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2018 (2) TMI 153 - AT - Service TaxBenefit of N/N. 16/02-Service Tax dated 2.8.2002 - Whether the service provided to World Bank and International Finance Corporation is eligible for exemption N/N. 16/02-Service Tax dated 2.8.2002, which provides exemption to the services provided to United Nations or an International Organization? - Held that - the definition of international organization as provided therein all the entities of United Nations are covered in the exemption. Therefore, if any entity falls under the umbrella of United Nation, all those entities are covered under the explanation in the exemption notification and apart from those entities, if there are other entities which may or may not part of United Nation, but listed in schedule of Section 3 of the United Nation (Privileges and Immunities) Act, 1947, those entities will be covered under International organization - in the present case, World Bank and International Finance Corporation are part of United Nations. Therefore, there is no need to resort to the definition of International Organization for extending the benefit of notification. In this scenario, the services provided to World Bank and International Finance Corporation being entities of United Nation, exempted under N/N. 16/2002-ST. - benefit allowed. CENVAT credit - Whether the appellant are entitled for CENVAT Credit in respect of input services namely, credit of Insurance Auxiliary Service, Outdoor Catering Service and Mandap Keeper Service for the period prior to 1.4.2011? - Held that - the Insurance Auxiliary service used for indemnification of the officials such as Directors, employees, who play key role in providing the output service. The mandap keeper service used for conducting interviews for hiring employees, therefore, it is directly related to the overall providing of output service. Outdoor catering service is provided to the employees and clients of the appellant and the cost of the outdoor catering is incurred by the appellant. Therefore, it qualifies as input service and the credit is admissible. The exclusion clause was introduced on 1.4.2011 - In the present case, the period involved is prior to that date. Therefore, there is no dispute for allowing the credit on the aforesaid services - credit allowed. Whether the short utilization of CENVAT Credit against the eligible 20% can be carried forward in the subsequent month and such carried forward amount can be utilized, which comes to more than 20% of the total tax liability in the subsequent month? - Held that - f in a particular month against the liability of 20% if the appellant utilized less than 20% and the remaining amount is available to the appellant for utilization and the same was utilized in subsequent month. On considering overall period, the total utilization remains within 20% ceiling irrespective in some month utilization is less than 20% and in subsequent month, the utilization is more than 20%, the conditions of Rule 6(3)(c) of CENVAT Credit Rules, 2002, in our view stand complied with - identical issue decided in the case of VIJAYANAND ROADLINES LTD. Versus COMMISSIONER OF C. EX., BELGAUM 2006 (12) TMI 56 - CESTAT,BANGALORE , where it was held that In case a service provider avails credit on any input service and renders such output services which are chargeable to service tax as well as exempted, then the service provider is required to maintain separate accounts for receipt and consumption of input service meant for taxable output service and non-taxable (exempted) output service - in the present case, the appellant in overall period did not exceed 20% of CENVAT Credit utilized. Hence, the demand of service tax equivalent to amount of CENVAT Credit utilized in excess to 20% is not sustainable, accordingly set aside. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Eligibility for exemption under Notification No. 16/02-Service Tax for services provided to World Bank and International Finance Corporation. 2. Entitlement to CENVAT Credit for input services such as Insurance Auxiliary Service, Outdoor Catering Service, and Mandap Keeper Service for the period before 1.4.2011. 3. Utilization of CENVAT Credit exceeding 20% of the total tax liability in a subsequent period due to under-utilization in a previous period. Issue-wise Analysis: 1. Exemption Eligibility for Services Provided to World Bank and International Finance Corporation: The primary issue was whether services provided to the World Bank and International Finance Corporation qualify for exemption under Notification No. 16/02-Service Tax dated 2.8.2002, which exempts services provided to the United Nations or an International Organization. The appellant argued that both organizations are part of the United Nations, supported by a website printout listing them as United Nations entities. They cited various judgments to bolster their claim. The Revenue countered that these organizations are not listed in the schedule of Section 3 of the United Nations (Privileges and Immunities) Act, 1947, and hence do not qualify for the exemption. The Tribunal concluded that since the World Bank and International Finance Corporation are part of the United Nations' organizational structure, they are covered under the exemption provided by Notification No. 16/2002-ST. The Tribunal emphasized that entities falling under the United Nations umbrella are exempt, regardless of their listing in the schedule of Section 3 of the Act. 2. Entitlement to CENVAT Credit for Input Services: The second issue concerned the admissibility of CENVAT Credit for input services such as Insurance Auxiliary Service, Outdoor Catering Service, and Mandap Keeper Service for the period before 1.4.2011. The appellant argued that these services are used in relation to their overall business activities and are thus admissible for credit. They cited judgments supporting their claim. The Revenue contended that these services do not have a direct nexus with the output service, justifying the denial of credit. The Tribunal found that the Insurance Auxiliary Service is used for indemnifying key officials, the Mandap Keeper Service is used for conducting interviews, and the Outdoor Catering Service is provided to employees and clients, with costs incurred by the appellant. These services qualify as input services, and the credit is admissible since the exclusion clause was introduced only on 1.4.2011. The Tribunal upheld the appellant's entitlement to CENVAT Credit for these services. 3. Utilization of CENVAT Credit Exceeding 20%: The third issue was whether the appellant could utilize CENVAT Credit exceeding 20% of the total tax liability in a subsequent period due to under-utilization in a previous period. The appellant argued that Rule 6(3)(c) does not prohibit carrying forward unutilized credit to subsequent months, provided the overall utilization remains within the 20% limit. The Revenue maintained that Rule 6(3)(c) imposes a strict 20% ceiling per month, disallowing any carry-forward of unutilized credit. The Tribunal referred to the case of Vijayanand Roadlines Ltd., which allowed the carry-forward of unutilized credit, provided the overall utilization did not exceed the 20% ceiling. The Tribunal held that the appellant's overall utilization complied with the 20% limit, making the demand for service tax on excess utilization unsustainable. Conclusion: The Tribunal modified the impugned order, allowing the appeal. The services provided to the World Bank and International Finance Corporation are exempt under Notification No. 16/2002-ST. The appellant is entitled to CENVAT Credit for the specified input services for the period before 1.4.2011. The appellant's utilization of CENVAT Credit exceeding 20% in a subsequent period, due to under-utilization in a previous period, is permissible. The appeal was allowed with consequential relief.
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