2017 (1) TMI 658 - AT - Service Tax

100% EOU - Refund claim - various input services - denial on the ground for absence of evidence of usage for business purpose, not clear as to the purpose for which the charges were paid, input services do not impact the quality of export services produced, or input service not having nexus with the output service - Held that - I am of the opinion that the disputed input services, disallowed by the lower authorities, will merit consideration as input services for the purposes of Rule 2(l) of the Cenvat Credit Rules, 2004, as amended w.e.f. 1-4-2011 and that these services have clear nexus with the output service provided by the appellant and are very much used by them to provide the output service - refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Denial of refund for various input services utilized by the appellant.
2. Justification of the denial based on the absence of evidence, lack of clarity, and nexus with the output service.

Detailed Analysis:

i. Air Travel Agent’s Services:
The lower authority disallowed the refund on the grounds that the appellant could not submit material evidence proving the services were utilized for official purposes. However, the appellant provided sample input invoices and internal approval copies demonstrating that the services were strictly for business purposes. The denial of the refund was deemed unjustifiable.

ii. Banking and Other Financial Services:
The refund was disallowed due to a lack of connectivity to export services. The appellant argued that these services were used to provide foreign currency to employees on overseas tours, directly related to rendering export services. Sample invoices and internal approvals were submitted. The denial was found unjustifiable.

iii. Chartered Accountant’s Services:
Refund was disallowed due to no established connectivity to export services. The appellant contended these services were for audit and certification, falling under accounting and audit activities in the definition of 'input service'. The denial was deemed unjustifiable.

iv. Commercial Training or Coaching Services:
Refund was disallowed for training on communication skills and conferences. The appellant argued these services were for business conferences/seminars and communication training, part of input services. The denial was deemed unjustifiable.

v. Courier Services:
Refund was disallowed due to lack of evidence of business usage. The appellant stated courier services were for sending business documents, integral to their business. The denial was deemed unjustifiable.

vi. Custom House Agent’s Services:
Refund was disallowed due to lack of clarity on the service's purpose. The appellant argued these services were for importing IT equipment. The denial was deemed unjustifiable.

vii. Information Technology Software Services:
Refund was disallowed without reason. The appellant stated the credit was for 'hosting charges' related to exporting their output service. The denial was deemed unjustifiable.

viii. Management, Maintenance and Repair Services:
Refund was disallowed for services like premises maintenance, Xerox machine maintenance, and fire alarm maintenance, deemed not impacting output service quality. The appellant argued these services were essential for day-to-day office functions. The denial was deemed unjustifiable.

ix. Management or Business Consultant’s Services:
Refund was disallowed for invoices related to statutory compliance and payroll processing. The appellant argued these services were for enhancing efficiency and ensuring compliance. The denial was deemed unjustifiable.

x. Manpower Recruitment or Supply Agency’s Services:
Refund was disallowed without reason. The appellant stated these services were for supplying qualified IT professionals. The denial was deemed unjustifiable.

xi. Renting of Immovable Property Services:
Refund was disallowed for rent of fitouts, deemed not part of immovable property service. The appellant argued fitouts were essential for providing export services. The denial was deemed unjustifiable, considering the service as 'naturally bundled' with renting of immovable property.

xii. Internet/Telecommunication Services:
Refund was disallowed due to invoices not reflecting business calls. The appellant argued these services were essential for exporting software services and communication. The denial was deemed unjustifiable.

xiii. Sponsorship Services:
Refund was disallowed. The appellant argued these services were for enhancing organizational visibility, akin to advertisement or sales promotion. The denial was deemed unjustifiable.

xiv. Club or Association Services:
Refund was disallowed as club services are excluded from input service. The appellant clarified these were for membership fees to the Indian Semiconductor Association, not for personal use. The denial was deemed unjustifiable.

xv. Legal Consultancy Services:
Refund was disallowed. The appellant argued these services were essential for conducting business and had a direct nexus with the output service. The denial was deemed unjustifiable.

Conclusion:
The Tribunal found that the disputed input services had a clear nexus with the output service provided by the appellant and were used to provide the output service. The appeal was allowed with consequential reliefs as per law.