Custom, Excise & Service Tax Tribunal
The Commissioner Of Central Excise vs M/S. Deloitte Tax Services India Pvt. ... on 13 March, 2008
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT BANGALORE Appeal No: ST/310/2007 (Arising out of Order-in-Appeal No: 1/2007 (H-IV) ST dated 9.4.2007 passed by the Commissioner of Customs & Central Excise (Appeals), Hyderabad.) 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? Yes 3. Whether their Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? The Commissioner of Central Excise Hyderabad-IV Commissionerate Hyderabad. Appellant Vs. M/s. Deloitte Tax Services India Pvt. Limited Respondent
Appearance Shri K. Sambi Reddi, Authorised Representative (JDR) for the Revenue.
Shri G. Shiva Dass, Advocate for the Respondents.
CORAM DR. S.L. PEERAN, HONBLE MEMBER (JUDICIAL) SHRI T. K. JAYARAMAN, HONBLE MEMBER (TECHNICAL) Date of Hearing: 26.02.2008 Date of decision: 13.03.2008 ORDER No._______________________2008 Per Shri T. K. Jayaraman This appeal has been filed against the impugned Order-in-Appeal No. 1/2007 (H-IV) ST dated 9.4.2007 passed by the Commissioner of Customs and Central Excise (Appeals), Hyderabad.
2. The Respondent M/s. Deloitte Tax Services India Pvt. Ltd. is a private limited company under 100% EOU registered with Software Technology Park of India, Hyderabad. They provided various services to M/s. Deloitte Tax LLP in USA like back office services and other assistance such as lead tax services, international assignment services, tax services etc. According to the Respondents, these services were covered under Business Auxiliary Services (BAS) and Management Consultancy Services. They had also got themselves registered under the Service Tax Authority. The issue here is that the Respondent received various input services on which they had paid appropriate Service Tax, on which they availed the input Service Tax credit. According to them these input services were used in relation to providing the output service which is the Business Auxiliary service (BAS). Since the output service has been exported, they applied for refund of Rs.8,57,241/- on 31.3.2006 for the period from May 2005 to February 2006 under Rule 5 of the Cenvat Credit Rules, 2004 and Notification No.5/2006 CE (NP) dated 14.3.2006 issued under Rule 5 ibid. The lower authority rejected the refund claim mainly on the ground that the output service or the services rendered by the Respondent to the party in USA does not amount to BAS and they would come under the Information Technology Service which is excluded from the scope of BAS. Since the Information Technology Service is not taxable, they would not be entitled for any input credit of the Service Tax on input services. Another ground taken by the lower authority was that the input services do not have any nexus with the output service. In view of this, the refund was rejected. The Respondent approached the Commissioner (A) and the Commissioner (A) after going through various facts which are on records held that the two issues are in favour of the Respondent. He held that the services rendered by the Respondent would not amount to Information Technology Service and would indeed be covered under the category of Business Auxiliary Service. Further, he also held that the Respondent availed various input services and they had rightly availed the input credit and they would be entitled for refund of this credit when the output service was exported.
3. Revenue is aggrieved over the impugned Order-in-Appeal No. 1/2007 dated 9.4.2007 on the following grounds.
a) That the Commissioner (Appeals) has erred in holding that the services provided by the Respondent are covered under the taxable service of Business Auxiliary Service and Management Consultant Service.
b) That the services provided by the Respondent are covered under Information Technology service and which is excluded from the definition of BAS and hence, not a taxable service.
c) That the Returns filed by the Noticee are self assessed and cannot be an aid to determine the proper classification of the service.
d) That the Commissioner (Appeals) has erred in holding that it was not necessary that the input services should be used directly or relatable directly for the purpose of being qualified as an input service.
e) That the Commissioner (Appeals) has failed to note that input services credit under Rule 5 of the Cenvat Credit Rules, 2004 was eligible for refund only w.e.f 14.03.2006 and as such the services rendered during the period from May 2005 to February 2006 are not eligible for claiming refund.
4. Shri K. Sambi Reddi, departmental representative appeared for the Revenue and Shri G. Shiva Dass, learned advocate appeared on behalf of the Respondent.
5. We heard both sides. The learned advocate took us through the Agreement for Services and Development. The description of the services to be provided by the Respondent to the party in USA reads as follows:
Exhibit - A Description of Services In connection with the Deloitte Taxs business and engagements, Deloitte Tax India will provide preparation and consulting services and back office and technology support as requested by Deloitte Tax for the activities of Deloitte Tax, especially in providing assistance to Deloitte tax with respect to continued support for Deloitte Taxs clients and the design, implementation and upgrade of various Deloitte Tax programme. The services to be provided by Deloitte Tax India to Deloitte Tax under this agreement may include data entry, data processing, and such other incidental and support services as may be requested by Deloitte Tax for preparation and filing of US Federal, State and local tax returns, and property tax returns, as well as for computing advance tax estimates, wage card processing, and transfer pricing planning and execution.
On going through the services to be provided by the Respondent to the party in America it is very clearly seen that these services do not relate to Information Technology Service. In fact Information Technology Service is defined as follows:
Information Technology Service means any service in relation to designing, developing or maintaining of computer software or computerized data processing, or system networking, or any other service primarily in relation to operation of computer system.
On going through the scope of the services, we do not find that they are in relation to designing, developing or maintaining of computer parts or computerized data processing. The activities of the Respondent relate to tax returns and other business activities and they do not relate to development of software. Therefore, the contention of the Revenue is not acceptable. In this connection, the learned advocate invited our attention to the Circular issued by the CBEC dated 21.8.2003 wherein it is stated that mere fact that a personal computer or a laptop has been used for providing the service does not, ipso facto, make the service an Information Technology services. Our attention was also invited to the clarification given in Board Circular dated 20.6.2003. On proper reading of this clarification, one cannot say that payroll-processing, accounts management etc., even by using computer programmes, cannot be termed as activities primarily in relation to computer systems. The use of computer in these services is secondary and the primary activity is that of business-related work. Thus, these services will be taxable as Business Auxiliary Service. Therefore, we are convinced that the services rendered by the Respondents do not amount to Information Technology services. Therefore, they are not excluded from the scope of Business Auxiliary Service. When such a view is taken, the BAS is taxable and the respondent is entitled to take credit on the Service Tax paid on the input services.
5.1 Even if it is assumed that the services rendered amounts to Information Technology Service, in that case the Respondent relied on the Apex Court decision in the case of Tata Consultancy Services Vs. State of AP - (137 STC 620). Even if the services rendered by them are taken to mean Information Technology services, by virtue of the decision of the Apex Court in the case of Tata Consutlancy Services, software put in a media can be taken as goods and if the items exported are considered as goods, even then the refund of the credit taken should be available.
5.2 Further, one of the grounds in appeal memo by the Revenue is that the various input services have no nexus with the output services provided by the Respondent. The definition of Input Service is reproduced herein below.
Input service means any service -
(i) used by a provider of taxable service for providing an output service, or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal.
and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal:
On going through the definition, we find that the scope of the input service is quite wide. In the present case, it has been submitted that the following input services have been arranged by the respondent.
(i) Equipment hiring charges
(ii) Professional Consultation Service
(iii) Recruitment Services
(iv) Security Services
(v) Telephone Services
(vi) Transport Services
(vii) Training Services
(viii) Facility Operation Service
(ix) Courier Services
(x) Cafeteria Service
(xi) Other input services like advertisement service, recruitment service and security service The Commissioner (A) in the impugned order has gone through the facts in detail and has come to a conclusion that these services can rightly be termed as Input Services used by the Respondents to provide the output services. Once they are input services and when output services is taxable, then definitely they are entitled for the credit.
5.3 Another objection taken by the department is that Rule 5 of the Cenvat Credit Rules was amended with effect from 14.3.2006 and since the refund pertains to the period May 2005 to February 2006, the Respondents are not entitled for the refund as the amended Rule has only prospective effect. In this connection, the Respondent has given elaborate reason to show that the amendment will have retrospective effect. That apart, our attention was invited to the decision of the Mumbai Bench in the case of WNS Global Services (P) Ltd. Vs. CCE, Mumbai by Final Order No.A/49 to 51/08/WZB/CSTB/C-I dated 18.1.2008 wherein this issue has been dealt with by the Tribunal in an elaborate manner. In that decision the Tribunal has held as follows:
10. ............... We, therefore hold that in present circumstances, where the refund claims were filed after the amendment, and satisfies every requirement of Rule 5 and the Notification issued thereunder, the refund cannot be rejected as there was no condition in the notification or rules that such notification would apply only in respect of the exports made after 14.03.2006. Once the refunds are under the amended rules and the Notification issued thereunder, as already held, the same cannot be denied merely because they relate to the exports made prior to the date of amendment.
This very issue has been dealt with and the Tribunal has held that Rule 5 by which the refund is given in respect of the credit taken will be applicable even to the refunds relating to the period prior to 14.3.2006. In other words, when the refund claim is made and if the Rule as amended in operation, then the refund cannot be denied on the ground that the refund pertains to an earlier period. In the present case, the refund claim was filed on 31.3.2006 which is after 14.3.2006 and the only reason given in the adjudication for rejection of the claim is that it pertains to the year prior to 14.3.2006. In view of the decision of the Mumbai Bench, this objection cannot be sustained. It has also been observed that statute cannot be treated retrospective merely because it relates to the past action. A statute which takes away or impairs vested rights acquired under existing laws, or creates a new obligation or imposes a new duty, or attaches a new disability in respect of transaction already past, alone is called a retrospective legislation. It was also pointed out by the learned advocate that the suggestion that Rule amended on 14.3.2006 will be applicable only to goods or services exported after 14.3.2006 is not sustainable. This is precisely the contention raised by the assessee in Mysore Rolling reported at 1987 (28) ELT 50 (SC) with regard to the interpretation of Section 11A which was rejected by the Supreme Court.
6. On a very careful consideration, we do not find any merit in the Revenues appeal. In our view the services rendered would not amount to Information Technology Service, therefore, they are not excluded from the scope of Business Auxiliary Service which is taxable. Once it is held that they are taxable and the credit taken on the input services has not been utilized for payment in respect of output services, they are entitled for the refund of the credit in terms of the Cenvat Credit Rules. Moreover, the departments objection with regard to the Input Services, entitlement of credit is also not correct because on going through the definition of input service and also the services availed by the Respondent, we find that they are very necessary for providing output services and they satisfy the condition of the input services as given in the Cenvat Credit Rules. In our view, the scope of input services as given in the definition is very wide and the services availed by the Respondent as input services are indeed input services. Further, Rule 5 allows refund in respect of the tax paid on the input services will be available for the Respondent and the grounds taken by the Revenue that they would be available only in respect of exports made after 14.3.2006 is not sustainable in view of the Tribunals decision quoted supra. The respondents have taken several other contentions which in our view need not be dealt with in depth. Hence, the appeal filed by the Revenue does not have any merit. The impugned order of the Commissioner (A) is legal and proper. Therefore, Revenues appeal is dismissed.
(Operative portion of this Order was pronounced in open court on conclusion of hearing) (T.K. JAYARAMAN) Member (T) (S.L.PEERAN) Member (J) /rv/