Custom, Excise & Service Tax Tribunal
M/S D.E. Shaw India Software Pvt Ltd vs Cce, Hyderabad-Ii on 1 July, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Bench SMB
Court I
Appeal No. ST/27930/2013
(Arising out of Order-in-Appeal No. 94/2013 (H-II) S. Tax dt. 24.07.2013 passed by CC, CE & ST (Appeals-II))
For approval and signature:
Honble Ms. Sulekha Beevi, C.S., Member (Judicial)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3.
Whether their Lordship wish to see the fair copy of the Order?
4.
Whether Order is to be circulated to the Departmental authorities?
M/s D.E. Shaw India Software Pvt Ltd
..Appellant(s)
Vs.
CCE, Hyderabad-II
..Respondent(s)
Appearance
Sh. S. Thirumalai, Advocate for the Appellant.
Sh. Nagraj Naik, Deputy Commissioner (AR) for the Respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member (Judicial)
Date of Hearing: 01.07.2016
Date of Decision: 01.07.2016
FINAL ORDER No._______________________
[Order per: Sulekha Beevi, C.S.]
The appellant is engaged in providing software development services and registered with the Service Tax Department. They filed refund claim for the quarter January, 2012 to March, 2012 for an amount of Rs. 19,83,533/- in respect of the service tax paid on various input services used for providing output services. The refund claim was filed under Rule 5 of the CENVAT Credit Rules, 2004 read with Notification No. 5/2006 CE (NT) dated 14.03.2006. After adjudication vide Order-in-Original dated 22.03.2012 the adjudicating authority granted refund for Rs. 15,68,941/-. The amount of Rs. 4,14,592/- was rejected on the ground that the input services had no nexus with the output services exported. Further, the refund amount was reduced proportionately by Rs. 1,08,417/- on the basis of DTA services provided by the appellant. In appeal the Commissioner (Appeals) upheld the same. The appellants have thus come before the Tribunal.
2. The details of services of which refund was rejected is as shown below:
Description of service received by DESIS
Amount (INR)
Air travel agents services
42,781
Management, maintenance or repair services
1,29,370
Chartered Accountants services
82,719
Commercial Training or Coaching Services & Convention Services
9,860
Management or business consultancy services
41,445
Total
3,06,175
3. It is submitted by Learned Counsel that air travel agent services were availed for the employee to attend business meetings abroad. The learned counsel has furnished the details of the office communication which shows that the employee had travelled abroad for the purpose of business and not for his personal affairs. Therefore, I find that Air Travel agent services availed by the appellant is eligible for refund. The management, maintenance or repair services are with regard to the maintenance charges paid by the appellant for the premises taken for rent. The original authority allowed credit availed on service tax paid on renting of premises; but however disallowed the credit availed on service tax paid on the amount of maintenance charges paid for the same premises. The rent amount and maintenance charges are shown separately in the invoices. The renting agreement includes maintenance charges also. This amount is seen to be part and parcel of the rent agreement. So denial of credit availed on service tax paid on maintenance charges, in my view is unjustified. It needs to be mentioned that the invoice in respect of maintenance charges includes maintenance charges for cafeteria also. The original authority having allowed service tax paid on rent for cafeteria I do not find any reason to disallow the maintenance charges for the cafeteria.
4. The appellants have availed credit of service tax paid on training programmes which is evident from the invoices. The other services are Chartered Accountant service which was availed for human capital audit. All these services such as, Management Maintenance and Repair services, Chartered Accountant service, Commercial Training or Coaching services are included in the inclusive part of the definition. Therefore rejection of refund stating that these services do not qualify as input service and are ineligible for credit is not justified. Management consultancy services were availed by appellant for the purpose of complying with statutory and legal requirement. These services are essential for the running of the establishment and therefore refund of the service tax paid on such services is eligible and is to be allowed.
4. The learned counsel for appellant has put forward the contention that the refund allowed has been reduced by an amount of Rs. 1,08,417/- as the original authority wrongly applied formal provided in condition 5 of the Notification No. 5/2006-CE (NT) dated 14.03.2006. As per condition 5 the formula is:-
Maximum refund = Total CENVATcredit taken on input services x export turnover
Total turnover
1.
Export turnover & total credit taken on input services
A) Export turnover of taxable services:
B) Exempted turnover
C) Domewstic turnover of taxable services
D) Total Turnover
E) Total credit on input services taken
F) Total unutilized credit on input services
Rs.
574,293,757
-
39,685,035 613,978,792 6,071,093 1,983,533
2. Refund of Input Service Credit under Rule 5 of the CENVAT Credit Rules, 2004 = E x A/D = 6071093 * (574293757/613978792) = Rs. 5,678,683/-
3. Amount of refund of input service tax credit is Rs. 19,83,533/-
(unutilized credit or refund eligible as per Rule 5 whichever is lower) Thus, as per the formula the total credit taken (E) has to be applied to compute the refund credit. The original authority first held on merits that appellant is not eligible for Rs. 3,06,175/-. This amount was deducted from the total claim of refund (Rs. 19,83,533-3,06,175) and arrived at Rs.16,77,358/- and this amount was considered to be eligible for refund. To this amount the original authority has again applied the formula to again arrive at the eligible refund.
16,77,358 x 57,42,93,757 61,39,78,792
5. Thus, there has been in a way application of the formula twice over. Identical issue was considered by the Tribunal in the case of CST, Mumbai-1 Vs Global Market Center Private Ltd., [2015 VIL 136 CESTAT Mumbai SD]. The Tribunal observed that the formula in the notification used the word total CENVAT credit taken on input services. Therefore the inadmissible part of input services cannot be deducted before applying the formula. I am convinced by the argument put forth by the counsel for appellant. The appropriate reduction of Rs. 1,08,417/- has happened due to wrong application of formula. The impugned order to the extent of upholding the reduction of amount of Rs. 1,08,417/- is set aside.
6. From the above, I find that the rejection of refund of Rs. 3,06,175/- is unjustified and the impugned order rejecting the refund is set aside. Appellant is eligible for refund of Rs. 3,06,175/-. In the result the appeal is allowed with consequential reliefs, if any.
(Operative part of this order was pronounced in court on conclusion of the hearing) (SULEKHA BEEVI C.S.) MEMBER (JUDICIAL) Jaya.
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