2019 (2) TMI 19 - AT - Service Tax

Refund of CENVAT Credit - input services - Air Travel Agent Services - Banking Financial Services - Business Auxiliary Services - General Insurance Services - denial on account of nexus - Denial of excess refund claim to the Appellant for the quarters October, 2014 to December, 2014 and January, 2015 to March, 2015. General Insurance Services - Held that - The insurance policy is taken by the Appellant in relation to the financial risks during the course of business that may arise upon the appointment of the employees as Nominee Director/Alternate Director in the investee company and not for the personal consumption of the employees. The said input service is used in the course of provision of output service and has not only a nexus with the output services but is essential for the business of the Appellant, therefore the Appellant is eligible for CENVAT credit on General Insurance Services - refund allowed. Air Travel Agent Services - Held that - The Appellant has availed those services for booking air tickets for the travelling of its employees for official meetings with the client at various locations. Those meetings are conducted to enable to the Appellant to understand the needs of the overseas client and to deliver qualitative services to them. These meetings are essential for the business of the Appellant and in its absence, the business of the Appellant is going to be affected - this input service as availed by the Appellant in connection with its business are essential for the provision of output services and therefore the Appellant is entitled for refund of Service Tax on the said services - refund allowed. Storage and Warehousing Services - Banking Financial Services - Business Auxiliary Services - Held that - These services are essential and there is nexus between the input services and output services and therefore for these services also the Appellant is entitled for refund - refund allowed. Denial of excess refund claim to the Appellant for the quarters October, 2014 to December, 2014 and January, 2015 to March, 2015 - denial on account of non-reversal of erroneous credit availed by the Appellant in their ST-3 return - mis-match between the opening and closing balance for the month of September, 2014 October, 2014 - Held that - Both the Authorities below have erred in considering the amount of unutilised credit for the quarter, which was calculated by deducting the amount of domestic services tax liability for the period discharged through utilisation of CENVAT credit, from the amount of CENVAT credit availed by the Appellant during the period. The submission of the Appellant seems to be reasonable that nowhere in Notification No. 27/2012 or in Rule 5 ibid there is a requirement to consider the amount of unutilised credit for the period. The calculations/tables have been produced by the Appellant for comparing the amount of CENVAT credit balance available on the last day of the quarters, on the day of filling the refund claim and also the quantum of refund claim worked out as per Notification No. 27/2012- CE (NT) dated 18.06.2012 - it is clear that the Appellant has followed calculation as prescribed by Notification No. 27/2012 and Rule 5 ibid, and has rightly claimed refund of the lowest amount for the relevant quarters viz. October, 2014 to December, 2014 and January, 2015 to March, 2015 and there is no question of excess credit availed by the Appellant - refund allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Rejection of CENVAT credit on "Air Travel Agent Services," "Banking & Financial Services," "Business Auxiliary Services," and "General Insurance Services."
2. Denial of excess refund claim due to non-reversal of erroneous credit.

Issue-wise Detailed Analysis:

1. Rejection of CENVAT Credit:

General Insurance Services:
The Appellant argued that the insurance policy was taken to protect against financial risks arising from appointing employees as Nominee Directors/Alternate Directors in investee companies, which is essential for their business. The Tribunal acknowledged that the insurance policy was related to the financial risks during the course of business and not for personal consumption. Therefore, it concluded that the "General Insurance Services" had a nexus with the output services and were essential for the business, making the Appellant eligible for CENVAT credit. This was supported by a similar decision in the case of Morgan Stanley Advantage Services Pvt. Ltd.

Air Travel Agent Services:
The Appellant utilized these services for booking air tickets for employees traveling for official meetings with clients, which were essential for understanding client needs and delivering quality services. The Tribunal found that these meetings were crucial for the business and the input service was essential for providing output services. Thus, the Appellant was entitled to a refund of Service Tax on these services.

Storage and Warehousing Services:
These services were used for storing important business-related information and files essential for the smooth functioning of the business. The Tribunal recognized the necessity of these services for the business and confirmed the nexus with the output services, making the Appellant eligible for a refund.

Banking & Financial Services:
These services were availed for foreign exchange conversion for employees traveling abroad for business purposes. The Tribunal found a direct nexus with the output services and deemed these services essential for the business, thereby entitling the Appellant to a refund.

Business Auxiliary Services:
These services were procured for repairing cellular phones provided to employees for business communication. The Tribunal noted that the phones were essential for business operations and the services were necessary to avoid information leakage. Hence, the Appellant was entitled to a refund for these services.

2. Denial of Excess Refund Claim:

The Appellant had erroneously availed excess CENVAT credit in August 2014 and identified the error after the due date for revision of the Service Tax return. They reversed the erroneous credit in October 2014 to avoid a mismatch between the opening and closing balances. The Tribunal found that the Appellant's method of adjusting the excess credit was reasonable and in accordance with Rule 5 of the CENVAT Credit Rules, 2004 and Notification No. 27/2012-CE (NT) dated 18.06.2012.

The Tribunal emphasized that the refund claim should be the lowest amount among the credit balance at the end of the quarter, at the time of filing the refund claim, and the amount calculated as per the prescribed formula. The Tribunal cited a similar decision in the case of Morgan Stanley Investment Management Pvt. Ltd., where it was held that the refund claim amount should not exceed the balance at the end of the quarter or at the time of filing the refund claim.

Conclusion:
The Tribunal concluded that the Appellant had correctly followed the calculation as prescribed by the relevant rules and notifications and was entitled to the excess refund claim. Consequently, the appeals were allowed with consequential relief.

(Pronounced in Court on 25.01.2019)