard, I am of the view that since, except small part for which no refund claim was filed, entire services have been undisputedly exported; no one to one co-relation is required to be proved. When entire services have been exported then it cannot be said that nexus of input services with the output services is not established and therefore the Ld. Commissioner (Appeals) has erred in rejecting the claim of the said services. As regard telephone services, Ld. Commissioner (Appeals) rejected the claim on the ground that it is for personal use of the employee and the bill for such telecommunication service is in the name of the employee, therefore it cannot be said to have been used by the appellant. I do not agree with this contention of the Ld. Commissioner for the simple reason that normally telephone or mobile is issued in the individual name but the fact is not under dispute that telephone bill bearing name of the appellant also. Most important part is that the bill is paid by the appellant and the same has been booked as expenditure by the appellant, therefore, it cannot be said that the service of telecommunication has been used for business activity of the appellant. Needless to say that business activity is export of software technology service to the foreign country, therefore in my considered view the telephone services is input service used for out put service exported, in particular, when the Revenue could not establish with any evidence that the telephone/mobile has been used by the employee for their personal use. As regard reimbursement of expenses, I observed that in the contract of the appellant with the Foreign Service receipent, following clause is referred:

Any other costs which may be specifically agreed upon in writing between the parties to be excluded for the purpose of arriving at the operating cost for the purpose of this Agreement.

The operating costs as incurred in INR will be charged to buyer in US dollar. The invoice conversion to US dollars to be billed to buyer shall be INR costs divided by base factor of INR 48 (i.e. 1US$=INR 48) for the period January 10 to March 10.

The seller will charge rechargeable expenses to the Buyer at he dollar rupee rate for the month. The buyer will charge the same to his customers.

Seller may raise invoices on Buyer on the last working day of every calendar month or at such intervals as may be mutually agreed and the same is payable by the buyer within 90 days post receipt of the invoice. Seller shall be entitled to raise an invoice for the services rendered during the tenure of the agreement and the Buyer shall arrange payment against such invoice, as a term of their Agreement.

From the above clause it is very clear that seller i.e. appellant shall charge, rechargeable expenses to the buyer i.e. recipient of the service. Under this clause, service recipient in addition to the IT Software, under obligation to also pay rechargeable expenses which is nothing but reimbursement expenses. On this, I am of the view that it is like export value devided into parts one, value of the software and part two on account of reimbursement; however there is no dispute that both the amounts have been realized in convertible foreign exchange. The reimbursement cannot be treated in isolation but is very much in connection with the export of services. Therefore in my view refund of the service tax on reimbursement which has been realized by the appellant from Foreign Service recipient in convertible foreign is admissible. I do not find that the judgment in the case of Bhagwati Traders is relevant in the present case. Subsequently now the larger bench of this Tribunal has already decided Bhagwati Traders case as reported in [2011(24) STR 290]. In the said judgment issue is not related to export and refund their against. Therefore, I am of the view, the ratio of the same is not applicable in the present case. In my above discussion, I am of the view that on all three counts, the appellant is entitled for refund, however subject to proper verification, in view of my above observations, I therefore set aside the order and remand the matter to the original authority to pass a fresh denovo order taking into account, my above observations. The adjudicating authority is expected to dispose of refund claim of the appellant preferably within a period of three months from the date of receipt of the order.

(Order pronounced in court on ____________)

sk Ramesh Nair Member (Judicial)

sk

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