2013 (12) TMI 558 - AT - Service Tax

Denial of refund claim - Refund claimed in terms of Notification No. 5/2006 under Rule 5 of CENVAT Credit Rules, 2004 - Management or Business Consultancy Services - Held that - Management Consultancy Services can be treated as input services in relation to the output services rendered by the appellant and therefore, the refund granted by the original authority is in order - There shall be waiver of pre-deposit of amount ordered to be recovered by the order-in-revision passed by the Commissioner and stay of recovery thereof till the disposal of the appeal - Stay granted.

Summary

Issues:
1. Eligibility of credit for "Management or Business Consultancy Services" under Notification No. 5/2006
2. Validity of recovery notice issued by the Commissioner
3. Whether "Management Consultancy Services" can be considered as 'input services'

Analysis:
1. The original authority had sanctioned a refund under Rule 5 of CENVAT Credit Rules, 2004, but the Commissioner issued a notice proposing recovery of a portion of the refund. The Commissioner held that a specific amount related to "Management or Business Consultancy Services" was not eligible for credit as these services were considered incidental/auxiliary to the output services provided. The appellant, a STPI unit exporting software services, argued that these consultancy services were essential for maintaining the quality and efficiency of their exported services.

2. The appellant's representative contended that the "Management Consultancy Services" directly contributed to the quality and efficiency of the output services, establishing a nexus between the two. On the other hand, the Superintendent (AR) supported the Commissioner's decision. After considering the arguments and examining the records, the Tribunal agreed with the appellant's position. It held that the "Management Consultancy Services" could be treated as 'input services' in relation to the output services provided by the appellant, thereby upholding the validity of the refund granted by the original authority.

3. Consequently, the Tribunal ordered a waiver of the pre-deposit amount specified in the Commissioner's recovery notice and stayed the recovery process until the appeal was disposed of. The decision emphasized the crucial role of "Management Consultancy Services" as input services directly linked to the appellant's exported services, warranting the continuation of the refund granted by the original authority. The judgment highlighted the importance of establishing a clear nexus between input services and the output services to determine the eligibility of credits under the relevant rules and notifications.