2018 (11) TMI 421 - AT - Service Tax

Classification of services - Refund of input CENVAT Credit - export of services which are in the nature of Business Auxiliary Services - whether the services rendered by the appellant fall under BAS or ITSS? - CBEC Circular No. 62/11/2003-ST dated 21.08.2003 - Held that - IT services are only those services which are primarily used in relation to operation of computer system and other services even if they use computer systems do not deserve to be classified as ITSS. It is not in dispute in the present case that the nature of services rendered by the appellant through M/s Zavata Inc, USA to their clients are in the nature of documentation and other services related to health administration. Clearly it is nobody s case that appellant is maintaining their computer systems or managing their software. CBEC s clarification in this Circular leaves no doubt that the appellant s services do not get covered under ITSS but fall under BAS which were taxable during the relevant period. Since, they have exported these services they are entitled to the benefit of the refund of the input service tax. The disputed services all have a direct bearing in the provision of the export services and lack of these services will definitely effect the provision of output services. Appellant is eligible for refund - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of services rendered by the appellant as either 'Business Auxiliary Services' (BAS) or 'Information Technology Support Services' (ITSS).
2. Nexus between input services and the output services provided by the appellant for eligibility of CENVAT credit refund.

Issue-wise Detailed Analysis:

1. Classification of Services:

The primary issue was to determine whether the services rendered by the appellant fell under 'Business Auxiliary Services' (BAS) or 'Information Technology Support Services' (ITSS). The appellant argued that their services were BAS as they provided support to M/s Zavata Inc, USA, involving documentation and health administration services, not primarily related to computer systems operation. The appellant cited Section 65 (19) (vi) and CBEC Circular No. 62/11/2003-ST dated 21.08.2003, which clarified that services primarily in relation to the operation of computer systems are classified as ITSS, whereas other services using computers fall under BAS. The Tribunal agreed with the appellant, noting that their services were not related to maintaining or managing computer systems but were business-related tasks using computers. Therefore, the services were classified as BAS, making them eligible for service tax during the relevant period.

2. Nexus Between Input and Output Services:

The second issue was whether the input services on which credit was denied had a nexus with the output services provided by the appellant. The appellant referred to Circular No. 120/1/2010-ST of CBEC dated 19.01.2010, which stated that the test for nexus is whether the absence of such input or input service adversely impacts the quality and efficiency of the output service. The appellant provided a list of services and cited various judgments where similar services were allowed for credit. The Tribunal found that the disputed services, such as air travel agent services, catering services, courier services, etc., had a direct bearing on the provision of export services. The Tribunal held that there was a sufficient nexus between these input services and the exported output services, making them eligible for CENVAT credit and refund.

Conclusion:

The Tribunal concluded that the services rendered by the appellant were classified as BAS and not ITSS, thereby making them eligible for service tax during the relevant period. Additionally, the Tribunal found that there was a sufficient nexus between the input services and the exported output services, entitling the appellant to the refund of the input service tax. The impugned orders were set aside, and the appeals were allowed.