Custom, Excise & Service Tax Tribunal
M/S. Xilinx India Technology Services ... vs Cc,Ce&St, Hyderabad-Iv on 29 April, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench SMB Court I Appeal No.ST/28290/2013 (Arising out of Order-in-125/2013(H-IV) S.Tax dt. 26/08/2013 passed by CC,CE&ST(Appeals-II), Hyderabad) 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. Xilinx India Technology Services Pvt. Ltd. ..Appellant(s) Vs. CC,CE&ST, Hyderabad-IV ..Respondent(s)
Appearance Shri S. Thirumalai, Advocate for the appellant. Shri Rajesh Jacob, Asst. Commissioner(AR) for the respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member(Judicial) Date of Hearing:04/04/2016 Date of decision:.
FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.] The brief facts of the case are that the appellants are engaged in providing software services which are exported. They are a 100% EOU, registered with Software Technology Parks of India (STPI) and have service tax registration under the category of Information Technology Software Services (ITSS). They are aggrieved by the denial of refund to the extent of Rs.16,88,981/- of service tax paid on some input services availed by them. The period involved in the appeal is January 2012 to March 2012. The main grounds on which the credit/refund denied with respect to certain input services availed by the appellant are absence of evidence of usage for business purpose, not clear as to the purpose for which the charges were paid, input services do not impact the quality of export services produced, or input service not having nexus with the output service. However, with respect to input services like Information Technology Service, Management Maintenance and Repair Services, Manpower Recruitment Agencys Services and Renting of Immovable Property Services, refund of part of the input service credit has been disallowed without recording reasons.
2. I find that during the period January 2012 to March 2012, the following relevant portion of the definition of input service vide Rule 2(l) of the CENVAT Credit Rules 2004, as amended w.e.f. 01/04/2011, was applicable to their case:-
(l) input service means any service, --
(i) used by the provider of output service for providing an output service; .. .
3. The summary of disallowances as listed out by the counsel in the appeal is as under:-
Sl.
No. Particulars Refund rejected (Rs.) i.
Air Travel Agents Services 28,664 ii.
Banking and Other Financial Services 12,102 iii.
Chartered Accountants Services 5,252 iv.
Commercial Training or Coaching Services 11,192 v.
Courier Services 4,695 vi.
Custom House Agents Services 1,16,437 vii.
Information Technology Software Services 4,635 viii.
Management, Maintenance and Repair Services 6,55,251 ix.
Management or Business Consultants Services 2,00,295 X Manpower Recruitment or Supply Agencys Services 2,47,860 Xi Renting of Immovable Property Services 1,19,160 Xii Internet/Telecommunication Services 1,53,379 Xiii Sponsorship Services 97,850 Xiv Club or Association Services 5,150 xv Legal Consultancy Services 27,058 Total 16,88,981
4. In this regard, it is found as follows:-
i. Air Travel Agents Services:
While conceding that this service is an eligible input service for exporting the taxable output service, the lower authority has disallowed refund of the credit thereof on the grounds that the appellant could not submit any material evidence that the services are utilized for official purpose.
The appellants have adverted that they do not provide facilities of air travel to their employees for personal tour and that the said services are strictly availed only with reference to official tours. The appellant has also enclosed sample input invoices along with contemporary copies of internal approval for availing such services to demonstrate that the said services were availed only for business purpose.
In the circumstances, I hold that the denial of the refund is not justifiable.
ii. Banking and Other Financial Services Refund of credit on these services has been disallowed by lower authority on the ground that no connectivity has been established to conclude that the said services are used in relation to export.
The appellant has adverted that these services were received by them to provide the employees the foreign currency on overseas tours to meet clients and hence, directly connected with the rendering export of output service. The appellant has also submitted copies of sample input service invoices along with contemporary copies of internal approval for availing such services to demonstrate that the said services were availed only for business purpose.
In the circumstances, I hold that the denial of the refund is therefore not justifiable.
iii. Chartered Accountants Services The refund of the credit on these services has been disallowed by lower authority on the grounds that no connectivity has been established to conclude that the said services are used in relation to export.
The appellant has adverted that these services were received by them in connection with their audit and issue of certificate by practicing Chartered Accountant and that these services will fall under the ambit of activities like accounting and audit which form part of the inclusive portion of the definition of input service at Rules 2(l) of the CENVAT Credit Rules 2004.
I find merit in the submissions of the appellant and in consequence, I hold that the denial of the refund for this input service is not justifiable.
iv. Commercial Training or Coaching Services I find that the lower authority while conceding that the appellant is eligible for claiming refund on this service, has however disallowed an amount of Rs.11,192/- with regard to training on communication skill and conference.
The appellant has adverted that the input service in this case pertains to participation fees paid for attending business conference/seminar and business communication training services and that input services like coaching and training exhibition are part of input service.
In the circumstances, I hold that the denial of the refund for this input service is therefore not justifiable.
v. Courier Services The refund of the credit on this input service has been disallowed by the lower authority on the ground that absence of any evidence of its usage for business purpose.
The appellant has adverted that the courier services are required for sending documents to their customers / vendors which is an integral part of their business. They have further adverted that they do not provide courier service to their employees and that same are exclusively used by them to send business documents only.
In this age of tight schedules, it cannot be said that courier services are not required by trade and industry for quick relay of documents etc. I therefore find and hold that this would also therefore has to be necessarily considered as an input service used in providing the output service. In the circumstances, I hold that the denial of the refund for this input service is not justifiable.
vi. Custom House Agents Services The lower authorities have disallowed refund of the credit on this service on the ground that there is lack of clarity as to the purpose for which these charges are paid and in which manner these services are related to output service exported.
The appellant has adverted that the services provided by Custom House Agents are availed by the appellant in connection with import of IT equipment from outside India.
I find merit in the aforesaid submission of the appellant, especially when it has not been disputed by the Revenue that these services have been used for enabling customs clearances of employees and / or their personal goods in activities relating to business purpose. In the circumstances, I hold that the denial of the refund for this input service is not justifiable.
vii. Information Technology Software Services.
The lower authority while conceding that the assessee is eligible for refund of the credit on this service, has however disallowed an amount of Rs.4,635/- without assigning any reason thereof.
The appellant has adverted that the impugned credit amount has been incurred by them on the invoices raised by M/s. TenXLabs Technologies Pvt. Ltd. towards hosting charges availed by them to access web based application and that the same are directly related to the export of their output service.
I find merit in the above submissions of the appellant and I hold that the denial of the refund for this input service is not justifiable.
viii. Management, Maintenance and Repair Services The lower authority has disallowed refund pertaining to premises related to maintenance, Xerox machine maintenance, fire alarm maintenance etc. on the ground that some do not impact the quality of the output service.
The appellant has adverted that these services are consumed essentially in relation to day-to-day function of the office including security, cleaning and housekeeping services and an indispensable services being directly connected to office premises. They have relied upon the ratio of Tribunals order in the case of CCE Vs. CE Gloves India Ltd. [2013-TIOL-1975-CESTAT-BANG.].
In the circumstances, I find merit in the above submission and I hold that the denial of the refund for this input service is not justifiable.
ix. Management or Business Consultants Services The lower authority while conceding that these services are covered under the definition of input service has however disallowed an amount of Rs.2,00,295/- in respect of invoices on the ground that the related invoices were towards fees for statutory compliance and towards pay roll processing.
The appellant has adverted that these services were used in connection with the accounting, payroll, tax and regulatory services rendered by the management consultants and other professions.
I find merits in the submission of the appellant. These services are very much required to enhance efficiency and productivity of the organization and to ensure compliance with tax and regulatory requirements. I therefore hold that the denial of the refund for this input service is not justifiable.
x. Manpower Recruitment or Supply Agencys Services The lower authority while conceding the eligibility of this input service both for taking credit and refund thereof, has however disallowed an amount of Rs.2,47,860/-; no reasons have been adduced for the denial.
The appellant has adverted that the impugned services are received in connection with the supply of qualified IT professional by other IT companies on fees basis to enable the appellant export the software development services.
I find that inter alia, recruitment is in the list of services included in the inclusive portion of the definition of input service referred supra.
I therefore hold that the denial of the refund for this input service is not justifiable.
xi. Renting of Immovable Property Services The lower authority, while inter alia holding that the appellants are rightly eligible for claiming refund of the service tax paid on renting of immovable property, has however disallowed an amount of Rs.1,19,160/- pertaining to rent of fit outs and has also held that input services should have been used for providing the output services and input services though used by the service provider would render themselves ineligible if their consumption is not in relation to or not having nexus with the output service. On appeal, the appellate authority has inter alia upheld that part of the order of the lower authority disallowing the refund of CENVAT credit in respect of input services pertaining to rent of fit outs, holding that the same does not form part of immovable property service.
Before this Tribunal, the appellant has contended that the fitouts rent are towards the basic furniture and fixtures provided by the premises owner along with the premises as part of the renting services; that this is an essential service without which the appellant cannot export services; that any view that no furniture and fixtures are required for rendering the output services is devoid of merit.
In the instant case, I find that the appellants were a provider of output service under the category of Information Technology from their premises at Madhapur, Hyderabad. It is not disputed that the said output service was provided by the appellant from their said premises which had been leased out by them from M/s. Cyberpearl Information Technology Park Private Ltd., the lessor and the provider of both the services renting of immovable property service as well as the renting out of fitouts (interiors and improvements) as per the list of furniture and fittings attached in the Second Schedule to the Deed of Lease. There can be no dispute that the aforesaid fitouts are used by the Information Technology and Software Service providers such as this appellant for housing their employees and equipment, without which they cannot provide the export service they set out to do.
It is also noted that in this case, the service pertaining to renting of fitouts will have to be necessarily considered as a naturally bundled services with the service of renting of immovable property, for the purposes of Section 66F of the Finance Act, 1994.
In view of the above, I am of the considered opinion that the service of renting of fitouts availed by the appellant passes the test of an input service for providing an output service as envisaged in Rule 2(l) of the CENVAT Credit Rules, 2004, as amended w.e.f. 01/04/2011.
xii. Internet/Telecommunication Services The lower authority has disallowed part of the refund claim in respect of this service on the ground that the invoice copy submitted by the appellant did not reflect whether of the calls of business purpose.
The appellant has adverted that these are the internet, tele-conference facilities, telephone connections and mobile phone facilities are required in order to export the software services electronically, communicate with the customers and the vendors and hence are essential for the functioning/business of the company that is rendering of the output services. These are essential lifelines for the efficient working of any organization and are very much used for providing output service.
I find merit in the above submissions of the appellant. In the circumstances, I hold that the denial of refund of credit on this service is not justifiable.
xiii. Sponsorship Services These services are basically for the purpose of enhancement of visibility of the organization and are advertisement services provided by them. This would therefore very much in the nature of advertisement or sales promotion, which finds place in the inclusive portion of the definition of input service. I therefore hold that the appellants are eligible for the refund of credit on this service.
xiv. Club or Association Services I find that services such as this provided by a club are excluded from the ambit of input service by virtue of Rule 2(l)(C) of the CENVAT Credit Rules 2004. However in this instance, it has been clarified by the appellant that these services are with reference to the membership fees paid to the Indian Semiconductor Association which represent the interest and concern of appellant and are not availed for personal use or consumption of the employee. This being the case, I hold that this input service is used for the furtherance of the output service provided by the appellant.
xv. Legal Consultancy Services Like Chartered Accountant services, these are also essential services which are required by service providers or manufacturers for conducting their business and hence have a direct nexus. In any case, the said service finds place in the inclusive portion of the definition of input service.
3. In view of the above, I am of the opinion that the disputed input services as aforesaid, disallowed by the lower authorities, will merit consideration as input services for the purposes of Rule 2(l) of the CENVAT Credit Rules 2004, as amended w.e.f. 01/04/2011 and that these services have clear nexus with the output service provided by the appellant and are very much used by them to provide the output service. Therefore the appeal filed by the appellant is allowed with consequential reliefs, as per law.
(Pronounced in open court on ) SULEKHA BEEVI C.S. MEMBER(JUDICIAL) Raja.
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