2018 (6) TMI 658 - AT - Service Tax

CENVAT credit - input services - activities relating to Business - Held that - During the relevant period, the definition of input services had a wide ambit as it included the words activities relating to business - In Coca Cola India Pvt. Ltd. Vs. Commissioner of Central Excise, Pune 2009 (8) TMI 50 - BOMBAY HIGH COURT , the Hon ble High Court of Bombay has considered the eligibility of credit on various input services and held that almost all the services would come within the phrase activity relating to business - credit allowed - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Eligibility of CENVAT credit on input services.
2. Interpretation of the definition of input services.
3. Applicability of the decision in Knoah Solutions Pvt. Ltd. case.
4. Justification for allowing credit on input services.
5. Comparison with the decision in Coca Cola India Pvt. Ltd. case.

Analysis:
1. The case involved a dispute regarding the eligibility of CENVAT credit on various input services availed by a subsidiary company of M/s. Sutherland Global Services Inc. USA. The Service Tax Department contended that the credit was not eligible, leading to the issuance of show cause notices for recovery of the credit amount along with penalties and interest.

2. The Commissioner, after due process of law, dropped the proceedings for recovery of a significant portion of the CENVAT credit but disallowed a specific amount in respect of group medical insurance premium and insurance paid by the respondent. The Department, aggrieved by the decision, filed an appeal challenging the allowance of credit.

3. The respondent argued that the credit was rightly allowed by the Commissioner as the input services were used for providing output services, especially highlighting the wide ambit of the definition of input services before 1.4.2011, which included "activities relating to business." The respondent also relied on the decision in the Knoah Solutions Pvt. Ltd. case to support their claim.

4. The Tribunal, after hearing both sides, examined the impugned order and found that the Commissioner had provided a detailed explanation on how the input services were directly or indirectly utilized by the respondent. Referring to the broader interpretation of input services encompassing "activities relating to business," the Tribunal cited the decision in the Coca Cola India Pvt. Ltd. case, where the High Court of Bombay held that most services would fall under this category.

5. Consequently, the Tribunal upheld the impugned order, dismissing the appeal filed by the Revenue. The decision was based on the understanding that the input services in question were integral to the business activities of the respondent, aligning with the broader interpretation prevalent during the relevant period. The judgment emphasized consistency with established legal precedents and the rationale behind allowing credit on the disputed input services.