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2025 (2) TMI 682 - AT - Service TaxRefund claim - input services - whether denial of refund of CENVAT credit on the aforesaid disputed services by holding the same as ineligible input service in terms of Rule 2(l) of the CENVAT Credit Rules 2004 is legally sustainable or not? - Invocation of Section 11B of the Central Excise Act 1944 read with Section 83 of the Finance Act 1994. HELD THAT - Plain reading of the definition of input service indicate that there are three categories of input services viz. the first category services given under the means part; second category under the inclusion part and the third category of services which are given under the exclusion part. Therefore in order to ensure that a particular input service is eligible for availing CENVAT credit it should be covered either under first or second category and should not be covered under the third category of excluded items. Hotel Short term accommodation service - HELD THAT - The above services are to be considered as eligible for refund as the learned Commissioner (Appeals-II) himself had held so and that different stand cannot be taken on the admissibility of input services for allowing refund and that too for the same assessee-appellants again during the same period in the absence of any substantial changes in the statute. Event management service - Management Business consultancy service - HELD THAT - Since these have been used for enhancing the skills of the employees on duty involved in the company s projects in order to provide desired results in respect of output services these fall under the category of means part as eligible services under the definition of Rule 2(i) ibid. Therefore the refund of CENVAT benefit on the above services allowed. Refund of service tax paid on outdoor catering services / outdoor services and Health Check-up service claimed during the period of April 2015 to December 2015 - HELD THAT - The issue is no more res integra in view of the decision of the Larger Bench of the Tribunal in the case of Wipro Ltd. 2018 (4) TMI 149 - CESTAT BANGALORE - LB wherein it has been held that the definition of input service has been amended w.e.f. 01.04.2011 providing the exclusion clause wherein the definition of input service under Rule 2(l) ibid specifically excludes outdoor catering services and health services . It has been concluded in the said order that the outdoor catering service is not eligible for input service credit post amendment dated 01.04.2011 vide Notification No. 3/2011-CE (NT) dated 01.03.2011 - the appellants are not eligible to refund of CENVAT credit on such input services. Invocation of Section 11B of the Central Excise Act 1944 read with Section 83 of the Finance Act 1994 in rejection of refunds after providing sufficient opportunity for the appellants to demonstrate that the availment of CENVAT credit is in compliance with the CENVAT Credit Rules 2004 - HELD THAT - In such circumstances it cannot be said that what is clearly excluded from the scope of eligible input service in terms of Rule 2(l) ibid can be treated as eligible since the appellants have already taken CENVAT credit on the same on the sole ground that it was not objected to earlier by the department. Therefore sufficient compliance of requirement of Rule 14 of Cenvat Credit Rules, 2004 has been adhered to in this case. Conclusion - The services explicitly excluded under Rule 2(l) of the CENVAT Credit Rules such as Outdoor catering and Health Check-up services are not eligible for CENVAT credit stating that denial of refund of CENVAT credit in respect of outdoor catering services / outdoor services and Health Checkup service is proper and justified being not in conformity with the statutory provisions. Appeal allowed in part.
ISSUES PRESENTED and CONSIDERED
The primary issue under consideration was whether the denial of refund of CENVAT credit on certain disputed services, by holding them as ineligible 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004, was legally sustainable. The specific services in question included Hotel & Short term accommodation, Outdoor services, Event management, Management Business consultancy, Catering, and Health Check-up services. ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The legal framework primarily involved the interpretation of Rule 2(l) of the CENVAT Credit Rules, 2004, which defines 'input service'. This rule categorizes services into three parts: those included within the 'means' part, those under the 'inclusion' part, and those explicitly excluded. The Tribunal also referenced past decisions, including those involving similar facts and legal questions. Court's interpretation and reasoning: The Tribunal interpreted Rule 2(l) to determine whether the services in question fell within the eligible categories for CENVAT credit. The Tribunal emphasized that services should either fall within the 'means' or 'inclusion' categories and not be listed under 'exclusion'. The Tribunal also considered prior decisions and factual circumstances specific to the case. Key evidence and findings: The Tribunal found that for Hotel & Short term accommodation services, the appellants demonstrated that these services were used exclusively for project work and not for personal use. Similarly, Event management and Management Business consultancy services were used for skill enhancement, which was necessary for providing output services. In contrast, Outdoor catering and Health Check-up services were explicitly excluded under the amended definition of 'input service' post-01.04.2011, as they were primarily for personal use. Application of law to facts: The Tribunal applied the legal definitions to the facts presented, determining that Hotel & Short term accommodation, Event management, and Management Business consultancy services were eligible for CENVAT credit. However, Outdoor catering and Health Check-up services were not, due to their explicit exclusion in the rules. Treatment of competing arguments: The appellants argued that the denial of refunds was unsustainable as the department had not initially questioned the availing of CENVAT credit. The Tribunal, however, clarified that the denial was based on the explicit exclusion in the rules and that procedural compliance had been adhered to by issuing deficiency memos. Conclusions: The Tribunal concluded that the denial of refund for Hotel & Short term accommodation, Event management, and Management Business consultancy services was incorrect, while the denial for Outdoor catering and Health Check-up services was justified. SIGNIFICANT HOLDINGS The Tribunal held that the services of Hotel & Short term accommodation, Event management, and Management Business consultancy were eligible for CENVAT credit as they had a direct nexus with the output services. The Tribunal preserved the legal reasoning that "these services do have direct nexus with the 'output services' exported by the Appellant and hence the refund to the extent is allowable." The Tribunal also reinforced the principle that services explicitly excluded under Rule 2(l) of the CENVAT Credit Rules, such as Outdoor catering and Health Check-up services, are not eligible for CENVAT credit, stating that "denial of refund of CENVAT credit in respect of 'outdoor catering services'/ 'outdoor services' and 'Health Checkup service' is proper and justified, being not in conformity with the statutory provisions." Final determinations on each issue: The Tribunal determined that the appellants were entitled to a refund of Rs.3,23,933/- for eligible input services. However, the denial of refund for Rs.84,414/- related to ineligible services was upheld. The appeal was thus partly allowed, granting the refund for eligible services while sustaining the denial for those explicitly excluded under the rules.
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