2014 (8) TMI 672 - AT - Service Tax

Denial of CENVAT Credit - Training & coaching service - Expenses incurred by way of brokerage for finding accommodation for its faculty - Held that - CENVAT credit has been claimed by the Noticee in respect of Training and Coaching, Management Consultants and Convention Services Noticee have utilized the credit on output services such as 1) maintenance of pond and garden, (2) Extension of Road, (3) Brokerage amount on account of purchase/lease of flats, (4) Fabrication, fencing of compound, (5) Jogging Track repairs. Noticee have claimed that the maintenance of pond and garden, extension of roads, fabrication, fencing of compound, jogging track repair services have been used by them in maintaining/renovating/repairing of their training campus in good running condition for purpose of providing output services of Training and Coaching, Management Consultants and Convention Services and these activities relate to their business. Further services of brokerage for purchase/lease of flats are for procuring residential accommodation for their-in-house faculty members who take lectures in their training programme and this service is also sued for providing output service. On this point I have observed that unless and until the premises are maintained in good and running condition for the purpose of output services i.e. Training and Coaching, Management Consultants and Convention Services . Expenses incurred for input service by the appellant by way of brokerage for finding accommodation for its faculty is related to its output service of providing training. The appellant cannot provide the output service of training without having the faculty available for the same. Thus the impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
1. Admissibility of CENVAT credit for input services.
2. Interpretation of the definition of "input service" under CENVAT Credit Rules, 2004.
3. Nexus between input services and output services for availing CENVAT credit.
4. Applicability of staff welfare expenses as input services.
5. Comparison with previous legal rulings on similar matters.

Issue 1: Admissibility of CENVAT credit for input services:
The case involved a dispute over the admissibility of CENVAT credit for certain input services availed by the appellant. The Revenue raised concerns regarding the nature of services for which the credit was claimed, leading to a show-cause notice being issued to the appellant.

Issue 2: Interpretation of the definition of "input service" under CENVAT Credit Rules, 2004:
The Adjudicating authority analyzed the definition of "input service" as per Rule 2(l) of the CENVAT Credit Rules, 2004. The authority highlighted the two parts of the definition, emphasizing the direct and indirect nexus of services used for providing output services to qualify as input services.

Issue 3: Nexus between input services and output services for availing CENVAT credit:
The Adjudicating authority concluded that the input services claimed by the appellant, such as maintenance, fabrication, and repair services, were directly or indirectly connected to the output services of "Training and Coaching, Management Consultants, and Convention Services." The authority held that these services were essential for maintaining the premises to provide the output services.

Issue 4: Applicability of staff welfare expenses as input services:
The Revenue contended that services related to procuring residential accommodation for faculty members were staff welfare activities and did not have a nexus with the output services. The Commissioner (Appeals) disallowed CENVAT credit for such services, relying on a previous ruling by the Authority on Advance Rulings (AAR).

Issue 5: Comparison with previous legal rulings on similar matters:
The appellant cited legal precedents, including rulings by the Hon'ble Karnataka High Court and the Hon'ble Bombay High Court, to support their argument that expenses incurred for input services directly related to the output services should be allowed for CENVAT credit. The appellant also referenced a Tribunal ruling to emphasize that rulings of Advance Authority are binding only on the parties concerned.

In the final judgment, the appellate authority set aside the impugned order disallowing CENVAT credit for input services related to securing accommodation for faculty members, stating that such expenses were essential for providing the output service of training. The appeal was allowed with consequential relief granted to the appellant.