2014 (6) TMI 832 - AT - Service Tax

Denial of CENVAT Credit - order beyond the scope of show cause notice - Input services - Refund claim - nexus with the output service - Held that - Original adjudicating authority as well as the first appellate authority have considered the issue of eligibility of CENVAT credit in respect of services received by them and held that many services cannot be considered as input services since they have no nexus with the output service provided by them. This was not at all the ground taken in the show-cause notice and therefore both the lower authorities have travelled beyond the show-cause notice when they considered the issue of eligibility for CENVAT credit in respect of input service received by them - Therefore, the stand taken by both the lower authorities that certain services could not have been considered as input services cannot be sustained. Accordingly, the decisions of both the lower authorities holding that CENVAT credit of service tax paid on several services is not admissible cannot be sustained and is set aside - Matter remanded back. Appeal filed by the assessee is allowed and the matter is remanded to the original adjudicating authority who shall consider whether the documents on the basis of which credit is taken are complete and other requirements of the Notification have been fulfilled in accordance with the grounds taken in the show-cause notice. - Decided in favour of assessee.

Summary

Issues:
1. Eligibility of CENVAT credit for input services
2. Refund claim for services received prior to 14.3.2006
3. Interpretation of Notification No. 5/06 regarding input services usage

Analysis:

Issue 1: Eligibility of CENVAT credit for input services
The Appellant, engaged in providing BPO services abroad, filed a refund claim for service tax paid on input services. A show-cause notice challenged the claim citing incomplete documents and ineligibility of credit for services without nexus to output services. The lower authorities rejected the claim based on these grounds. However, the Tribunal found that the lower authorities exceeded the show-cause notice's scope by considering eligibility issues beyond what was initially raised. Consequently, the decisions denying CENVAT credit for certain services were set aside.

Issue 2: Refund claim for services received prior to 14.3.2006
The Appellant sought a refund for services received before 14.3.2006, invoking a precedent decision. The Tribunal agreed that the Appellant was entitled to the refund as per the cited case law, despite the issuance of Notification No. 5/06 on 14.3.2006. The Appellant's eligibility for credit related to services received in March 2006 was upheld based on the Tribunal's previous ruling.

Issue 3: Interpretation of Notification No. 5/06 regarding input services usage
The Revenue contended that input services must be "used in" providing output services as per Notification No. 5/06, but the Tribunal noted a retrospective amendment substituting "used for" in place of "used in." This change rendered the Revenue's argument invalid. Additionally, concerns regarding incomplete documents and lack of evidence for service tax payment were raised by the Revenue. The Tribunal directed a reassessment of these aspects to determine the refund claim's validity in compliance with the notification requirements.

In conclusion, the Appellant's appeal was allowed, and the matter was remanded to the original adjudicating authority for a thorough review based on the Tribunal's observations. The Revenue's appeal was rejected due to the unauthorized expansion of issues beyond the show-cause notice's scope.