2015 (4) TMI 288 - HC - Service Tax

CENVAT Credit - Commercial training and coaching services - Various other services used to provide facilities to students - Held that - Appellant is essentially providing commercial training and coaching services to the students. It is not permitted to confer educational degrees on the students. The services of catering, photography and tents are used by the appellant to encourage the successful students in coaching. These services are used only after commercial training or coaching is over. The celebrations are organized by the appellant during the academic sessions to encourage the existing students and motivate new students. In these celebrations, catering, photography and tents are used by the appellant and these celebrations are held only when students pass commercial training or coaching classes. The appellant is paying service tax under the output service of commercial training or coaching. Once the students pass their coaching classes, the activities of catering, photography and tent services cannot be said to have been used to provide output service. Similarly, the appellant maintain and repair its motor vehicle during the course of the business and there is no material to show that maintenance and repairs have any nexus to commercial training or coaching. Likewise, the travelling expenses incurred by the appellant for the business tours cannot be related to provision for commercial training or coaching. - Decided against assessee.

Summary

Issues:
1. Admissibility of Cenvat credit on input services for a service provider.
2. Eligibility of Cenvat credit on specific input services.
3. Nexus between input services and output services for availing Cenvat credit.
4. Limitation period for challenging the action taken by the respondent.

Analysis:
1. The appellant, a service provider offering commercial training and coaching services, availed Cenvat credit on various input services. The Revenue contended that the appellant wrongly claimed Cenvat credit on certain ineligible input services, arguing that these services did not fall under the definition of input services as provided in the Cenvat Credit Rules. The Department issued a show cause notice demanding service tax, interest, and penalty. The order-in-original was challenged before the Commissioner (Appeals) and subsequently before the Appellate Tribunal.

2. The Appellate Tribunal partially allowed the appeal, ruling that the appellant was eligible for Cenvat credit only in relation to the hiring of an examination hall on rent. However, for services such as catering, photography, tents, and motor vehicles, the Tribunal held that the appellant was not entitled to Cenvat credit. The Tribunal emphasized the necessity for a direct nexus between the input services and the output services provided by the appellant.

3. The appellant's argument that the services of catering, photography, and tents were used to encourage and celebrate successful students after the completion of coaching classes was rejected. The High Court concurred with the Tribunal's view that these services did not have a direct connection with providing commercial training or coaching services. Similarly, expenses incurred for maintenance, repairs of motor vehicles, and business tours were deemed unrelated to the output services, leading to the denial of Cenvat credit on these services.

4. The appellant raised the issue of the action taken by the respondent being beyond the period of limitation. However, the High Court noted that this point was not argued before the Appellate Tribunal and, therefore, declined to address it. Consequently, the appeal was dismissed on the grounds of lacking merit, upholding the decision of the Appellate Tribunal regarding the admissibility of Cenvat credit on specific input services for the appellant.