2016 (3) TMI 713 - AT - Service Tax

CENVAT Credit - eligibility of input services vis-a-vis manpower recruitment or supply agency service, renting of immovable properly services, telecommunication services, rent a cab services, etc. - Department denied credit on all input services availed - Held that - the view of the department do not have nexus with the output services as it has denied credit on all input services availed. By denying credit on all the input services, it seems to appear that the appellants has not availed any input service for providing output service during the relevant period, which is not possible. In the Circular No. 120/01/2010-ST dated 19-01-2010, Board has specifically clarified that in the case of BPO/call centers the services like renting of premises, software technology services, telecom services, rent a cab services etc. would be needed for providing their output services efficiently and that such services would be eligible for credit. Therefore, by taking into account the judicial dispositions laid in the judgments in Coca Cola India Pvt.Ltd 2009 (8) TMI 50 - BOMBAY HIGH COURT , KPMG Vs CCE. 2013 (4) TMI 493 - CESTAT NEW DELHI and CCE Vs HCL Technologies 2014 (11) TMI 663 - ALLAHABAD HIGH COURT , on the issues and the circular dated 19-01-2010, the CENVAT Credit is admissible on all the services. - Decided in favour of appellant with consequential relief

Summary

Issues:
1. Disallowance of Cenvat credit on input services by the Service Tax Department.
2. Appeal against the order disallowing credit and confirming demand, interest, and penalty.
3. Disputed input services disallowed by the Commissioner (Appeals).
4. Nexus between input services and output services exported.
5. Arguments regarding the definition of input services pre and post 01-04-2011.
6. Verification of invoices and facts for certain input services.
7. Applicability of Circular No. 120/01/2010-ST dated 19-01-2010.
8. Judicial precedents and circular supporting admissibility of credit on input services.
9. Decision on the appeal and consequential reliefs.

Analysis:

1. The appellants, a 100% EOU registered under the STPI Scheme, Hyderabad, were engaged in software development services for their parent entity abroad. The Service Tax Department observed irregular Cenvat credit availed on input services like manpower recruitment, renting of immovable property, telecommunication services, etc. A show cause notice was issued, leading to disallowance of credit, demand recovery, and penalty by the original authority. The matter was taken to the Tribunal, which remanded it to the Commissioner (Appeals), who upheld the disallowance of credit, demand, and interest, reducing the penalty.

2. The appellant's consultant submitted a detailed table of disallowed input services, arguing that the Commissioner (Appeals) incorrectly disallowed them without considering the wide ambit of input services definition pre-2011. Services remanded for verification included rent-a-cab, renting of immovable property, and Information Technology Software Services. The appellant provided invoices and Cenvat credit registers to prove credit admissibility, citing Circular No. 120/01/2010-ST to support their claim.

3. The Commissioner (Appeals) disallowed input services based on nexus with output services, relying on post-2011 definitions, and judgments on credit for inputs rather than input services. However, the Tribunal's previous remand order indicated awareness of the matter's complexity. The appellant argued that the denial of credit on all input services was unjustified, and the Commissioner's remand lacked specific reasons for further verification.

4. After hearing both sides, the Tribunal found that all disputed input services were eligible for credit based on previous judgments and the 2010 circular clarifying credit eligibility for BPO/call centers. Denying credit on all services was deemed unjustifiable, leading to setting aside the impugned order and allowing the appeal with consequential reliefs.

5. In conclusion, the Tribunal held that the credit on all services was admissible, overturning the disallowance and confirming the appellant's eligibility for credit, as supported by legal precedents and the relevant circular. The impugned order was set aside, and the appeal was allowed with any necessary consequential reliefs.