Custom, Excise & Service Tax Tribunal
M/S Conexant Systems Pvt.Ltd vs The Commissioner on 27 January, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench Single Member Bench Court I Appeal No.ST/20974/2014 (Arising out of Order-in-Appeal No.206/2013(H-IV)S.Tax. Dated 29-11-2013 passed by Commissioner of C.C.E&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 Conexant Systems Pvt.Ltd. Hyderabad ..Appellant(s) Vs. The Commissioner. C.C.E&ST, Hyderabad-IV ..Respondent(s)
Appearance Shri Abhishek Rastogi&Rashmi Deshpande, Advocates for the Appellant Shri Deepak, AR for the Respondent Coram:
Honble Ms. Sulekha Beevi, Member(Judicial) Date of Hearing : 27/01/2016 Date of decision: 27/01/2016 FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.]
1. The appellants are 100% EOU registered under the Software Technology Parks of India (STPI) Scheme, Hyderabad, and is engaged in the business of providing software development service with respect to software solutions to its parent entity abroad. The appellants are registered with the Service Tax Department and are holding Centralized Service Tax Registration under category of Information Technology Software Services(ITSS). On verification of the ST-3 Returns of the appellants for the period April, 2009 to September, 2009 and Oct. 2009 to March, 2010, it was observed that appellants have irregularly availed Cenvat credit on input services vis-`-vis manpower recruitment or supply agency service, renting of immovable property services, telecommunication services, rent a cab services, etc. A show cause notice was issued proposing to deny the credit and demanding recovery of the same along with interest and proposing penalty. After due process of law, the original authority disallowed the credit and confirmed the demand interest and penalty. The matter was carried by the appellant upto the Tribunal and vide Final Order No 25424 dated 05-06-2013, the Tribunal remanded the matter to the Commissioner (Appeals). The matter was reconsidered by the Commissioner(Appeals) and vide order impugned herein the Commissioner(Appeals) has disallowed the credit upholding the confirmation of demand and interest. The penalty of Rs.5 lakhs imposed by original authority was reduced to Rs.1 lakh. Being aggrieved by the said order the appellants have filed the present appeal.
2. On behalf of the appellant, the Learned consultant Sri Abishek Rastogi submitted a detailed table reflecting the input services, which was disallowed by the Commissioner(Appeals). The same is reproduced as below:
S.No. services Amount Details
1.
Chartered Accountants Service 213,733 Rejected by Com(A) specifically included in input
2. Telecommunication Service 6,065 Rejected by com(A)
3. Business Support Service 6,044 Rejected by com(A)
4. Business Auxiliary Service 16,484 Rejected by com(A)
5. Clearing and forwarding Agency Service 6,667 Rejected by com(A)
6. Club or association Service 10,300 Rejected by com(A)
7. Customs House Agent Service 371 Rejected by com(A)
8. Consulting Engineer Service 2,575 Rejected by com(A) Covered under Rule 6(5)
9. Outdoor catering Service 11,622 Rejected by com(A) Covered under Rule 6(5)
10. Erection, Commissioning & Installation Service 102,668 Rejected by com(A) Covered under Rule 6(5) 11 Management or business Consultancy Services 408,102 Rejected by com(A) Covered under Rule 6(5)
12. Rent-a-cab Service 75,684 Remanded by com(A) to verify facts
13. Renting of Immovable Property Service 158,800 Remanded by com(A) to verify invoices
14. Information Technology Software Service 3,605 Remanded by com(A) to verify invoices 15 Cargo handling Service 4,519 Remanded by com(A) to verify invoices 16 Management, Maintenance or repair Service 306,102 Remanded by com(A) due to inconsistencies by the department. Covered under rule 6(5) Specifically included in input services 17 Security Agency Service 134,067 Remanded by com(A) due to inconsistencies by the department. Covered under rule 6(5) Specifically included in input services 18 Manpower Recruitment & Supply Agfency service 120,967 Remanded by com(A) due to inconsistencies by the department. Specifically included in input services 19 Courier Service 5,064 Remanded by Com(A) due to Remanded by com(A) due to inconsistencies by the department.
Total 1,593,439
3. The learned Consultant submitted that S.No.1 to 11 in the above table have been disallowed by the Commissioner (Appeals) by holding that these services do not have nexus with the output services provided by the appellant. He pointed out that the Commissioner (Appeals) in the impugned order has relied upon the definition of input services pertaining to the period after 01-04-2011, while the credit availed on input services in the present case pertains to the period prior to 01-04-2011, where the definition of input service had wide ambit, as it included the phrase activities relating to business. In addition, he submitted that the judgments relied by the Commissioner (Appeals) are regarding inputs and not input services. That the Commsiisoner (Appeals) has relied on the judgment in Maruthi Suzuki Ltd. Vs CCS Delhi 2009 (240)ELT 641(SC), wherein the Honble Apex Court was considering the issue of credit on inputs and not input services. That therefore, the restriction of inputs is not applicable to input services. The services in S.No.12 to 15 has been remanded by the Commissioner (Appeals) for further verification of facts regarding the service as well as the invoices. The learned Consultant referred to the relevant paragraphs in the impugned order and submitted that, though the Commissioner (Appeals) observed that the appellant is a BPO industry and has to avail rent a cab service 24 x 7 for transportation of its employees still, has remanded the matter to the original authority without any basis.
4. The appellant produced details of invoices and the Cenvat credit registers to establish the credit availed on various input services. He contended that the Commissioner (Appeals) has erred in remanding the matter to the Original authority for reconsideration as the appellant has already furnished all necessary documents discharging the burden to prove the admissibility of credit on these input services. The Circular No. 120/01/2010-ST dated 19-01-2010 was placed before me to contend that the Board has issued clarification regarding input services which are directly relatable to export business of BPOs/call centers. That the services stated in S.No.16 to 19 in the above table fall into the category clarified in para 3.1.2 of the above Circular dated 19-01-2010 and the denial of credit is unjustified. Winding up his arguments, he submitted that no interest is liable to be paid as the appellant is eligible for credit. For this, he relied upon the judgment in CCE Vs Billforge Pvt.Ltd.2012 (279) ELT 209(Kar).
5. Against this, the learned AR Shri Deepak supported the finding in the impugned order. He contended that the appellants have to establish the nexus between the input services and output services exported. The appellants having failed to discharge this burden, the Commissioner (Appeals) was right in disallowing the credit. Further that the appellant did not produce sufficient documents and for this reason, some of the services have been remanded by the Commissioner. He pleaded that the appeal may be dismissed.
6. I have heard the rival submissions and perused the appeal papers. At the outset, it has to be stated that the period involved is prior to 01-04-2011 when the definition of input services had a wide ambit covering all most all services relating to business of manufacture/providing of output services. All the services listed in the above table have been covered by various judgments in which it has been held that credit is admissible, observing that these services would fall within the purview of activities relating to business. The submission made by the learned Consultant that the Commissioner (Appeals) has relied upon the definition of input pertaining to the period after 01-04-2011 appears to be correct. It is also seen that Commissioner (Appeals) has relied upon the judgments in Maruthi Suzuki case, Vandana Global case etc. in which the issue under consideration was mainly admissibility of credit on inputs and not input services. The impugned services listed in the table above have been held to be eligible for credit in the judgment laid in Coca Cola India Pvt.Ltd 2009(242)ELT 168(Bom) KPMG Vs CCE. 2013-TIOL-761-CESTAT(Del), CST, Bangalore Vs Mercedez Benz research & Development(P)Ltd 2013(30)STR 257(Tri.Bang), CCE Vs HCL Technologies(2014)52 Taxmann.com 393(Allahabad).
7. I am not able to endorse the view of the department that the impugned services do not have nexus with the output services. In fact, the department has denied credit on all input services availed. By denying credit on all the input services, it seems to appear that the appellants has not availed any input service for providing output service during the relevant period, which is not possible. Some of the services like rent a cab service, renting of immovable property, Information Technology Software Services, Cargo handling Service etc have been remanded by the Commissioner (Appeals) to verify invoices as well as facts. It needs to be stated that the matter was remanded by the Tribunal by its earlier order to the Commissioner (Appeals) for reconsideration of the matter. While remanding the matter to Commissioner (Appeals), the Tribunal was fully aware that the matter could be tried and decided by the Commissioner (Appeals). In such circumstances, remand by Commissioner(Appeals) of some services (issues) to the adjudicating authority is not called for. It is also to be stated that the appellants have furnished invoices, Cenvat register and other document necessary to show the availment of credit. In the impugned order, while remanding the matter the Commissioner (Appeals) has not stated what is the document/fact which is further necessary to decide the issue. Without any such averment the Commissioners (Apeals) has simply remanded the matter to the adjudicating authority. At this juncture, it is relevant to advert to the Circular dated 19-01-2010 placed before me by the learned Consultant. In the said circular, Board has specifically clarified that in the case of BPO/call centers the services like renting of premises, software technology services, telecom services, rent a cab services etc. would be needed for providing their output services efficiently and that such services would be eligible for credit.
8. Taking into account the facts of the case the judicial dispositions laid in the judgments in Coca Cola India(P)Ltd. KPMG case, HCL Technologies case, on the issues and the circular dated 19-01-2010, I hold that the credit is admissible on all the services. Denial of the credit being unjustifiable, the impugned order is liable to be set aside.
9. In the result, the impugned order is set aside and the appeal is allowed with consequential reliefs, if any.
(Pronounced in open court) (SULEKHA BEEVI. C.S.) MEMBER(JUDICIAL) Dks DKS 2