Custom, Excise & Service Tax Tribunal
Commissioner Of Service Tax vs Verizon Data Services India P.Ltd on 11 December, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal No.ST/S/40055/2013 & ST/40069/2013
[Arising out of Order-in-Appeal No.124/2012 (MST) dt. 25.9.2012 passed by the Commissioner of Central Excise (Appeals),Chennai]
For approval and signature:
Honble ShriMATHEW JOHN, Technical Member
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 the Member wishes to see the fair copy of
the Order? :
4. Whether Order is to be circulated to the Departmental
Authorities? :
Commissioner of Service Tax
Chennai
Appellant
Versus
Verizon Data Services India P.Ltd.
Respondent
Appearance:
Shri P. Arul, Superintendent (AR)
For the Appellant
Shri S.Muthu Venkatraman,
For the Respondent
CORAM:
Honble Shri Mathew John, Technical Member
Date of hearing : 11-12-2013
Date of decision : 11-12-2013
FINAL ORDER No.40627/2013
1. In this case, after hearing both parties on 04-12-13 by Division Bench, it was felt that the matter was covered by a decision of the Hon'ble Karnataka High Court and therefore both stay petition and appeal should be heard together. It was also decided that the case may be heard by Single Member Bench since Cenvat credit involved is less than Rs.50 lakhs. Accordingly, the case was posted for hearing today. Since there was no prima facie merit in the stay petition filed by Revenue, it was dismissed and thereafter appeal was taken up for regular hearing and final disposal and both the sides were heard accordingly.
2. The respondent was engaged in providing services like Commercial Training and Coaching, Erection, Commissioning and Installation, Maintenance or Repair and was registered with the service tax authorities for payment of service tax for those services as and when those services became taxable. On 16-05-08, a new levy was imposed on "Information Technology Software Service". The respondents were providing such service and they were also receiving such services from persons located abroad. The services provided by them were being exported.
3. On 27-06-08, the respondent applied for modifying their registration with service tax authorities to include the new taxable service namely, Information Technology Software Services and also for centralized registration of their units located at various locations in India. Such registration was granted on 22-07-08. They started taking Cenvat credit of input services used in the new taxable output service. They were not able to utilize entire Cenvat credit that was being taken for payment of service tax provided within India. So they filed a refund claim on 23-01-09 under Rule 5 of the Cenvat Credit Rules, 2004 pertaining to services exported during the period May 2008. The total amount of refund claimed was Rs.16,67,520/-. Out of that, the adjudicating authority sanctioned refund of Rs.5,07,020/-and rejected the remaining amount of Rs.11,60,500/-. The said amount was rejected on two grounds namely,-
(i) the respondent had taken credit of input services received prior to 28-05-08. This date has been reckoned after giving allowance to the fact that respondent had to apply for registration only within 30 days from the date they started providing taxable service.
(ii) Some portion of the credit taken is rejected on certain services which the adjudicating authority considered to be not input services. These amounts were service tax paid on (a) rent paid for cafeteria area in their business premises (b) AMC charges for Air Conditioners. (c) payments made to Instructor in Gymnasium in business premises.
4. Aggrieved by the order of the adjudicating authority, the respondent filed an appeal with the Commissioner (Appeals). The Commissioner (Appeals) relied on the decision of the Karnataka High Court in the case of mPortal India Wireless Solutions (P) Ltd. Vs CST 2012 (27) STR 134 (Kar.) holding that service tax registration is not mandatory for refund of accumulated Cenvat credit of service tax paid on input services used for export of services. The Commissioner (Appeals) also held that the disputed input services had nexus with the output services provided by the respondent and allowed credit and consequent refund on such amount was also sanctioned. Aggrieved by the order of the Commissioner (Appeals), Revenue has filed this appeal.
5. Arguing for Revenue, Ld. AR for Revenue submits that Karnataka High Court gave the decision in mPortal India Wireless Solutions (P) Ltd. (supra) for the reason (as recorded in para 7 of the order) that either side was not able to point out any provision in Cenvat Credit Rules, 2004 (CCR 2004 for short) to the effect that registration is a mandatory requirement for eligibility of Cenvat credit. He submits that there are provisions in Service Tax Rules, 1994 which makes it clear that registration is mandatory for any service provider. His submission is that a combined reading of the Service Tax Rules, 1994 and Cenvat Credit Rules, 2004 shows that registration is mandatory for taking credit. He relies on the following provisions:-
A) Section 69 of the Finance Act, 1994 which reads as under:-
SECTION 69.?Registration. (1) Every person liable to pay the service tax under this Chapter or the rules made thereunder shall, within such time and in such manner and in such form as may be prescribed, make an application for registration to the Superintendent of Central Excise.
(2) The Central Government may, by notification in the Official Gazette, specify such other person or class of persons, who shall make an application for registration within such time and in such manner and in such form as may be prescribed.
B) Rule 4 of Service Tax Rules, 1994 which reads as under :-
RULE 4.?Registration. (1)?Every person liable for paying the service tax shall make an application to the concerned Superintendent of Central Excise in Form ST-1 for registration within a period of thirty days from the date on which the service tax under section 66 of the Finance Act, 1994 (32 of 1994) is levied :
Provided that where a person commences the business of providing a taxable service after such service has been levied, he shall make an application for registration within a period of thirty days from the date of such commencement
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(4)?Where an assessee is providing more than one taxable service, he may make a single application, mentioning therein all the taxable services provided by him, to the concerned Superintendent of Central Excise.
(5)?The Superintendent of Central Excise shall after due verification of the application form, or an intimation under sub-rule (5A), as the case may be, grant a certificate of registration in Form ST-2 within seven days from the date of receipt of the application or the intimation. If the registration certificate is not granted within the said period, the registration applied for shall be deemed to have been granted.
(5A)?Where there is a change in any information or details furnished by an assessee in Form ST-1 at the time of obtaining registration or he intends to furnish any additional information or detail, such change or information or details shall be intimated, in writing, by the assessee, to the jurisdictional Assistant Commissioner or Deputy Commissioner of Central Excise, as the case may be, within a period of thirty days of such change. C) He relies on Rule 7 of Service Tax Rules 1994 which reads as under :-
RULE 7.?Returns. (1)?Every assessee shall submit a half-yearly return in Form ST-3 or ST-3A, as the case may be, along with a copy of the Form TR-6, in triplicate for the months covered in the half-yearly return.
(2)?Every assessee shall submit the half yearly return by the 25th of the month following the particular half-year D) He also relies on Rule 3 of CCR 2004 which reads as under:-
CENVAT credit.?RULE 3. (1) A manufacturer or producer of final products or a provider of output service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of --- E) He also relies on Rule 9(1), 9(2), 9 (5), 9(6) and 9(9) of CCR 2004 which prescribe the documents based on which credit can be taken, the records to be maintained and returns to be filed for availing Cenvat Credit. (These rules do not mention registration)
6. He also relies on Notification No.5/06-CE (N.T)which provides for refund of accumulated credit as per Rule 5 of CCR 2004. Conditions 3 and 6 in Appendix to the Notification read as under:-
3.?The manufacturer or provider of output service, as the case may be, submits an application in Form A annexed to this notification to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, in whose jurisdiction, -
(a) the factory from which the final products are exported is situated, along with the Shipping Bill or Bill of Export, duly certified by the officer of customs to the effect that goods have in fact been exported; or
(b) the registered premises of the service provider from which output services are exported is situated, along with a copy of the invoice and a certificate from the bank certifying realization of export proceeds.
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6.?The application in Form A, along with the prescribed enclosures and the relevant extracts of the records maintained under the Central Excise Rules, 2002, CENVAT Credit Rules, 2004, or the Service Tax Rules, 1994, in original, are filed with the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, before the expiry of the period specified in section 11B of the Central Excise Act, 1944 (1 of 1944).
7. Thus he argues that there are legal provisions under which a service provider is required to take out registration before claiming Cenvat credit and these provisions were not pointed out to the High Court in the case of mPortal Wireless Solutions (supra). He also relies on Tribunal's stay order in the case of Welspun Maxsteel Ltd. Vs CCE Raidgarh 2012-TIOL-1517-CESTAT-MUM. He relies on the decision of the Tribunal in the case of Showa India (P) Ltd. Vs CCE Faridabad 2012 (275) ELT 128 (Tri.-Del.)
8. He relies on a host of other decisions to argue that whenever exemption is claimed, the conditions have to be strictly complied with. He particularly relied on the following decisions.
(i) CCE New Delhi Vs Hari Chand Shri Gopal - 2010 (260) ELT 3 (SC)
(ii) Eagle Flask Industries Ltd. Vs CCE Pune - 2004 (171) ELT 296 (SC).
(iii) Wipro Ltd. Vs UOI 1997 (94) ELT 470 (SC). 2012 (27) STR 225 (Kar.).
(iv) CST Bangalore Vs Motor World 2012 (27) STR 225 (Kar.).
(v) CCE Ahmedabad Vs Inductotherm (I) Pvt. Ltd. - 2012 (283) ELT 359 (Guj.).
9. Ld.AR also submitted that in the case of disputed input services, Revenue is not contesting the credit in respect of maintenance of building at Hyderabad as mentioned in ground No.(vii) of the memo of appeal. In respect of other services, like rent paid on cafeteria area, AMC for Air conditioning and service tax paid on services of instructor engaged in a gymnasium in business premises. The Ld A.R. contests that those services have no nexus with the output services provided. In support of his contention, he relies on the decision of Hon'ble Gujarat High Court in CCE Ahmedabad Vs Cadila Healthcare Ltd. - 2013 (30) STR 3 (Guj.). He especially relies on para 5.2 (ix) and 5.5 (xi). He submits that allowing of credit in respect of disputed services by the Commissioner (Appeals) is not proper and same should be set aside and adjudication order should be restored and appeal may be allowed.
10. Opposing the prayer, Ld. advocate for the respondent submits that information technology software service became taxable from 16-05-08. The appellant was already registered with service tax department for payment of tax on other taxable services. On 23-07-08 itself they had applied for amending their service tax registration to include the new service. They were actually exporting these services and in respect of this service, they were not required to pay any service tax. Rule 4 of Service tax Rules, 1994 requires a person liable to pay service tax to take registration. Since they were not liable to pay service tax for service exported there was delay of about 11 days in applying for registration. It is his contention that there is no time limit provided in the CCR, 2004 for taking of credit with reference to date on which service is received or the date on which the invoice is raised. The only restriction is that same should be in respect of taxable service and taken only after payment was made to the service provider. There is nothing in the proceedings to the effect that credit was taken in respect of any exempted service or the appellant took credit without payment of consideration for services received. In the decision of Karnataka High Court in mPortal India Wireless Solutions Pvt. Ltd. (supra) the High Court held that there is nothing in CCR 2004 to the effect that Cenvat credit for a period prior to date of registration could not be taken. Even in the present proceedings, Revenue is not pointing out any such explicit provision in Cenvat Credit Rules, 2004. He submits that this decision of Hon.Karnataka High Court should prevail over the decision of Tribunal in Showa India (P) Ltd. (supra) and the stay order of the Tribunal in Welspun Maxsteel Ltd. (supra). The other decisions pointed out Ld. A. R. are not dealing with the issue presently in dispute.
11. At this stage, the Bench raised a query whether the credit taken related to the period prior to date from which Information Technology Software Service became taxable i.e 16-05-08. Learned advocate said that no such credit has been taken and there is no allegation in the show cause notice that such credit was taken and that is the reason why there is no argument on this issue has been placed before the lower authorities.
12. The Ld Advocate for Respondent argues that in a context, where they were not required to pay service tax in respect of the information technology service provided, the delay of 11 days cannot be reason to deny credit especially having regard to the fact that CCR, 2004 does not impose any restriction as to the time limit within which credit is to be taken. He submits that input services in question were received after 16-05-08 and used for providing taxable output service exported and that should be sufficient for the purpose of claiming refund. He further submits that provisions of notification 5/06-CE(NT) have been complied because respondent had already taken out registration and the refund claim was filed before the authority with whom registration was taken. According to him, the decision of Karnataka High Court in mPortal India Wireless Solutions Pvt. Ltd.(supra) applies on all fours to the facts of the case and therefore there is no reason to interfere with the order of the Commissioner (Appeals). He also points out that even in cases of clandestine manufacture and clearance more often than not, Cenvat credit is allowed during adjudication stage or higher levels even to SSI units which are not registered with the department.
13. I have considered submissions on both sides. I find force in the argument of respondent that as pointed out by Hon. Karnataka High Court there is nothing in CCR, 2004 to restrict taking of credit only for services received after the date of registration especially in a situation where provider of service is exporting the services and is not required to pay service tax.
I note that Rule 4 of Service Tax Rules is applicable to a person who is liable to pay service tax. If there is an offence of not complying with Rule 4 of Service Tax Rules, that matter has to be adjudicated as per the provisions of the Act and the Rules. Denial of Cenvat credit may not be the proper course in such situation. The delay in taking registration is only of 11 days. The claim for refund has been submitted after registration. Further the provision of CCR, 2004 which is not complied with is not precisely pointed out. The requirement of registration prior to having eligibility for credit is sought to be achieved by a laborious interpretation of Service Tax Rules, 1994 and Cenvat Credit Rules, 2004 by interpreting that a service provider has to get registered (as per Service Tax Rules, 1994) and only a service provider can take credit (as per Cenvat Credit Rules, 2004) and deducing that an unregistered service provider does not get eligibility for credit. This is not a very sound argument. By not getting registered a person does not cease to become a provider of taxable service if he is actually providing such service. Even if a service provider is not registered there will be tax liability on him if he is providing taxable service. The concomitant benefit of Cenvat credit also has to be seen accordingly, of course subject to provisions in Cenvat Credit Rules 2004, in the absence of clear provisions to the contrary.
14. The procedural requirements for allowing Cenvat Credit is construed more liberally than the condition of an exemption notification as may be seen from the powers granted to the Assistant/Deputy Commissioner in condoning the defects in the documents based on which credit is taken. The essential criteria laid down in the proviso to Rule 9(2) is that the service should have been received and accounted and used in providing the taxable service.
15. The decisions pointed out by the Ld A. R. for revenue are in the matter of claiming exemption notification and in the matter of compliance with substantive issues. Those are not in the context of Cenvat Credit Rules. So I consider the facts and law of this case to be different from those dealt with in those cases.
16. In view of discussions as above, I do not find any reason to take a view different from the one taken by Hon. Karnataka High Court in the case of mPortal Wireless Solutions Pvt Ltd.(Supra). So I uphold the order of Commissioner (Appeals) on the first issue.
17. On the issue of eligibility of cenvat credit on certain specific services also I have heard both sides in detail. There is no reason to hold that renting of cafeteria area cannot form input service when service of cafeteria itself is considered as input service as decided by Mumbai High Court in CCE Nagpur Vs Ultratech Cement Ltd. - 2010 (20) STR 577 (Bom.) and by the Karnataka High Court in the case of CCE Bangalore Vs Stanzen Toyotetsu India (P) Ltd.-2011 (23) STR 444 (Kar.). So is the case with AMC paid for maintenance of air conditioner as air conditioners are used for maintenance of computers used in information technology field. This is an input service directly needed for providing output service and there is no need to consider the scope of the expression activities relating to business to allow this credit. Only in a situation where a service is sought to be brought within the definition of Rule 2 (i) of CCR, 2004, within the scope of the expression activities relating to business there is a need to look at the decision in the case of Cadila Health Care Ltd. (Supra)
18. In the case of Gym instructor, considering peculiar nature of information technology services, physical fitness of the employee is necessary input for providing output services and I do not find any reason to deny this credit either. This service is almost similar to canteen services provided to employees.
19. Thus I do not find any reason to interfere with the order of Commissioner (Appeals) and the second issue as well.
20. In view of analysis as above the appeal filed by Revenue is rejected.
(Dictated and pronounced in open court) (MATHEW JOHN) TECHNICAL MEMBER gs 2