2018 (12) TMI 1426 - AT - Service Tax

CENVAT Credit - input services - repair and maintenance of staff quarters - expenses incurred towards staff welfare services - travelling expenses - membership fees - denial of credit on the ground of nexus - Held that - Under the unamended definition of input service (effective upto 31.03.2011) the phrase activities relating to business was specifically finding place for consideration of the service as input service. The fact is not under dispute that for accomplishing the purpose of the appellant business, the appellant had used and utilized the disputed services. Since the value of taxable service along with service tax paid there-on was considered as business related expenses in the Books of Accounts, the disputed services should be considered as input service in terms of Rule 2(l) of the Rules for the period upto 31.03.2011. Under the amended definition of Rule 2(l) (with effect from 01.04.2011), the assessee is permitted to avail credit on any service used for providing the output service, excepting the excluded category of services mentioned in the definition of input service - The description of disputed services provided in the impugned order, do not fall under the excluded category provided under Rule 2(l) of the Rules. Since the original authority had specifically recorded the findings that the appellant had not produced any documentary evidences to show nexus as well as the eligibility of Cenvat benefit on the disputed services, the matter should be remanded to the original authority for verification of the documentary evidences to be produced by the appellant - appeal allowed by way of remand.

Summary

Issues:
Disputed CENVAT Credit on various taxable services availed by the appellant - Nexus between disputed services and output service provided by the appellant - Eligibility of CENVAT benefit on disputed services - Documentary evidences to demonstrate conformity to the definition of input services.

Analysis:
The appeal pertains to the disputed CENVAT Credit availed by the appellant on various taxable services, including repair and maintenance of staff quarters, staff welfare services, travelling expenses, and membership fees. The department contested the availed credit, alleging a lack of nexus between the disputed services and the output service provided by the appellant. The impugned order disallowed the CENVAT Credit and directed the appellant to pay interest, citing insufficient supporting evidence to establish the disputed services as input services for CENVAT benefit.

The appellant argued that the disputed services were covered under the definition of 'input service' and were used for providing the output service. Relying on judicial decisions, the appellant contended that the disputed services qualified as input services under the CENVAT Credit Rules. The Revenue, however, maintained that the disputed services did not meet the criteria for input services, thus challenging the appellant's eligibility for CENVAT benefit.

Upon review, the Tribunal observed that under the unamended definition of input service, the disputed services were considered business-related expenses in the appellant's Books of Accounts, warranting their classification as input services. For the period post-amendment, the disputed services did not fall under the excluded category specified in the Rules. The Tribunal concluded that denial of CENVAT benefit solely based on the disputed services not conforming to the definition of input service was unjustified. However, due to the absence of documentary evidence demonstrating the nexus and eligibility of CENVAT benefit on the disputed services, the matter was remanded to the original authority for further verification.

The Tribunal ordered a fresh adjudication, emphasizing the need for the appellant to provide documentary evidence establishing the conformity of disputed services to the definition of input services and their utilization for providing the output service. The appellant was granted a personal hearing during the re-adjudication process, with all issues from the appeal kept open for consideration by the original authority.

In conclusion, the Tribunal remanded the matter for reevaluation, highlighting the importance of substantiating the eligibility of disputed services for CENVAT benefit through documentary evidence and ensuring a fair opportunity for the appellant to present their case during the fresh adjudication.