2015 (1) TMI 999 - AT - Service Tax

Denial of input credit - Online Data Retrieval or Access - Nexus with manufacturing activity - Held that - On perusal of the definition of input service as contained in Rule 2(l) of the Cenvat Credit Rules, 2004, it would reveal that the substantive part covers services used by a provider of taxable service for providing the output service; whereas, the inclusive part covers various services, which have been used/utilised by the service provider for accomplishing its business activities. In other words, the services envisaged in the inclusive part of the definition is very broad and a narrow interpretation cannot be placed to infer, without proper discussion, that certain services have no nexus with the output service provided by the service provider. The nature, purpose and use of the disputed services by the appellant as explained in the grounds of appeal, to my opinion, establish the fact that the expenditure incurred for those services are commercially required to be incurred with a view to facilitate carrying on the business as a service provider, and thus, confirming to the expression activities relating to business as contained in the definition clause of input service ; as the word business is one of wide import and in fiscal statutes, it must be construed in a broad rather than a restricted sense. - disputed goods indicated above should merit consideration as input service , since those services have nexus with the output service provided by the appellant - Decided in favour of assesse.

Summary

Issues:
Refund of service tax on input services under Rule 5 of Cenvat Credit Rules, 2004 read with Notification No.5/2006-C.E. (N.T.) dt. 14/03/2006 disallowed for certain services - Nexus between input services and output services - Interpretation of 'input service' under Rule 2(l) of Cenvat Credit Rules, 2004 - Eligibility of services like renting of furniture, housekeeping services, annual maintenance contract, and food coupons as input services for export services.

Analysis:

The case involved the appellant, a subsidiary of a US company, providing IT enabled services and registered as a 100% export processing unit. The appellant claimed a refund of service tax paid on input services under Rule 5 of the Cenvat Credit Rules, 2004. The authorities allowed refund for some services but disallowed for others like renting furniture, housekeeping, maintenance, and food coupons, citing lack of direct or indirect relation to export services.

The learned consultant for the appellant argued the nexus between input and output services. Furniture was hired for new recruits engaged in export activities, housekeeping for premises upkeep, maintenance for UPSs and computer networks, and food coupons for staff meals. Citing precedent orders and circulars, the consultant contended these services were essential for business activities and eligible for credit as per the definition of 'input service' in Rule 2(l) of Cenvat Credit Rules, 2004.

The revenue's representative reiterated the findings of the impugned order disallowing the refund for certain services. The Tribunal, upon hearing both parties and examining the definition of 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004, emphasized the broad scope of services covered under the definition. The Tribunal noted that a narrow interpretation should not be applied to exclude services without proper discussion, especially considering the inclusive part of the definition encompassing various services used for business activities.

The Tribunal analyzed the nature, purpose, and use of the disputed services by the appellant and concluded that the expenditure incurred on these services was commercially necessary to facilitate the business as a service provider. The Tribunal highlighted that the term 'business' should be construed broadly in fiscal statutes. Therefore, the Tribunal found that the disputed services had a nexus with the output service provided by the appellant and allowed the appeal, granting consequential relief in accordance with the law.