2017 (1) TMI 1081 - AT - Service Tax

Rejection of refund claim - export of information technology software services - input services - insurance auxiliary service - N/N. 5/2006 dated 14.3.2006 - denial on account of lack of nexus between the input/output services - Held that - insurance services are connected with the business and in the absence of such insurance, companies properties would be at risk from natural event which are beyond the control of the respondent-assessee. The company only insures risk and lives of employees and his health, which falls in the definition of input service - refund allowed - appeal dismissed - decided in favor of assessee.

Summary

Issues:
- Refund claims under Notification No.5/2006 for export of taxable services
- Rejection of refund claims due to lack of nexus between input/output services
- Appeal against allowing refund on insurance auxiliary service

Analysis:
The case involved the Revenue filing three appeals against the impugned order dated 10.11.2014, where the Commissioner disposed of three Order-in-Original concerning refund claims under Notification No.5/2006 for export of taxable services. The main issue was the rejection of refund claims based on the lack of nexus between input and output services. The respondent-assessee, engaged in information technology software services, had filed refund claims covering the period from 7/2010 to 03/2011. The Department issued show-cause notices, and the claims were partially sanctioned and partially rejected by the Assistant Commissioner of Service Tax, Bangalore, in OIO No.230/2012, No.470/2012, and No.471/2012. The rejection was primarily due to the lack of nexus between input/output services.

The impugned order allowed the refund on various input services, including insurance auxiliary service, based on the interpretation of the input service definition before 1.4.2011. The Revenue appealed against the refund granted for insurance auxiliary service, arguing that it was not related to the output service rendered by the assessee. The Revenue contended that the definition of input service post 1.4.2011 excluded life insurance and health insurance from the definition, making the refund erroneous.

In defense of the impugned order, the assessee's CA cited judgments supporting the allowance of refund on insurance services, emphasizing their connection to the business operations and risk mitigation. The CA argued that insuring risks and employees' health fell within the definition of input service, crucial for protecting the company's properties from natural events beyond its control.

After hearing both parties and reviewing the judgments cited, the Tribunal, per S. S. Garg, found no infirmity in the impugned order warranting interference. The Tribunal upheld the decision to allow the refund of CENVAT credit on insurance services, dismissing all three appeals filed by the Revenue.

In conclusion, the Tribunal's decision affirmed the allowance of refund on insurance auxiliary service, emphasizing the importance of such services in mitigating risks and protecting business assets, in line with the interpretation of the input service definition applicable during the relevant period.