2013 (6) TMI 466 - AT - Service Tax

Cenvat Credit - input services - Advertising Services, Food Pass Services, Security Services etc - Held that - In respect of most of the input services except in the case of food pass, the services are necessary for acquiring and utilizing their business assets namely people and computers - credit allowed. Food pass services - Held that - as the manner in which these food passes are utilized is not a matter which can be clearly established - Without such information it is not possible to come to a conclusion that there was a nexus between the food passes and the business process of the respondent. Moreover this is essentially in the nature of a payment of a perk to the employee rather than as an input service for business - credit denied.

Summary

Issues:
Claim for refund of CENVAT credit under Rule 5 of CENVAT Credit Rules 2004 for exported services; Dispute over refund amount sanctioned and rejected; Nexus between input services and exported services for eligibility of refund; Specific scrutiny of input services like Advertising, Food Pass, Security Services, etc.; Interpretation of the definition of input services under Rule 2(l) of CENVAT Credit Rules, 2004; Nexus between food passes and business process for CENVAT credit eligibility.

Analysis:
The judgment deals with a case where a 100% EOU, providing Online Data Retrieval or Access Service, sought a refund of CENVAT credit under Rule 5 of the CENVAT Credit Rules 2004 for services exported. The respondent claimed a refund of Rs. 2,96,940 for the period from 01.01.2008 to 31.03.2008, out of which Rs. 2,53,655 was sanctioned by the adjudicating authority, and Rs. 43,285 was rejected. The Commissioner (Appeals) allowed the refund of the rejected amount, leading to an appeal by the Revenue against this decision.

The Commissioner scrutinized the input services for which the refund was denied, referring to Circular No. 120/1/2010 ST dated 19.01.2010 by CBEC. The Commissioner found a sufficient nexus between the input services and the exported services, making the appellants eligible for the refund. However, the Revenue argued that certain services like Advertising, Food Pass, Security Services had no direct nexus with the exported services, contrary to the Commissioner's findings.

The respondent's counsel presented a breakdown of the amounts involved, emphasizing that each service was related to the assets of the respondent, namely computers and staff. Notably, the recruitment service, included in the definition of input services under Rule 2(l) of CENVAT Credit Rules, 2004, was highlighted for its clear nexus with the business process. Regarding food passes, the counsel argued that providing food to employees was integral to the business process and should be eligible for CENVAT credit.

The debate over food passes revolved around their utilization and nexus with the business process. While the respondent argued for their eligibility based on the recognized importance of providing food to employees, the Revenue contended that food passes were akin to cash and did not directly contribute to the business activities. The judgment acknowledged the necessity of most input services for acquiring and utilizing business assets but found the nexus lacking in the case of food passes due to unclear utilization and their nature as employee perks.

Ultimately, the judgment allowed the appeal only to the limited extent of Rs. 2,409 for food passes, rejecting the appeal of Revenue concerning the remaining amounts. The decision emphasized the importance of establishing a clear nexus between input services and the business process to determine eligibility for CENVAT credit refunds.