2016 (5) TMI 1053 - AT - Service Tax

Refund claim - Allowability of input service Cenvat credit - Claim was not in accordance with foreign exchange realisation - Held that - Learned Commissioner (Appeals) has not at all examined what was the issue before him in Appeal No.21/2013 but has abruptly come to the conclusion on a different premise holding inadmissibility of certain input credit. Therefore, the matter is remanded to him re-examine the controversy before him as emanated from the Order-in-Original and upon hearing the appellant shall pass appropriate order. Clearing & Forwarding Agency Services and Membership Fees - Held that - by considering the necessity of Carrying & Forwarding Agency Service, in the course of import and export, the appeal is allowed on this count disallowing CENVAT credit on Membership Fees, which has no connection to the output service provided and appellant is entitled to the refund which shall be recalculated by the adjudicating authority, taking the disallowance aspect hereby ordered. Air Travel Agency Service, Chartered Accountant s Service, Insurance (Motor Vehicle) and Customs House Agents Service - Held that - So far as the Air Travel Agency and Chartered Accountant s service is concerned, there shall be no denial of CENVAT credit, for the reason that the appellant being an importer and exporter of services, would be requiring service of Air Travel Agency and also certification by Chartered Accountant in respect of the foreign exchange receipts as well as other aspects. So far as the insurance on the motor vehicle is concerned, the period in question being Apr.-12 to Jun.-12 and amendment to the law has been made from 01.04.2011. Learned adjudicating authority shall re-examine the admissibility of CENVAT credit on such services in accordance with law. Since no finding has been made by both the authorities below, in their orders, appeal is remanded on this limited count to examine that aspect. Management, maintenance or repair service - Held that - the adjudicating authority noticed that the same relates to supply of foods and ineligible tangible goods. He did not examine this aspect thoroughly for which he himself was under confusion without specifying the amount of credit allocable to this service and evidence if any before him. However, considering that remanding back the matter for a small amount of credit shall serve no useful purpose but shall result in waste of time and public money, the appeal on such count is allowed. Disallowance of Cenvat credit - Invoice carried the defective address - Held that - It is relevant for the law that if the service has been utilized, the authority should cause enquiry as to the genuineness of the service provider and allow the same provided the tax paid by appellant had gone into the treasury. Therefore, it is left to the authority to enquire who was the service provider in respect of credit of ₹ 38,811/- and result of the enquiry confronted to the appellant for rebuttal. Upon hearing the appellant, appropriate order shall be passed. Works contract service - Held that - Learned adjudicating authority did not examine what was the works contract service availed by the appellant. Therefore, he has to examine the relevancy of such service and hearing the appellant thoroughly shall pass appropriate order. Business auxiliary service (membership fee) - Held that - it does not appeal to common sense as to relevancy thereof to allow CENVAT credit. Accordingly, no claim thereon shall be admissible. Insurance auxiliary service (motor car) - Held that - the authority has not at all examined as to relevancy and evidence thereof to declare that ineligible input. Therefore, he should examine the relevancy of the services and its nexus as well as integral connection to the output service and hearing the appellant shall pass appropriate order. Defective invoices - Held that - the authority has not at all examined any aspect thereof. The disallowance being limited to ₹ 444/- on two counts, the authority shall grant opportunity to the appellant to rectify the defect and pass appropriate order upon hearing the appellant. Validity of adjudicating authority order - not at all examined the justification for disallowance of CENVAT credit on the respective services - Held that - in absence of any examination by the adjudicating authority it is premature to pass any order as to justification for eligibility thereof. Therefore, learned adjudicating authority shall rehear the appellant on each and every aspect of the disallowance and hearing the appellant both on facts and evidence, shall apply the law and pass a reasoned and speaking order. Maintenance and repair service (gardening) - Held that - it does not appeal to common sense as to relevancy thereof to the output service. Therefore, no CENVAT credit thereof shall be admissible. Common area / parking charges and supply of food and tangible goods - Held that - for no description and examination of evidence and application of law, those items shall receive scrutiny of the adjudicating authority for passing reasoned and speaking order granting fair opportunity of hearing to the appellant. Legal consultancy service - Held that - CENVAT credit thereon cannot be denied since that is permissible being inextricably connected with the business operation. Business auxiliary service (not used for output service) - Held that - shall receive the scrutiny of the adjudicating authority for no examination done by that authority and hearing the appellant, he shall pass appropriate order. Parking charges, supply of foods and tangible goods and interior decoration service, civil work - Held that - it would be necessary for the adjudicating authority to say the reason for his disallowance since the order is cryptic and unreasoned. Therefore, appellant is entitled to reasonable opportunity of hearing and considering the appellant s pleading as well as evidence, the authority shall pass order in the re-adjudication proceeding. Business Auxiliary Service - Held that - for no reasoning stated, learned adjudicating authority shall scrutinise the same and hearing the pleading of the appellant shall pass appropriate order in accordance with law. - Appeal disposed of

Summary

Issues Involved:

1. Eligibility of CENVAT credit on various input services used for providing Business Support Service.
2. Nexus between input services and output services for claiming CENVAT credit.
3. Admissibility of refund claims based on foreign exchange realization and discrepancies in export turnover.
4. Examination of evidence and reasoning in adjudication orders.

Detailed Analysis:

1. Eligibility of CENVAT Credit on Various Input Services:

- Air Travel Agency Service (ATA): The appellant claimed that ATA was used for providing Business Support Service, which involves processing medical data for diagnosis and treatment. The CENVAT credit on this service was deemed admissible.

- Clearing House Agency Service (CHA): CHA services were availed to clear input data consignments from abroad, directly linked to the Business Support Service. The CENVAT credit on this service was allowed.

- Facility Services: These services were used to provide refreshments to employees, enhancing efficiency. Following the Board’s Circular No.120/01/2010-ST, dated 09.01.2010, the CENVAT credit was deemed admissible.

- Videography Service: The appellant did not claim CENVAT credit on this service.

- Clearing & Forwarding Agency (CFA): CFA services, similar to CHA services, were used for clearing input materials and forwarding output materials. The CENVAT credit was allowed.

- Membership Fees: Fees for association memberships were not considered relevant to the output service and thus, CENVAT credit was not admissible.

- Chartered Accountant: Services of Chartered Accountants were necessary for statutory obligations and financial presentations, relevant to the output service. The CENVAT credit was allowed.

- Insurance: Insurance services for input materials and output services were deemed necessary and relevant. The CENVAT credit was allowed.

- Tour Operators & Travelling Service (TOT): This service was used for employee transportation, integral to the output service. The CENVAT credit was allowed following the Board’s Circular.

- Maintenance & Repair Service (MMR): Services related to equipment and hardware maintenance were integral to the output service. However, maintenance of gardens was not eligible for CENVAT credit.

- Insurance Auxiliary Service (IAS): This service insured motor vehicles used in connection with the output service. The CENVAT credit was allowed.

- Business Auxiliary Service (BAS): The appellant did not press its claim on this count.

- Outdoor Catering (ODC): Catering services for employees in the software sector were deemed admissible for CENVAT credit following the Board’s Circular.

- Telephone Operators Service (TO): The appellant did not press its claim on this service.

- Common Parking Operators Service (MMR): Services for availing parking areas were integral to the output service, making CENVAT credit admissible.

- Landscaping Service (LS): The appellant did not press its claim on this service.

- Renting of Immovable Property (ROI): Renting canteen premises for employee welfare was essential, making CENVAT credit on rental admissible.

- Legal Consultancy Service (LCS): Legal services were integrally connected with the output service to reduce litigation, making CENVAT credit admissible.

- Works Contract Service (CCS): Services for interior designing of office premises were relevant to the output service, making CENVAT credit admissible.

- Rent-a-Cab Service (INS): Transporting employees from distant places was essential in the software sector, making CENVAT credit admissible following the Board’s Circular.

2. Nexus Between Input Services and Output Services:

The learned Commissioner (Appeals) emphasized that input services must have a direct nexus with the final output services to be eligible for CENVAT credit. In the absence of such a nexus, the appellant was not entitled to credit, and no refund was permissible.

3. Admissibility of Refund Claims Based on Foreign Exchange Realization:

Several appeals highlighted discrepancies between export turnover in accounts and ST-3 returns. The adjudicating authority disallowed refund claims where there was no reconciliation or where claims were not in accordance with foreign exchange realization.

4. Examination of Evidence and Reasoning in Adjudication Orders:

- Appeal No. ST/42113/2015: The adjudicating authority did not thoroughly examine the claims for Facility Services, Event Management, and Photographic Services. The appeal was allowed due to the small refund amount involved.

- Appeal No. ST/42114/2015: The adjudicating authority found discrepancies in export turnover and disallowed refund claims. The matter was remanded for re-examination.

- Appeal No. ST/42115/2015: Similar to the previous appeal, discrepancies in export turnover led to disallowed refund claims. The matter was remanded for re-examination.

- Appeal No. ST/42116/2015: CENVAT credit on Clearing & Forwarding Agency Services was allowed, but Membership Fees were disallowed. The refund was to be recalculated.

- Appeal No. ST/42117/2015: CENVAT credit on Air Travel Agency and Chartered Accountant services was allowed. The matter was remanded to re-examine insurance on motor vehicles.

- Appeal No. ST/42118/2015: CENVAT credit on clearing and forwarding agency service and air travel agency service was allowed. The matter was remanded to examine management, maintenance, or repair service thoroughly.

- Appeal No. ST/42119/2015: CENVAT credit on clearing and forwarding agency service was allowed. The matter was remanded to verify the genuineness of the service provider for defective invoices.

- Appeal No. ST/42120/2015: CENVAT credit on clearing and forwarding agency service and air travel service was allowed. The matter was remanded to examine works contract service.

- Appeal No. ST/42121/2015: CENVAT credit on air travel agency service was allowed. The matter was remanded to examine other services' relevancy and defective invoices.

- Appeal No. ST/42122/2015: The adjudicating authority did not examine the justification for disallowing CENVAT credit. The matter was remanded for re-examination.

- Appeal No. ST/42123/2015: CENVAT credit on air travel agency service and customs house agency service was allowed. The matter was remanded to examine insurance auxiliary service (motor car).

- Appeal No. ST/42124/2015: Similar to the previous appeal, the matter was remanded to examine insurance auxiliary service (motor car).

- Appeal No. ST/42125/2015: The matter was remanded for re-examination of claims on common area/parking charges and supply of food and tangible goods.

- Appeal No. ST/42126/2015: Similar to the previous appeal, the matter was remanded for re-examination.

- Appeal No. ST/42127/2015: CENVAT credit on air travel agent service, CHA service, and legal consultancy service was allowed. The matter was remanded to examine business auxiliary service.

- Appeal No. ST/42128/2015: The matter was remanded for re-examination of claims on parking charges, supply of foods, and interior decoration service.

- Appeal No. ST/42129/2015: CENVAT credit on air travel agent service, CHA service, and legal consultancy service was allowed. The matter was remanded to examine business auxiliary service.

- Appeal No. ST/42130/2015: Similar to the previous appeal, the matter was remanded to examine business auxiliary service.

Conclusion:

The Tribunal disposed of the 18 appeals by allowing some claims, remanding others for re-examination, and providing detailed directions for the adjudicating authority to pass reasoned and speaking orders after thorough examination and hearing the appellant.