2013 (7) TMI 347 - AT - Service Tax

Refund of Credit on input services appellant provided IT enabled services they claimed refund of un utilised accumulated credit on input services Held that - Assessee was entitled for credit on manpower recruitment service and security agency service - ground raised by them is not valid - the recruitment of manpower for rendering the services and no further details were required by the department appeal decided against the department. Court allowed the refund of credit on advertisement, housekeeping service, hiring of furniture and clearing & forwarding service - the same also should be treated as input service - Appeal decided in the favour of assessee.

Summary

Issues:
Appeal against order of Commissioner (Appeals) regarding refund claim of unutilised accumulated credit on input services used in the export of taxable services. Dispute over refund claims for various services like Advertisement, Housekeeping service, Annual Maintenance Contract service, Clearing & Forwarding service, Chartered Accountant services, Manpower Recruitment or Supply service, and Security Agency service.

Analysis:
The judgment involves two appeals, one filed by the appellant-assessee and the other by the department, against the order of the Commissioner (Appeals) regarding a refund claim of unutilised accumulated credit on input services used in the export of taxable services. The appellant-assessee, a 100% E.O.U. under STPI Scheme providing IT enabled services, had a refund claim of Rs. 2,30,125, out of which Rs. 1,96,349 was sanctioned, and Rs. 33,776 was rejected by the original authority.

The Commissioner (Appeals) allowed credit for chartered accountancy, manpower recruitment & supply service, and security agency service but upheld the rejection of refund for advertisement, housekeeping service, hiring of furniture, and clearing & forwarding service. The department appealed against the allowance of credit for certain services, while the appellant-assessee appealed against the rejection of credit for other services.

The department contended that the appellant failed to explain how manpower recruitment or supply service and security agency service were used in providing output taxable service exported. The appellant argued that all input services utilized, including manpower recruitment, hiring of furniture, and housekeeping service, were essential for their business activities. They also cited a judgment of the Karnataka High Court to support their case.

The judgment analyzed the submissions and records, concluding that the recruitment of manpower and security agency services were essential for the IT service provider's operations and office security, justifying the refund of credit for these services. It also found that services like advertisement, hiring of furniture, housekeeping, and clearing & forwarding were integral to the business activities and should be considered as input services for which credit should be allowed.

Ultimately, the appeal by the department was rejected, and the appeal of the appellant was allowed with consequential relief as per law. The judgment highlighted the importance of considering the nature of services in relation to the business activities of the appellant while determining the eligibility for refund of credit on input services used in the export of taxable services.

End of Analysis