2015 (6) TMI 871 - AT - Service Tax

Rejection of refund claim - Claim for refund of service tax of renting of immovable properties taken on sub-lease - Held that - It is axiomatic and this position follows from Explanation (c) of Section 67 of the Finance Act, 1994, that M/s HCL Technologies Limited would be liable to remit service tax on the mere recording of a debit or credit notes in respect of a transaction with an associated enterprise, such as the appellant. As a corollary thereof, the payment of rent including the service tax component thereon by the appellant to M/s HCL Technologies Limited evidenced by the debit note constitutes proof of the appellant having incurred in service tax liability in respect of the lease of immovable property from M/s HCL Technologies Limited as a sub-lessee. The burden therefore shifts to the Revenue to establish that the debit note recorded by M/s HCL Technologies Limited is a fraudulent instrument not reflecting the true transaction between the parties. This principle of law, that a suspicion however grave cannot be a foundation for a logical conclusion of fact, is well settled. Board Circular No. 120/01/2010-ST dated 19.01.2010, vide paragraphs 3.1.1 and 3.3 clearly enjoins that there is no requirement of a precise or a one-to-one correlation between an input service leading to an output service. The decisions of this Tribunal in Commr. of C. Ex. Vadodara vs. Transatlantic Packaging Pvt Ltd. 2011 (11) TMI 226 - CESTAT, AHMEDABAD ; Capiq Engineering Pvt. Ltd. vs. CCE, Vadodara - 2008 (10) TMI 84 - CESTAT, AHMEDABAD and in CCE, Mysore vs. Chamundi Textiles (Silk Mills) Ltd. 2011 (3) TMI 193 - CESTAT, BANGALORE uniformally expound the same principle, of the absence of a need for a one to one correlation between an input or output service. In the light of the fact that the premises in issue was the premises from which the appellant was operating is established by the debit note, by the lease deed of M/s HCL Technologies Limited and the sub-lease deed of the appellant, the preponderance of probabilities legitimises the conclusion that renting of immovable property was the input service utilised for the exported output service provided by the appellant. - Decided in favour of assessee.

Summary

Issues:
Refund of service tax on renting immovable property

Analysis:
The appeal was against the order partially allowing the refund claim for service tax. The primary authority rejected the claim due to various reasons, including the delay in payment, improper documents, and lack of proof of remittance to the government exchequer. The appellate Commissioner reversed the decision on using a debit note for availing credit but upheld the rejection of the refund claim for service tax on renting immovable properties.

The appellate Commissioner reasoned that the transaction between the appellant and the holding company was not at arm's length due to the delayed rent payment, making the debit notes inadmissible. Additionally, the premises mentioned in the lease deed did not match the registered premises, and there was no nexus between the input service (renting) and the output service (exported service) for the claimed period.

However, the Tribunal found the reasons for rejecting the refund claim unsustainable. It established the appellant's lease of premises from the holding company through lease and sub-lease deeds, supported by debit notes showing rent and service tax payments. The Tribunal emphasized that suspicion alone cannot disprove the validity of the debit notes.

Moreover, the Tribunal disagreed with the appellate Commissioner's view on the nexus between input and output services, citing relevant circulars and precedents. It concluded that the renting of immovable property was indeed the input service for the exported output service provided by the appellant, as evidenced by the documents and circumstances.

Based on the detailed analysis of the lease agreements, debit notes, and legal principles, the Tribunal quashed the impugned order and allowed the appeal, granting the appellant a refund of service tax amounting to Rs. 21,42,757. No costs were imposed in this decision.