2008 (3) TMI 35 - AT - Service Tax

Decision finds services are Business Auxiliary Services; Cenvat Credit Rule 5 allows refund of unused input credit

The Commissioner of Central Excise, Hyderabad-IV Versus M/s. Deloitte Tax Services India Pvt. Limited

CESTAT, BANGALORE held the impugned Commissioner(A) order legal and dismissed Revenue's appeal. The tribunal found the services were not Information ... Classification of services - 'Information Technology Service' Or under the category of 'Business Auxiliary Service' - Eligibility for input service tax credit - definition of 'Input Service' - HELD THAT:- In our view the services rendered would not amount to 'Information Technology Service', therefore, they are not excluded from the scope of 'Business Auxiliary Service' which is taxable. Once it is held that they are taxable and the credit taken on the input services has not been utilized for payment in respect of output services, they are entitled for the refund of the credit in terms of the Cenvat Credit Rules. Moreover, the department's objection with regard to the 'Input Services', entitlement of credit is also not correct because on going through the definition of input service and also the services availed by the Respondent, we find that they are very necessary for providing output services and they satisfy the condition of the input services as given in the Cenvat Credit Rules. In our view, the scope of input services as given in the definition is very wide and the services availed by the Respondent as input services are indeed input services. Further, Rule 5 allows refund in respect of the tax paid on the input services will be available for the Respondent and the grounds taken by the Revenue that they would be available only in respect of exports made after 14.3.2006 is not sustainable in view of the Tribunal's decision in WNS Global Services (P) Ltd. Vs. CCE [2008 (1) TMI 94 - CESTAT, MUMBAI]. The respondents have taken several other contentions which in our view need not be dealt with in depth. Hence, the appeal filed by the Revenue does not have any merit. The impugned order of the Commissioner (A) is legal and proper. Therefore, Revenue's appeal is dismissed. Issues:1. Classification of services provided by the Respondent under taxable categories.2. Eligibility for input service tax credit and refund under Rule 5 of the Cenvat Credit Rules, 2004.3. Applicability of the amendment to Rule 5 of the Cenvat Credit Rules, 2004.Issue 1: Classification of services provided by the Respondent under taxable categories:The Respondent, a private limited company registered with Software Technology Park of India, Hyderabad, provided services to a US-based company. The main contention was whether these services fell under 'Business Auxiliary Services' (BAS) and 'Management Consultancy Services' or 'Information Technology Service.' The Commissioner (A) held in favor of the Respondent, stating that the services were indeed covered under BAS and that they were entitled to input service tax credit and refund when the output service was exported. The Tribunal agreed, emphasizing that the services did not qualify as 'Information Technology Service' as they were primarily related to business activities and not computer systems.Issue 2: Eligibility for input service tax credit and refund under Rule 5 of the Cenvat Credit Rules, 2004:The Revenue contested the eligibility of the Respondent for input service tax credit and refund, arguing that the input services did not have a nexus with the output services and that the refund claim was not valid for the period before the amendment to Rule 5. However, the Tribunal found that the input services availed by the Respondent, such as equipment hiring, professional consultation, recruitment, and security services, met the definition of 'Input Service.' The Tribunal upheld the Commissioner (A)'s decision that the Respondent was entitled to the credit and refund under Rule 5, rejecting the Revenue's objections.Issue 3: Applicability of the amendment to Rule 5 of the Cenvat Credit Rules, 2004:The Revenue argued that the amendment to Rule 5, effective from 14.3.2006, did not allow refunds for services rendered before that date. However, the Tribunal referred to a previous decision and held that the amendment applied to refunds claimed after the amendment date, even for services provided earlier. The Tribunal emphasized that the retrospective effect of the amendment was valid in this case, and the Respondent's refund claim, filed after the amendment, was deemed eligible. The Tribunal dismissed the Revenue's appeal, affirming the legality of the Commissioner (A)'s order.This comprehensive analysis of the judgment highlights the key issues addressed by the Tribunal regarding the classification of services, eligibility for input service tax credit and refund, and the applicability of the amendment to Rule 5 of the Cenvat Credit Rules, 2004.