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2021 (7) TMI 1089 - AT - Central Excise100% EOU - CENVAT Credit - input services - Event Management services - Outdoor Catering services - Mandap or Shamiana Service - Rent-a-Cab service - denial on the account of nexus and also on the ground of absence of such services will not directly have an impact on the quality and efficiency of provisions of taxable services - HELD THAT - The appellant is a 100% Export Oriented Unit registered under Software Technology Park of India (STPI) scheme and has been availing input services for rendering its output services. Appellant has been claiming refund of accumulated tax credit under Rule 5 of CENVAT Credit Rules, 2004. The adjudicating authority does not dispute the usage of impugned input services for providing the output services but has disallowed the credit only on the ground that these are not connected with the business activity or not necessary for providing output service. In this regard, it is noted that once for the previous period such nexus has been accepted by the department than there is no basis for denial of such nexus for the subsequent period - also, it is a settled position of law that there cannot be two different yardsticks i.e., one for allowing refund and the other for deciding the eligibility of CENVAT credit. In the case of CST, DELHI VERSUS CONVERGYS INDIA PVT. LTD. 2009 (5) TMI 50 - CESTAT, NEW DELHI , it has been held by the Division bench of the CESTAT, Delhi that there cannot be two different yardsticks, one for allowing refund and another for deciding eligibility of CENVAT credit. The impugned order denying the CENVAT credit on impugned services is not sustainable in law more so when refund relating to the impugned services has already been granted to the appellant - Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Eligibility of CENVAT credit on input services such as Event Management, Outdoor Catering, Mandap/Shamiana Service, and Rent-a-Cab service. 2. Nexus between input services and output services. 3. Principle of Consistency in taxation matters. Detailed Analysis: 1. Eligibility of CENVAT Credit on Input Services: The core issue is whether the input services in question qualify as eligible for CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004. The appellant provides customer care and product support services for Microsoft software products and operates as a 100% Export Oriented Unit (EOU). The appellant has been regularly filing for refunds of accumulated input tax credit. For the period April 2010 to March 2011, the Commissioner of Central Excise and Service Tax, Bangalore, rejected the refund claim and confirmed a demand of ?40,52,313/- along with interest and penalty, arguing that the input services did not qualify as eligible input services. 2. Nexus Between Input Services and Output Services: The appellant argued that the input services are essential for their business operations and have a direct nexus with the output services provided. The appellant provided detailed justifications for each service: - Event Management Service: Used for planning, promotion, and organizing business activities, essential for conducting meetings and seminars. - Outdoor Catering Service: Provided for employee welfare, essential for maintaining effective working conditions. - Pandal/Shamiana Service: Necessary for setting up furniture and fixtures for business meetings. - Rent-a-Cab Service: Provided for employee transportation, crucial for ensuring timely and efficient service delivery. The Commissioner, however, held that these services did not have a direct impact on the quality and efficiency of the taxable services provided by the appellant. 3. Principle of Consistency in Taxation Matters: The appellant contended that for the prior period (October 2006 to March 2010), the same input services were accepted for CENVAT credit, and the refund was allowed. The appellant argued that the Principle of Consistency should apply, as established by the apex court in Radhasoami Satsang vs. Commissioner of Income Tax. The appellant further pointed out that the department's acceptance of the previous order was not due to monetary limits, as the credit involved was ?1.42 crore, far exceeding the monetary limit for not filing an appeal. Tribunal's Findings: - The Tribunal noted that the definition of 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004, during the relevant period was broad and inclusive, covering services used directly or indirectly in relation to business activities. - The Tribunal referred to the case law of M/s. Dell International Services India Pvt. Ltd. vs. CCE, Bangalore, which recognized the wide scope of the term 'input service.' - The Tribunal found that the appellant had established a clear nexus between the input services and the output services. - The Tribunal emphasized the Principle of Consistency, noting that the department had accepted the nexus for the prior period and allowed refunds for the same input services. - The Tribunal also highlighted that the department's Circular No.120/01/2010-ST dated 19.1.2010 and case laws like Commissioner of Service Tax vs. Convergys India Services Pvt. Ltd. supported the view that there cannot be different standards for allowing refunds and determining the eligibility of CENVAT credit. Conclusion: The Tribunal concluded that the impugned order denying CENVAT credit on the input services was not sustainable in law, especially when refunds for the same services had already been granted. The appeal was allowed, and the impugned order was set aside. The stay petition was disposed of accordingly.
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