2024 (9) TMI 695 - AT - Service Tax

Telecom company wins appeal on Cenvat credit recovery after services reclassified from exempted to taxable category

M/s Integrated Global Solutions Private Limited Versus Commissioner of Central Excise and Service Tax, Chandigarh - I

CESTAT Chandigarh allowed the appeal concerning recovery of Cenvat credit with interest and penalty. The appellant provided customer care services under ... Recovery of Cenvat credit with interest and penalty - restriction on Cenvat credit utilization up to 20% on the ground that the appellant was providing taxable as well as exempted services - extended period of limitation. HELD THAT:- As per the appellant, the service rendered by him were not for the purpose of sale or telemarketing and therefore, the same cannot be described as service by a call centre for the purpose of said exemption Notification No. 08/03-ST dated 20.06.2003, this notification exempts the service provided by a call centre from payment of service tax, whereas, the Department it is a call centre service which is exempted service and therefore credit utilization is restricted up to 20%. It is further found that as per the terms of the agreement entered into by the appellant with M/s Spice Communications Limited. The appellant is supplying the customer care service under BAS by providing call support service and it has been held in the case of PHOENIX IT SOLUTIONS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, VISAKHAPATNAM [2011 (1) TMI 642 - CESTAT, BANGALORE] wherein it has been held that assessee providing call centre service on behalf of the client would fall under BAS within the purview of Service Tax. In the case of M/S. IBM DAKSH BUSINESS PROCESS SERVICES PRIVATE LTD. VERSUS CCE, DELHI-III [2014 (5) TMI 616 - CESTAT NEW DELHI], it was held that call centre service provided on behalf of the client would fall within the purview of Business Auxiliary Service. Extended period of limitation - HELD THAT:- The affairs of the appellant were in the knowledge of the Department as the Department conducted audit on 16.11.2005 and 08 to 10.01.2007, whereas, the show cause notice was issued on 26.03.2010 after a considerable delay of three years which is beyond the period of limitation - in the case of GOLDEN LAMINATES LTD. VERSUS COLLECTOR OF C. EX., DELHI-III [2000 (1) TMI 611 - CEGAT, NEW DELHI], the Tribunal held that when the facts are already known to the Department, it cannot be alleged that the appellant had suppressed or mis-declared any material facts with intention to wrongly avail the benefit of exemption from duty resulting in evasion of payment of duty. The impugned order is not sustainable in law on merits as well as on limitation - appeal allowed. Issues Involved:1. Classification of services provided by the appellant.2. Applicability of exemption notification.3. Denial of Cenvat Credit on certain services.4. Invocation of extended period of limitation.5. Imposition of interest and penalty.Issue-wise Detailed Analysis:1. Classification of Services Provided by the Appellant:The appellant provided customer care services to M/s Spice Communications Limited under an agreement dated 01.07.2004. The Department contended that part of these services fell under Call Centre Service, which is exempt, and thus restricted the Cenvat credit utilization to 20%. The appellant argued that their services did not involve sales, telemarketing, or payments and thus could not be described as Call Centre Services under Notification No. 8/2003-ST dated 20.06.2003. The Tribunal referred to the case of Phoenix IT Solutions Ltd. Vs. Commr. Of C. Ex., Visakhapatnam, which held that services provided on behalf of a client fall under Business Auxiliary Services (BAS) and not Call Centre Services. The Tribunal concluded that the appellant's services were correctly classified under BAS.2. Applicability of Exemption Notification:The appellant argued that it is not obligatory to avail of the benefit of an exemption notification and that service providers are free to pay service tax. The Tribunal cited decisions in the cases of IBM Daksh Business Process Services (P) Ltd. Vs. CCE., Delhi-III and Commissioner of Central Excise Vs. Federal Mogul TPR India Ltd., which supported the appellant's stance that the exemption is optional and not mandatory. The Tribunal held that the appellant was justified in paying service tax on the entire consideration received under the agreement.3. Denial of Cenvat Credit on Certain Services:The appellant contended that Cenvat Credit of Rs. 2,63,407/- was wrongly denied on management consultant's service, security agency, and maintenance or repair service. The Tribunal referred to the case of Adani Port and Special Economic Zone Ltd. Vs. Commissioner of Service Tax, Ahmedabad, which held these services to be input services. Thus, the Tribunal found that the denial of Cenvat Credit was incorrect.4. Invocation of Extended Period of Limitation:The appellant argued that the Department was fully aware of their activities since audits were conducted on 16.11.2005 and 08 to 10.01.2007, yet the show cause notice was issued on 26.03.2010, beyond the period of limitation. The Tribunal noted that the extended period of limitation can only be invoked in cases of fraud, collusion, willful misstatement, suppression of facts, or contravention of provisions with intent to evade payment of service tax. The Tribunal found that the Department failed to establish any of these ingredients. Citing the cases of Birla Corporation Limited Vs. Commissioner, CGST & Central Excise, Jabalpur and Golden Laminates Ltd. Vs. Collector of C.Ex. Delhi-III, the Tribunal concluded that the demand was barred by limitation.5. Imposition of Interest and Penalty:Given that the demand itself was found unsustainable, the Tribunal held that the question of interest and penalty did not arise.Conclusion:The Tribunal set aside the impugned order on both merits and limitation grounds, allowing the appeal with consequential relief as per law. The order was pronounced in the open court on 11.09.2024.