2019 (3) TMI 1884 - AT - Service Tax

CENVAT Credit - input services - Management Consultancy Service - effect of amendment of the definition of input service w.e.f. 1-4-2011 - HELD THAT - Under the unamended provisions (effective up to 31-3-2011), the phrase activities relating to business was specifically finding place in the inclusive part of the definition of input service . The inclusive definition in a fiscal statute is a well recognized device to enlarge the meaning of the word defined and it expands the meaning of the basic definition. If the expenses incurred by the assessee for using the disputed services are meant for accomplishing the business activities and also the same form part of the cost of the ultimate services provided by it, then the same should be considered as input service under such definition clause. The effect of amendment of the definition of input service w.e.f. 1-4-2011 is that certain services namely, Health Insurance, etc., were excluded from the purview of definition of input service, in the eventuality, when the said excluded category of service(s) are used primarily for personal use or consumption of any employee. Cenvat credit of service tax paid on such service(s) should not be considered as input service, entitling an assessee to avail Cenvat credit thereon - the nature of use of the disputed services as explained by the appellant was not properly addressed by the original authority in the impugned order passed by him - the ratio of the judgments relied upon by both sides to conclude that the Cenvat benefit on the disputed services would not be available to the appellant, not considered. The matter should be remanded to the original authority for a proper fact finding on issue of eligibility of Cenvat credit on the disputed services - other aspects involved in the case also require proper adjudication - Appeal allowed by way of remand.

Summary

Issues:
1. Availment of Cenvat credit on disputed services.
2. Inclusion of unregistered premises for Cenvat credit.
3. Compliance with Cenvat Credit Rules and Service Tax Rules.
4. Adjudication of show cause proceedings.

Analysis:
1. The appellant, engaged in providing taxable services, availed Cenvat credit on various services for providing taxable output services. The department alleged wrongful availment of credit and non-inclusion of branch offices in the Centralization Registration Certificate. The audit wing found discrepancies and initiated show cause proceedings. The Commissioner rejected Cenvat credit amounting to ?3,30,85,645 against a demand of ?45,79,21,556. The appellant appealed to the Tribunal, claiming the disputed services were used for output services, citing judicial decisions supporting their case.

2. The appellant argued that disputed services qualify as 'input service' under Rule 2(l) of the Cenvat Credit Rules. They contended that all services were used for taxable output services and that credit for unregistered premises should be allowed post-inclusion in Centralized Registration. The appellant presented various judicial decisions to support their claim. The Revenue, however, supported the department's findings, citing judgments to justify denial of Cenvat credit. The Tribunal noted the enabling provision under Rule 3 of the Cenvat Credit Rules and the amendment in the definition of 'input service' effective from 1-4-2011.

3. The Tribunal emphasized the need to examine the nature and purpose of service use in providing output services to determine Cenvat credit eligibility. It found the original authority had not properly addressed the nature of service use or discussed the relevance of cited judgments. Consequently, the Tribunal set aside the impugned order and remanded the case for proper adjudication. The Tribunal directed the original authority to consider the case laws cited by both parties and conduct a fact-finding on Cenvat credit eligibility for the disputed services, ensuring the appellant's right to a personal hearing.

4. The Tribunal allowed the appeal by way of remand, emphasizing the need for a thorough examination of the issues and proper adjudication in line with the observations provided. The original authority was instructed to reconsider the eligibility of Cenvat credit for the appellant, ensuring a fair process and adherence to legal principles. The appeal was allowed for further review and decision by the original authority following proper procedures and considerations.