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TMI Blog2022 (6) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... nd input services which it used in rendering these services. The definition of "input services" under the Cenvat Credit Rules 2004 is as follows: 2. Definitions.-In these rules, unless the context otherwise requires- (l) input service" means- (i) services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India where service tax is paid by the manufacturer or the provider of output service being importer of goods as the person liable for paying service tax for the said taxable services and the said imported goods are his inputs or capital goods; or (ii) any service used by a provider of output service for providing an output service; or (iii) any service used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal,] and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing due process, the Commissioner passed the impugned order assailing which the present appeal is filed. 4. On behalf of the appellant, following submissions were made: i. Expenditure on CSR is discharge of a statutory liability imposed under section 135 of the Companies Act 2013 and prior to the enactment of this Act, in compliance of the Department of Public Enterprise's guidelines. This section of Companies Act mandates companies to spend 2% of their average net profits towards CSR expenses. Non compliance of this provision entails action which may extend to fine and imprisonment. ii. Non compliance of section 135 read with section 134 of the Companies Act, they invite penal action against individual officers leading to serious breakdown in administration of the Company. iii. The services availed in respect of CSR activities qualifies as input service as per Rule 2(l) of CCR Rules 2004. iv. Reliance is placed on the following case laws: a. C. Ex & Service Tax, Chennai vs. Brakes India Ltd. reported as 2019 (369) ELT 577 (Mad.) b. Commr. Of C. Ex. Bangalore vs. PNB Metlife India Insurance Co. Ltd. reported as 2015 (39) STR 361 c. Gatway Terminals (I) Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other such legal responsibilities also towards other stakeholders also. These responsibilities, per se, do not make them input services to the output services are rendered by the appellant. In this case the output service is "banking and other financial service" with which the Cenvat Credit taken on CSR expenses has no nexus whatsoever. He therefore prays that the appeal may be dismissed. 9. We have considered the submissions of both the sides and perused the records. 10. The question to be answered by us is whether in the facts and circumstances of this case and the definition of input service under Rule 2(l) of CCR 2004, the expenditure incurred by the appellant in discharging its corporate social responsibility can be considered as input service or the output services rendered by it. Undisputedly, the output services rendered by the appellant were "banking and other financial services". These services can be rendered and were rendered using various input services. After rendering these services the appellant earns some profit or meets other criteria laid down under section 135 of the Companies Act 2013. This results in a legal obligation on the appellant to spend some am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Some services were also specifically excluded under the definition which is not relevant to this case. 13. As may be seen the services such as sales promotion, market research, training, coaching, modernisation, renovation and repairs of factory premises of output service do have a nexus with the business of the provider of output service or the manufacturer, as the case may be. However, it is clearly understood that these do not become input services per se because these are not used for providing output services or for manufacturing final product. However, the legislative intent was to allow Cenvat Credit on these services and therefore, they were specifically included in the definition. Clearly the corporate social responsibility was not included in the inclusion part of the definition. Viewing from this angle also the corporate social responsibility expenses cannot be called as an input service for providing the output services. The fact that the corporate social responsibility is a legal responsibility does not make it an output service. Several case laws were cited by the appellant. However, most of these do not deal with CSR. Learned counsel for the appellant mainly l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the medical and personal accident policy etc. they were held to be related to the business of manufacture of excisable goods. Accordingly, Cenvat Credit was allowed. There was a passing reference to corporate social responsibility in para 7 of the judgement but that was not issue in dispute nor was there any decision on if it qualifies as an input service. 15. As we have discussed above, several services which are not directly input services for providing of output services or which are not used for manufacturing final product have been included in the inclusion part of the definition under rule 2(l). This includes modernisation, repair etc. 16. As far as Essel Propack Ltd. (Supra) case is concerned it was on the specific ground of denial of Cenvat Credit on corporate social responsibility. Learned single member in this case has discussed the matter at length, paras 8 & 11 of which are reproduced below: "8. The refusal of such Cenvat credit availed by the appellant by the department, was mainly on three scores. First CSR is a charity which is unrelated to production. Second, no direct service was availed by the appellant from the said Kalama Charitable Trust as it had ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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