2018 (2) TMI 231 - AT - Service Tax

100% EOU - Refund of unutilized CENVAT credit - various input services - management consultant service - photography service - interior decoration service - supply of tangible goods services - renting of immovable property service - denial on the ground of nexus - Held that - The services except insurance services and transport of goods by road services are covered by various decisions holding that such services can be considered to have nexus with the output services provided by the assessee. Further, the definition of input service with regard to output service merely states that input services means any service used by a provider of output services for providing output service. The department has not been able to produce any evidence to show that the subject services have not been used by the assessee. The definition does not qualify the use of input services by a service provider by the words directly or indirectly, in or in relation to output service . Thus, the services would qualify as an input service if it is used by a provider of output service for providing the output service. Refund is also disallowed for ₹ 7,338/- alleging that the appellant has availed credit on debit notes instead of invoices - Held that - In Ad-Manum Packagings Pvt. Ltd. Vs. Commissioner of Central Excise, Indore 2017 (4) TMI 209 - CESTAT NEW DELHI , similar issue came for consideration wherein the Tribunal held that debit notes are valid documents for availing credit - the issue whether credit is admissible on debit notes has to be relooked by the adjudicating authority - matter on remand. Another ground for rejection of refund is that there is difference in the amount shown in ST3 returns and the refund claim with respect to total credit availed by the appellant - Held that - It is explained by the Id. consultant that the appellant could not revise the ST-3 returns after coming to know that the credit availed is shown incorrectly in the ST-3 returns filed. This aspect also requires verification as to whether the appellant has correctly calculated the total credit for which the refund claim has been filed - matter on remand. CENVAT credit - air travel agency service - Held that - In the impugned order dated 1.9.2016, the Commissioner (Appeals) has observed that the said services were availed in connection with the business activity of providing output services by the employees. Therefore, I do not find any ground to interfere with the order passed by the Commissioner (Appeals) and the appeal filed by the department is dismissed. Appeal allowed in part and part matter on remand.

Summary

Issues Involved:

1. Refund claim under Rule 5 of CENVAT Credit Rules, 2004.
2. Nexus of input services with output services.
3. Difference in CENVAT credit as per ST-3 returns and Form A.
4. Different yardstick for export turnover and total turnover.
5. Validity of debit notes for availing credit.
6. Eligibility of specific input services for credit.

Issue-wise Detailed Analysis:

1. Refund claim under Rule 5 of CENVAT Credit Rules, 2004:
The appellant, a 100% Export Oriented Unit (EOU), filed a refund claim for unutilized credit on input services availed for providing export services. The original authority sanctioned part of the refund and disallowed credit for certain input services. The Commissioner (Appeals) allowed part of the appeal but disallowed credit for some services, leading to these appeals.

2. Nexus of input services with output services:
The appellant argued that the input services like management consultant service, photography service, interior decoration service, renting of immovable property service, supply of tangible goods services, event management service, program producer charges, and insurance services are integrally connected to their business operations. The appellant cited various judicial precedents to support their claims. The tribunal found that the disallowance of credit on most of these services was unsustainable, except for the insurance services and transport of goods by road services, which were deemed for personal consumption of employees.

3. Difference in CENVAT credit as per ST-3 returns and Form A:
The appellant contended that the difference in CENVAT credit was due to clerical errors in the ST-3 returns, which could not be revised. The tribunal noted that this aspect required verification and remanded the issue to the adjudicating authority for reconsideration.

4. Different yardstick for export turnover and total turnover:
The appellant argued that as a 100% EOU with no domestic clearances, there should not be any difference between export turnover and total turnover. The tribunal agreed that this issue required reconsideration and remanded it to the adjudicating authority for verification.

5. Validity of debit notes for availing credit:
The tribunal referenced the decision in Ad-Manum Packagings Pvt. Ltd. Vs. Commissioner of Central Excise, Indore, which held that debit notes are valid documents for availing credit. The tribunal remanded this issue to the adjudicating authority for re-evaluation based on this precedent.

6. Eligibility of specific input services for credit:
The tribunal found that services like management consultant service, photography service, interior decoration service, renting of immovable property service, supply of tangible goods services, event management service, and program producer charges are eligible for credit. However, the credit for insurance services and transport of goods by road services was rightly disallowed as they were for personal consumption of employees.

Conclusion:
The tribunal allowed the appeals filed by the appellant-assessee in part and remanded certain issues to the adjudicating authority for reconsideration. The appeal filed by the department against the credit allowed on air travel agency service was dismissed. The tribunal emphasized the need for verification and reconsideration on specific issues, ensuring that the appellant is given an opportunity for a personal hearing and to adduce evidence.