2015 (6) TMI 1004 - AT - Service Tax

Allowability - Refund claim - Eligibility of credit of Service tax attributed to services used in Delhi office for distribution to the Mumbai office in terms of Rule 7 of Cenvat Credit Rules and allowability of Cenvat credit having no nexus with the output service - Held that - appellant is providing services from both the Delhi and Mumbai office and the accounts are centralized at Mumbai office and the billing of the services and purchase is also done by Mumbai office and the payments have been received regularly in foreign exchange therefore the input service credit is allowed. The whole amount disallowed for lack of nexus with the output service provided by the appellant is bad and the same is held as allowable and/or admissible under Rule 2(l) read with Rule 3 of Cenvat Credit Rules 2004. Also the Delhi office have rightly distributed CENVAT Credit to its Mumbai office in terms of Rule 7 of Cenvat Credit Rules and therefore the disallowance of credit is set aside. - Decided in favour of appellant with consequential relief

Summary

Issues:
1. Redistribution of CENVAT Credit by Delhi office as an ISD
2. Nexus of input services with output services

Issue 1: Redistribution of CENVAT Credit by Delhi office as an ISD
The appellant, a company with operations in multiple cities, filed an appeal against the rejection of its refund claim by the Commissioner of Central Excise & Service Tax. The issue revolved around the eligibility of the appellant to distribute CENVAT Credit from Delhi to Mumbai office. The Order-in-Original disallowed the credit due to the Delhi unit not providing taxable output services. The appellant argued that it had agreements with a foreign company for services from both Delhi and Mumbai offices, with all transactions recorded in Mumbai. The Tribunal found the disallowance unjustified as the appellant provided services from both offices, with centralized accounts in Mumbai, billing, and payments in foreign exchange. Consequently, the disallowance of credit amounting to &8377; 10,67,348/- was set aside, and the appeal was allowed for refund with interest.

Issue 2: Nexus of input services with output services
The second ground of contention involved the nexus of input services with output services. The Order-in-Original disallowed a portion of the CENVAT Credit due to lack of nexus with the output services provided by the appellant. The appellant argued that the disallowance was unwarranted, providing details of various services like Club or Association Services, Broadcasting services, and Real Estate Services, justifying their essential nature for business purposes. The Tribunal examined the details provided by the appellant, including expenditure on essential services, relocation of employees, and broadcasting services for promoting technology. It held that the disallowance of &8377; 1,81,290/- lacked merit and was deemed allowable under Rule 2(l) read with Rule 3 of Cenvat Credit Rules, 2004. The Tribunal directed the refund to be disbursed within 60 days of the order.

In conclusion, the Tribunal allowed the appeal, setting aside the disallowances and directing the refund of the contested amounts. The judgment emphasized the importance of maintaining nexus between input and output services for claiming CENVAT Credit and upheld the appellant's right to redistribute credit between its offices based on valid agreements and centralized operations.