2014 (7) TMI 1196 - AT - Service Tax

Eligibility of refund claim of Cenvat credit - Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No.5/2006-C.E. (N.T.) dated 14.03.2006 - Huge accumulated Cenvat credit of service tax paid on the input services - Early drug discovery services taxable under category of Scientific and Technical Consultancy Service exported to its overseas clients - Received various input services and avails Cenvat credit of Service tax paid on such input services - Services has no nexus with the output services. Held that - the business activities in the case of a service provider are not only confined to mere proving the service directly, but also include other activities, which he may be required for accomplishing the purpose of business. For smooth functioning of the business of providing the service and other like activities, the service provider may use other services, which are ancillary and incidental for accomplishing the main purpose. In such an eventuality, it cannot be said that the function of those ancillary services are not connected to the business purpose of the assessee. Therefore, in view of the definition of input service and the ratio laid down by the Hon ble Bombay High Court, any service received and which is commercially required for the purpose of carrying on the business of the service provider, will be covered by the expression activity relating to business contained in Rule 2(l) of the Cenvat Credit Rules, 2004. The nature, purpose and use of the disputed services by JBL establish the fact that the expenditure incurred for those purported disputed services are commercially required to be incurred with a view to facilitate the carrying on the business of providing the taxable service, and thus, confirming to the expression activities relating to business as contained in the definition clause of input service ; as the word business is one of wide import and in fiscal statutes, it must be construed in a broad rather than a restricted sense. Therefore, denial of refund benefit to JBL under Rule 5 ibid by the authorities below is not justified. I am also of the considered view that there are no merits in the appeals filed by the Revenue, because of the fact that the nexus between the input services and the output service exported by the appellant is duly established by JBL for claiming of refund of accumulated Cenvat credit. whether refund application was filed within the prescribed time limit - Held that - at this juncture, it is not appropriate for the Tribunal to ascertain the dates, when the refund applications were filed by JBL for the purpose of computation of the limitation. Therefore, the matter should be remanded back to original authority for ascertainment of fact regarding the date of filing of the refund applications and if the applications were filed within the stipulated time limit, then to decide the matter in line with the observations recorded above. - Appeals disposed of

Summary

Issues Involved:
1. Refund claim under Rule 5 of the Cenvat Credit Rules, 2004.
2. Nexus between input services and output services.
3. Rejection of refund claims on the grounds of time-bar.

Detailed Analysis:

1. Refund Claim under Rule 5 of the Cenvat Credit Rules, 2004:
The appeals were filed by M/s Jubilant Biosys Limited (JBL) and the Revenue Department concerning the refund of accumulated Cenvat credit of service tax paid on input services under Rule 5 of the Cenvat Credit Rules, 2004, read with Notification No.5/2006-C.E. (N.T.) dated 14.03.2006. JBL, being a 100% EOU, engaged in exporting services, had accumulated Cenvat credit due to non-levy of service tax on exported services. Refund claims were filed, and some were allowed while others were disallowed, leading to these appeals.

2. Nexus Between Input Services and Output Services:
The core issue in several appeals (ST/783, 784, 1392, 1390, 1419, 1388, 1393, 1394/2012) was the denial of Cenvat credit on various input services on the grounds of lacking nexus with the output services provided by JBL. The disallowed services included outdoor catering, insurance, management consultancy, mobile telecommunication, scientific and technical consultancy, travel agency, legal consultancy, business auxiliary, business support, cargo handling, equipment rental, manpower recruitment, maintenance or repair, banking and financial, professional consultancy, customs house agent, housekeeping and pest control, rent-a-cab, and security services.

The Tribunal emphasized that the definition of input service under the Cenvat Credit Rules, 2004, includes services used in relation to the business activities of the output service provider. The term "activities relating to business" is broad and encompasses various ancillary and incidental services necessary for the business. The Tribunal referenced the Hon'ble Bombay High Court's ruling in Coca Cola India Pvt. Ltd. v. Commissioner of Central Excise, Pune - III, which interpreted "activities relating to business" as having a wide import, covering all services used in relation to the business of manufacturing the final products.

The Tribunal concluded that services commercially required for carrying on the business of the service provider fall under the expression "activity relating to business." The Tribunal found that the nature, purpose, and use of the disputed services by JBL established their necessity for business operations, thus qualifying them as input services eligible for Cenvat credit and refund under Rule 5.

3. Rejection of Refund Claims on the Grounds of Time-Bar:
In appeal No. ST/782/2010, JBL contested the rejection of refund claims on the grounds of time-bar, arguing that the refund applications were filed within the stipulated time frame. The Tribunal noted that the refund sanctioning authority had not properly verified the filing dates. The matter was remanded back to the original authority to ascertain the filing dates and decide accordingly, ensuring the applications were within the prescribed time limit.

Judgment:
- Appeals Nos. ST/783, 784, 1392, 1390, 1419, 1388, 1393, 1394/2012 filed by JBL were allowed.
- Appeal No. ST/782/2010 filed by JBL was remanded to the original authority for de-novo adjudication.
- Appeals filed by the Revenue were dismissed.

The Tribunal's order emphasized the broad interpretation of "input service" and the necessity of services for business operations, thereby granting JBL the refund benefits under Rule 5 of the Cenvat Credit Rules, 2004.