2016 (10) TMI 135 - AT - Service Tax

Refund claim - whether the respondent-assessee is correct in claiming the refund of the Service Tax paid on various input services which are utilized by them for rendering output services that are exported or whether these services are not integrally connected with the respondent-assessee as claimed by the Revenue - export of Business Auxiliary Services - availed CENVAT credit of Service Tax paid on various input services used for providing such output services. Held that - the input services are in relation to the business activity undertaken by the respondent-assessee which cannot be disputed, as casual perusal of the services on which CENVAT credit was availed and for the purpose of which have been utilised as mentioned in the Order-in-Original would clearly indicate that these services were in relation to the business activity of the respondent-assessee. In our view, the first appellate authority has come to a correct conclusion that respondent-assessee is eligible to CENVAT credit and claim of the refund claim needs to be allowed. The claim of Revenue that input services do not have direct nexus to the business activity of respondent-asessee is a hollow claim. By applying the decision of Hon ble High Court of Bombay in the case of Commissioner of Central Excise, Nagpur Vs. Ultratech Cement Ltd. 2010 (10) TMI 13 - BOMBAY HIGH COURT , the first appellate authority was correct in allowing the refund claims on inputs services as they are utilized for activity of the business. - Decided against the Revenue

Issues Involved:
Refund claim of Service Tax paid on various input services used for providing export of services under "Business Auxiliary Services".

Issue-Wise Detailed Analysis:

1. Background and Appeals:
The appeals were filed by the Revenue against various Orders-in-Appeal and Orders-in-Original passed by the Commissioner of Central Excise & Service Tax (Appeals), Mumbai-I. The respondent-assessee also filed cross-objections against the Revenue's appeals. The core issue revolves around the refund claim filed by the respondent for the Service Tax paid on input services used for exporting "Business Auxiliary Services."

2. Refund Claim Context:
The respondent, an exporter of services under "Business Auxiliary Services," availed CENVAT credit of Service Tax paid on input services used for providing output services. They filed refund claims under Rule 5 of the CENVAT Credit Rules, 2004, for accumulated CENVAT credit on input services used for exporting services. The adjudicating authority partially allowed and partially rejected these claims. The respondent appealed to the first appellate authority, which allowed the appeals and directed the adjudicating authority to grant the refunds, except where input service invoices were unavailable.

3. Departmental Representative's Arguments:
The Departmental Representative argued that the first appellate authority's view contradicted the explicit provisions of the CENVAT Credit Rules, 2004. He contended that the input services on which CENVAT credit was availed lacked a direct nexus with the output services. He cited examples such as technical and analysis services and public services. He further argued that the refund should only be permissible for services directly and immediately used for exporting goods/services. Additionally, he claimed that the first appellate authority incorrectly applied the formula in Notification No. 05/2006-CE (NT).

4. Respondent's Counsel Arguments:
The respondent's counsel countered by detailing the various input services on which CENVAT credit was availed. He asserted that these services were utilized for the business activities of the respondent, which were exported under "Business Auxiliary Services." He referenced the Bombay High Court's judgment in Commissioner of Central Excise, Nagpur Vs. Ultratech Cement Ltd., which clarified the definition of input services and supported the respondent's claim.

5. Tribunal's Analysis:
The Tribunal considered the submissions and reviewed the records. It noted that the respondent's status as an exporter of services under "Business Auxiliary Services" was undisputed. The Tribunal examined the categories of input services and their usage, noting that these services were related to the respondent's business activities. The Tribunal found that the first appellate authority correctly concluded that the respondent was eligible for CENVAT credit and that the refund claim should be allowed.

6. Legal Precedent and Definition of Input Services:
The Tribunal referred to the Bombay High Court's judgment in Ultratech Cement Ltd., which defined input services under Rule 2(l) of the CENVAT Credit Rules, 2004. The definition includes services directly or indirectly used in manufacturing final products, services used for clearance of final products, and services related to business activities such as accounting, auditing, financing, recruitment, etc. The Tribunal noted that the respondent's input services fell within this definition.

7. Conclusion:
The Tribunal concluded that the first appellate authority correctly applied the formula in Notification No. 05/2006-CE and allowed the refund claims. The Tribunal rejected the Revenue's appeals and disposed of the cross-objections filed by the respondent. The Tribunal emphasized that the input services used by the respondent were integrally connected with their business activities, aligning with the legal precedent set by the Bombay High Court.

8. Operative Order:
The Tribunal pronounced the operative portion of the order in open court, rejecting the Revenue's appeals and disposing of the respondent's cross-objections.

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