2016 (6) TMI 679 - AT - Service Tax

Refund of cenvat credit - Rule 5 of CENVAT Credit Rules read with Notification No.5/2006-CE(NT) dt. 14/03/2006 - The refund of credit with regard to service tax paid on Telecommunication services, Management, Maintenance or Repair Services, Internet telecommunication service, Security Agency Service, Manpower Recruitment Service, Chartered Accountant Service, cleaning & housekeeping services and Clearing and Forwarding Service were denied holding that the appellant has failed to establish the nexus of these input services with output services provided. Hence the appeal. Held that - Various services mentioned in the definition 2(l) are only illustrative and other services also when used primarily for personal use or consumption of any employee would not qualify as input services. Cleaning services and housekeeping services are for proper upkeep of the office. These services definitely are not for personal use or consumption of an employee. Therefore in my view, these services are eligible for credit/refund. The rent payable for premises is split as rent amount for premises and common area maintenance charges. Both these fall within the main category of renting of immovable property. Undisputedly the issue has been reconsidered in the de novo proceedings. Hence the claim in this regard is held to be inadmissible. Appellant is eligible for refund in regard to services except common area maintenance charge - Decided partly in favor of assessee.

Summary

Issues:
Challenging rejection of refund under Rule 5 of CENVAT Credit Rules read with Notification No.5/2006-CE(NT) dt. 14/03/2006.

Detailed Analysis:
1. Eligibility of Credit on Various Input Services:
The appellant, engaged in BPO services, filed a refund claim for unutilized CENVAT credit. The Commissioner(Appeals) rejected the refund on most services, citing lack of direct nexus with output services. The appellant argued for a lower nexus standard for input services, referring to relevant case laws. Circular No.120/01/2010-5 clarified necessary input services for BPO efficiency. The definition of input services post-April 2011 was discussed, emphasizing the broad scope of services included. The judgment analyzed various input services:
- Manpower Recruitment / Supply Agency Service: Held admissible as it aids in selecting manpower for executing output services.
- Renovation Works: Approved as essential for maintaining a conducive workplace for output service provision.
- Faculty Charges for Training Programme: Deemed eligible as training enhances efficient output service delivery.
- ISMS Certification & Quality Control Service: Accepted as akin to credit rating and beneficial for service quality.
- Security Agency Services: Approved due to the necessity for premises, assets, and employee safety.
- Internet and Telecommunication Services: Allowed as crucial for BPO service provision.
- Auditing and Legal Services: Refund granted for compliance and representation expenses.
- AMC for Xerox/Printing Machine: Deemed essential for office operations and output service provision.
- Installation of Access/Attendance Control System: Approved as part of employee supervision for service efficiency.
- Clearing & Forwarding Services: Accepted for import of computers used in service provision.
- Housekeeping and Cleaning Services: Eligible for maintaining hygienic work premises.
- Common Area Maintenance: Excluded from refund as part of rent and already considered in de novo proceedings.

2. Refund on Renting of Immovable Property:
The original authority allowed refund on renting of immovable property after de novo adjudication, separating rent and common area maintenance charges. The appellant's claim regarding maintenance charges as part of rent was not considered in the present appeal due to the prior resolution of the issue. The judgment concluded that the appellant is eligible for refund on services except common area maintenance charges. The appeal was partially allowed with consequential reliefs, if any.