Custom, Excise & Service Tax Tribunal
Vmware Software India Pvt Ltd vs Commissioner Of Service Tax ... on 6 December, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: ST/2211/2012-SM [Arising out of Order-in-Appeal No. 139/2012 dated 31/05/2012 passed by the Commissioner of Central Excise (Appeals-II), Bangalore.] VMWARE SOFTWARE INDIA PVT LTD FORTUNA 1, #680, 15TH CROSS, 8TH MAIN ROD, JP NAGAR, 2ND PHASE, BANGALORE 560078 Appellant(s) Versus Commissioner of Service Tax BANGALORE-SERVICE TAX BANGALORE. KARNATAKA Respondent(s)
Appearance:
Mr. Arul Ebenezer, CA For the Appellant Mr. Pakshi Rajan, AR For the Respondent Date of Hearing: 06/12/2016 Date of Decision: 06/12/2016 CORAM:
HON'BLE SHRI S.S GARG, JUDICIAL MEMBER Final Order No. 21392 / 2016 Per : S.S GARG The present appeal has been directed against the impugned order dated 31.5.2012 vide which the Commissioner (A) has modified the Order-in-Original and denied the refund on few input services.
2. Briefly the facts of the case are that the appellant is engaged in the business of providing software development service classifiable as Information Technology Software service and call centre and marketing services classifiable as Business Auxiliary Service under Section 65 (105) (zzb) of Finance Act, 1994. Appellant primarily caters to the needs of their group companies scattered outside India. Appellant filed refund claim under Rule 5 of CENVAT Credit Rules (CCR), 2004 read with Notification No.5/2006-CE dated 14.3.2006 and Export of Service Rules, 2005. Thereafter a show-cause notice was issued proposing to deny the refund claim on the ground that those services are not input services. Thereafter the original authority allowed the refund of unutilized CENVAT credit of service tax of Rs.11,85,626/- and rejected the balance refund of Rs.90,34,835/- vide order dated 22.6.2010. Aggrieved by the said order, the appellant preferred appeal before the learned Commissioner (A) and the learned Commissioner (A) allowed the refund of Rs.72,26, 618/- and rejected the balance refund of CENVAT credit of Rs.29,93,849/-. Aggrieved by the said order, the appellant has filed the present appeal.
3. Heard both the parties and perused the records.
4. Learned counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without considering the provisions of input service as contained in the CENVAT Credit Rules and also without considering the judicial decisions rendered by higher judicial fora. He further submitted that all the input services on which the refund has been denied is covered by various decisions of the Tribunal and the High Court. The appellant has submitted in a tabular form the nature of service, their nexus and the supporting decisions which are reproduced herein below.
Sl. No. Service Nexus Citation
1. Business Support Service We procure these services for management of our database which are used in connection with software development services. These services are essential for VM Wares operations and it will not be possible to export services without these input services. Hence, these services are used in relation to the provisions of output service.
CCE vs. Ultratech Cement Ltd.: TOIL-745-HC-MUM-ST Megma Design Automation India Pvt. Ltd. vs. CST: 2015-TIOL-1845-CESTAT-BANG.
2. Catering Services Providing canteen facility to employees. Providing food for employees also aid refreshment during working hours is a business activity. This would help in ensuring uninterrupted and smooth flow of work and also increases the moral of the employees. Hence, these services are used directly in providing export services. Further, these services have been held to be eligible services in terms of Circular no. 120/01/2010-ST dated 19th January 2010.
Megma Design Automation India: 2015-TIOL-1845-CESTAT-BANG.
M/s. Heartland Bangalore Transcription Services (P) Ltd. vs. CST: 2010-TIOL-1764-CESTAT-BANG 3 Chartered Accountants Service VM Ware hires chartered accountants to assist in complying with various statutory requirements like sales tax, profession tax, provident fund, service tax, income tax, etc. The proper compliance to the statutory requirement is a must to fulfill legal responsibilities of a corporate and hence is vital in the operation of a business. Hence, these services are used in relation to the provision of output services, as without these services the organization shall not be functioning and providing any output services. Specifically, "auditing and finance" are covered under the definition of "input service" under Rule 2(l) of CENVAT Credit Rules, 2004. Comm. Of Cus. & ST., Bang vs GE Medical System Pvt Ltd.
CST Vs. Convergys India limited Pvt.
2015 (40) S.T.R. 697 (Tri. - Bang.) 2009 (92) R.L.T 1017 Ltd.
- UTOPIA India Pvt. LTD vs Comm of Service Tax, Bangalore
- M/s. Heartland Bangalore 2011 (23) STR (Tri.-Bang) Transcription Services (P) Ltd. Vs. CST 2010-TIOL-1764-CESTAT-BANG
4. consulting Engineer The services of a Consulting Engineer are utilized by the company for obtaining technical guidance on matters relating to the computer hardware and software which are essential for provision of output services. The absence of these services will have negative impact on the efficiency and quality of the output services.
Comm. Of Cus. & ST., Bang vs GE Medical System Pvt Ltd. :2015 (40) S.T.R. 697 (Tri. - Bang.)
5. Company Secretaries Service VMWare hires Company Secretaries to assist in complying with various statutory requirements like company law, due diligence, etc. The proper compliance to the statutory requirement is a must to fulfill legal responsibilities of a corporate and hence is vital in the operation of a business. Hence, these services are used in relation to the provision of output services, as without these services the organization shall not be functioning and providing any output services. Specifically, "auditing and finance" are covered under the definition of "input service" under Rule 2(l) of CENVAT Credit Rules, 2004.
M/s. Heartland Bangalore Transcription Services (P) Ltd. Vs. CST- 2010-TIOL-1764-CESTAT-BANG
6. Courier Services VM Ware uses courier services in its day to day operations such as sending proposals to prospective clients, for sending progress reports and time sensitive documents such as final reports, client communication related projects etc. and thereby are used as an activity relating to business and hence used in relation to the provision of output services. CCE, Hyderabad-IV vs. Deloitte Tax Services India Pvt. Ltd: 2008-TIOL-629-C ESTAT- BANG Megma Design Automation India Pvt Ltd. vs CST, Bang.
M/s. Heartland Bangalore: 2015-TIOL-1845-CESTAT-BAN Transcription Services (P) Ltd. vs. CST: 2010-TIOL-1764-CESTAT-BANG
7. Erection, Commissioning & Installation Service These services are procured for installation of servers and other network equipment used for rendering output services whereby they are a vital input service.
Dell International Services India P. Ltd. vs. CCE, Bang: 2010 (17) STR 540 (Tri.-Bang.)
8. Event Management Service These services are obtained in connection with conducting various events for customer mobilization, demand generation etc., in connection with rendering their output services. HCL Technologies Ltd. vs. CCE: 2015 (40) S.T.R. 369 (Tri. - Del.)
- Willis Processing Services (1) Pvt. Ltd. vs. CST: 2015 (38) S.T.R. 169 (Tri. - Mumbai)
9. Interior decorator These services are used for designing of additional work stations has we have expanded our business operations and the employees render services from these premises which have a direct impact on providing of quality, timely and efficient services to the clients.
10. Manpower Supply Services VM Ware requires manpower to undertake export of services which is of utmost importance. The services of manpower supply agencies are required for the purpose of obtaining highly skilled and technical personnel in the area of business in which the company operates.
Further, with the high attrition levels in the industry, the manpower supply service becomes a crucial service required by VMWare to enable them to perform the export of the services. Hence, as manpower is required for the purpose of performance of service by them, the same qualifies to be an activity in relation to business and hence an "input service" required for providing the output services.
Further, background verification services also fall under "manpower recruitment" as the definition clearly states, it is a service provided in relation to recruitment.
M/s. Brakes India Ltd. Vs. CCE: 2010-TIOL-817 UTOPIA INDIA PVT. LTD vs Comm of Service Tax, Bangalore: 2011 (23) STR (Tri.-Bang)
11. Public Relation Service We hire various public elation agencies to effectively communicate the company's strategy, its products etc. to Independent Researchers and Consultants so that these consultants portray the company in best possible light. This is vital to promoting the company's business and is done with an intention to advertise the company's business for securing prospective customers. Accordingly, such input services are an integral part of the company's marketing strategy and are very much an eligible input service, whereby we are eligible for refund of service tax paid on such services.
12. Real Estate Agency Services A key requirement for VMWare is real estate.VM Ware has a large employee base and hence requires good commercial space for effective rendering of services. In this regard, Real Esaste Agency services are essential to achieve the above objectives and hence shall be treated as an activity in relation to business and hence an input service used in relation to provision of output services.
CCE Vs. Ultratech Cement limited: TIOL-745-HC-MUM-ST
13. Supply of Tangible goods for right to use Training imparted to employees is a pre-requisite for efficient rendering of output services for which purpose the Company has hired video projectors and other equipments. As these services are essential for conducting effective training, it can be said that they are essential for rendering the output services. Definition of the term 'input service' includes services used by a provider of taxable service for providing output service.
14. Travel Agent Our professionals travel across locations on business purpose and also to customer locations in connection with provision of output services.
Accordingly, these input services are directly connected with rendering our output services and hence a vital requirement. Megma Design Automation India Pvt Ltd. vs CST, Bang.: 2015-TIOL-1845-CESTAT-BANG M/s. Heartland Bangalore Transcription Services (P) Ltd. vs. CST: 2010-TIOL-1764-CESTAT-BANG
5. On the other hand, the learned AR fairly conceded that with regard to few services viz., interior decorator, public relation service, and supply of tangible goods for right to use do not fall in the definition of input service unless the appellant establishes that the same is being used in or in relation to the business as per the requirement of law. With regard to other services, he conceded that they fall in the definition of input services but subject to verification at the level of original authority.
6. After considering the submissions of both parties, I am of the view that the input services as mentioned in the tabular form fall in the definition of input services as contained in Rule 2(l) of CCR, 2004 and the appellant is entitled to the refund of same subject to verification by the original authority on the basis of documents submitted by the appellant. With this, the appeal is allowed, subject to verification of the documents. (Operative portion of the Order was pronounced in Open Court on 06/12/2016.) S.S GARG JUDICIAL MEMBER rv 9