2012 (12) TMI 358 - AT - Service Tax

Waiver of pre-deposit of Duty along with interest and penalty - Real Estate, Insurance Service, Outdoor Catering Services, Staff Welfare, Management, Maintenance or Repair Services - held that - There is no nexus between the input services and the output services. The input service has been defined under Rule 2 of the CENVAT Credit Rules, 2004. These services in question are not integrity connected/related to the business of the applicant and the services do not have any nexus with the output services, in view of Rule 2(1) of the Cenvat Credit Rules - pre-deposit of Rs. 1,00,000/- (Rupees one lakh only) to be paid by the applicants within six weeks and compliance to be reported on 21.9.2012. On due compliance, there shall be stay against recovery of the balance service tax, interest and penalty till disposal of the appeal.

Summary

Issues:
- Eligibility of CENVAT Credit for various services including Real Estate, Insurance Service, Outdoor Catering Services, Staff Welfare, Management, Maintenance or Repair Services.

Analysis:
The judgment pertains to a stay application filed by M/s. SBI Capital Market Limited seeking waiver of pre-deposit and stay of recovery of Rs. 3,78,308/- along with interest and an equal amount of penalty imposed on them. The main issue involved in the appeal is the eligibility of CENVAT Credit for a range of services provided by the applicant, such as Real Estate, Insurance Service, Outdoor Catering Services, Staff Welfare, Management, Maintenance, or Repair Services. The department denied Central credit, asserting that these services lacked nexus with the output service provided by the applicant.

The Chartered Accountant representing the applicants argued that the Real Estate Agent Services were essential for providing residences to officers on deputation, without which they couldn't fulfill their duties. Event management services were deemed crucial for consultancy services provided to corporate houses, requiring strong public relations for delivering output services. The applicants also offered insurance services to directly recruited managerial staff and incurred Staff Welfare Expenses for various HR events. Additionally, Outdoor Catering Services Designs and Miscellaneous Services were provided for business activities. The representative cited various decisions supporting the contention that these services qualified as input services for CENVAT Credit.

On the other hand, the Revenue's representative contended that CENVAT Credit was permissible only for services directly or indirectly linked to the output service. They argued that the services in question lacked any direct or indirect relation with the output service, justifying the denial of CENVAT Credit and imposition of penalties.

After considering both arguments, the judge found that there was no nexus between the input services and the output services as required by Rule 2(1) of the CENVAT Credit Rules, 2004. Consequently, the judge ruled that the applicant failed to establish a strong prima facie case in their favor. The judgment ordered a pre-deposit of Rs. 1,00,000/- to be paid by the applicants within six weeks, with compliance to be reported by a specified date. Upon compliance, a stay was granted against the recovery of the remaining service tax, interest, and penalty until the appeal's disposal.