2021 (8) TMI 806 - AT - Service Tax

Tribunal grants refund of CENVAT credit with interest, clarifies eligibility criteria

M/s. Microsoft Research Lab India Private Limited Versus Commissioner Of Central Tax, Bangalore North

The Tribunal allowed both appeals, granting the appellant a refund of CENVAT credit with interest. It held that the disputed input services qualified as ... Refund of CENVAT credit - nexus of input services with the output services - Sponsorship Service - Event Management Services - Outdoor Catering Services - Rent-a-cab services - Pandal and Shamiana/ Mandap Keeper Services - Life Insurance Services - Insurance Auxiliary Services - HELD THAT:- The appellant has given detailed justification for each of the impugned services involved in these two appeals with judicial precedents and the impugned services have been used by the appellant for rendering the output services. Further, the reasoning given by the Commissioner(A) in the impugned orders is not correct in law and the correct position in law is that to test for eligibility is whether input services is used by the provider of taxable service for providing output service and the input services should not be covered by the exclusion clause. All the services on which refund has been rejected consistently held to be input services in various decision relied upon by the appellant. 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. VERSUS C.C.G.S.T., MUMBAI WEST [2018 (12) TMI 1481 - CESTAT MUMBAI] wherein it has been held that the department is not permitted to question the eligibility of CENVAT credit at the time of claiming refund. In view of the clarification given by the tax research unit of CBEC vide their letter dated 16.3.2012, the amended Rule 5 of CENVAT Credit Rules, does not require correlation between the output service exported and the input service used in such output service exported. The appellant is entitled to refund of CENVAT credit along with interest - Appeal allowed - decided in favor of appellant. Issues Involved:1. Rejection of refund claims on various input services.2. Nexus of input services with output services.3. Eligibility of CENVAT credit for refund.4. Requirement of correlation between input services and output services.5. Entitlement to interest on delayed refund.Detailed Analysis:1. Rejection of Refund Claims on Various Input Services:The appellants filed appeals against the rejection of refund claims on various input services by the Commissioner (A). The services in question included Sponsorship Service, Event Management Services, Outdoor Catering Services, Rent-a-Cab Services, Pandal and Shamiana/Mandap Keeper Services, Life Insurance Services, and Insurance Auxiliary Services. The appellant argued that these services qualify as input services under Rule 2(l) of the CENVAT Credit Rules, 2004, and have a nexus with the output services provided. The Commissioner (A) had rejected the claims, stating that these services do not qualify as input services.2. Nexus of Input Services with Output Services:The appellant contended that all the disputed input services are covered by the definition of 'input service' and have a direct nexus with the output services. They provided detailed justifications and cited various judicial precedents to support their claims. For instance, Sponsorship Services were argued to be essential for business growth, Event Management Services were necessary for organizing business meetings, and Outdoor Catering Services were important for employee productivity. The Tribunal found that the appellant had substantiated the nexus between the input services and the output services.3. Eligibility of CENVAT Credit for Refund:The appellant argued that once CENVAT credit is accepted at the availment stage, it cannot be challenged at the refund stage. This principle was supported by CBEC's circular No.120/01/2010-ST dated 19.1.2010 and various judicial precedents. The Tribunal agreed with this view, citing the case of K Line Ship Management Pvt. Ltd. vs. CGST, wherein it was held that the department cannot question the eligibility of CENVAT credit at the time of claiming a refund.4. Requirement of Correlation Between Input Services and Output Services:The appellant argued that neither Rule 5 of the CENVAT Credit Rules, 2004, nor the relevant notifications required them to prove the nexus between input and output services. The Tribunal supported this argument, referencing the clarification given by the tax research unit of CBEC and various judicial decisions. The Tribunal concluded that the amended Rule 5 does not require a correlation between the output service exported and the input service used in such output service exported.5. Entitlement to Interest on Delayed Refund:The appellant claimed interest on the delayed sanction of the refund under Section 11BB of the Central Excise Act, 1944, read with Section 83 of the Finance Act, 1994. They cited the apex court decision in Ranbaxy Laboratories Ltd. vs. Union of India, which mandates interest on delayed refunds. The Tribunal agreed with this claim and held that the appellant is entitled to interest on the delayed refund.Conclusion:The Tribunal allowed both appeals, holding that the appellant is entitled to a refund of CENVAT credit along with interest. The Tribunal found that the input services in question qualify as input services under the CENVAT Credit Rules, 2004, and have a nexus with the output services provided. The Tribunal also held that the department cannot question the eligibility of CENVAT credit at the refund stage and that there is no requirement for correlation between input and output services under the amended Rule 5. The order was pronounced in Open Court on 17/08/2021.