Custom, Excise & Service Tax Tribunal
Cst Bangalore vs Jubilant Biosys Ltd on 11 July, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order. 22339-22355 / 2014 Appeal(s) Involved: ST/1356/2012-SM, ST/1357/2012-SM, ST/1358/2012-SM, ST/1359/2012-SM, ST/1388/2012-SM, ST/1390/2012-SM, ST/1392/2012-SM, ST/1393/2012-SM, ST/1394/2012-SM, ST/1402/2012-SM, ST/1403/2012-SM, ST/1404/2012-SM, ST/1406/2012-SM, ST/1419/2012-SM, ST/782/2010-SM, ST/783/2010-SM, ST/784/2010-SM [Arising out of O-in-A No.04-2012 dated 22/02/2012 passed by CCE(Appeals-II), Bangalore-27 ] [Arising out of O-in-A No.05-2012 dated 22/02/2012 passed by CCE(Appeals-II), Bangalore-27.] [Arising out of O-in-A No.06-2012 dated 22/02/2012 passed by CCE(Appeals-II), Bangalore-27] [Arising out of O-in-A No.07-2012 dated 22/02/2012 passed by CCE(Appeals-II), Bangalore-27] [Arising out of O-in-A No.12-2012 dated 22/02/2012 passed by CCE(Appeals-II), Bangalore-27] [Arising out of O-in-A No.04-2012 dated 22/02/2012 passed by CCE(Appeals-II), Bangalore-27] [Arising out of O-in-A No.06-2012 dated 22/02/2012 passed by CCE(Appeals-II), Bangalore-27] [Arising out of O-in-A No.09-2012 dated 22/02/2012 passed by CCE(Appeals-II), Bangalore-27] [Arising out of O-in-A No.08-2012 dated 31/01/2012 passed by CCE(Appeals-II), Bangalore-27] [Arising out of O-in-A No.09-2012 dated 31/01/2012 passed by CCE(Appeals-II), Bangalore-27] [Arising out of O-in-A No.10-2012 dated 31/01/2012 passed by CCE(Appeals-II), Bangalore-27] [Arising out of O-in-A No.12-2012 dated 31/01/2012 passed by CCE(Appeals-II), Bangalore-27] [Arising out of O-in-A No.05-2012 dated 22/02/2012 passed by CCE(Appeals-II), Bangalore-27] [Arising out of O-in-A No.42 -44-2010 dated 19/01/2010 passed by CCE(Appeals-II), Bangalore-27 ] CST BANGALORE NO. 16/1, S.P. COMPLEX, LALBAGH ROAD, Appellant(s) JUBILANT BIOSYS LTD 96, INDUSTRIA AREA, 2ND STAGE, YESHWANTHPUR, BANGALORE Appellant(s) CST BANGALORE NO. 16/1, S.P. COMPLEX, LALBAGH ROAD, Appellant(s) JUBILANT BIOSYS LIMITED 96, INDUSTRIAL AREA, 2ND STAGE, YESHWANTHPUR, BANGALORE-560022 Appellant(s) JUBILANT BIOSYS LTD 96, INDUSTRIAL SUBURB, 2ND STAGE, INDUSTRIAL AREA, YESHWANTPUR, BANGALORE. Appellant(s) Versus JUBILANT BIOSYS LTD NULL Respondent(s)
Commissioner of Service Tax BANGALORE-SERVICE TAX NULL 1ST TO 5TH FLOOR, TTMC BUILDING,above BMTC BUS STAND,DOMLUR BANGALORE, - 560071 KARNATAKA Respondent(s) Commissioner of Service Tax JUBILANT BIOSYS LTD NULL 1ST TO 5TH FLOOR, TTMC BUILDING,above BMTC BUS STAND,DOMLUR BANGALORE, - 560071 KARNATAKA Respondent(s) Commissioner of Central Excise ,Customs and Service Tax BANGALORE-I NULL POST BOX NO 5400...CR BUILDINGS, BANGALORE, - 560001 KARNATAKA Respondent(s) Commissioner of Service Tax BANGALORE-SERVICE TAX NULL 1ST TO 5TH FLOOR, TTMC BUILDING,above BMTC BUS STAND,DOMLUR BANGALORE, - 560071 KARNATAKA Respondent(s) Appearance:
Shri Devendra Sharma, Advocate For the appellant/assessee Shri Ganesh Haavanur, Addl. Commissioner(AR) For the Revenue CORAM:
HON'BLE SHRI S.K. MOHANTY, JUDICIAL MEMBER Date of Hearing: 11/07/2014 Date of Decision: 11/07/2014 Order Per : S.K. MOHANTY These appeals have been filed by M/s Jubilant Biosys Limited (hereinafter, for short "JBL") and the Revenue Department. The issue involved in these appeals is identical i.e. refund claim in terms of Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No.5/2006-C.E. (N.T.) dated 14.03.2006 for refund of huge accumulated Cenvat credit of service tax paid on the input services. Thus, with the consent of both sides, all these appeals are taken up together for hearing and a common order is being passed. The details of appeal are as under:-
Sl.No. Appeal by JBL Appeal by Department 1 ST/782/2010 No appeal filed 2 ST/783/2010
-do-
3.
ST/784/2010
-do-
4. ST/1392/2012 ST/1356/2012
5. ST/1390/2012 ST/1406/2012
6. ST/1419/2012 ST/1357/2012
7. ST/1388/2012 ST/1359/2012
8. ST/1393/2012 ST/1358/2012
9. ST/1394/2012 ST/1403/2012
10. (Already decided) ST/1402/2012
11.
12.
-do-
No appeal filed ST/1404/2012 ST/1405/2012
2. The brief facts of the case are that JBL is a 100% EOU under the jurisdiction of Cochin Special Economic Zone (CSEZ) and is also registered with the Department of Scientific and Industrial Research (DSIR). It renders early drug discovery services, for which it is registered with the Service Tax Department under taxable category of Scientific and Technical Consultancy Service, which is mostly exported by M/s JBL to its overseas clients. To provide the said output service, JBL receives various input services and avails CENVAT credit of the service tax paid on such input services. Since JBL is engaged in exporting the output service on which no service tax is leviable, there was huge accumulation of CENVAT credit of service tax paid on the input services. Accordingly, JBL filed refund claims under Rule 5 of the CENVAT Credit Rules, 2004 read with Notification No.5/2006-C.E.(N.T.) dated 14/03/2006 before the jurisdictional Service Tax authorities. Service tax paid on some of the input services were allowed for refund by the authorities below. Against disallowance of refund claim on some other services, JBL is in appeal before this Tribunal.
3. The issue involved in the appeal Nos. ST/783, 784, 1392, 1390, 1419, 1388, 1393, 1394/2012 is with regard to denial of CENVAT credit on various taxable services by the authorities below on the ground that the services have no nexus with the output service provided by JBL. The disallowed services are as under:-
a. Outdoor catering service, b. Insurance service, c. Management consultancy service d. Mobile Telecommunication Service, e. Scientific and technical consultancy service f. Travel agency service g. Legal consultancy service h. Business Auxiliary Service i. Business Support Service j. Cargo handling Agency k. Equipment Rental Charges l. Manpower Recruitment Agency Services m. Maintenance or Repair Services n. Banking and other Financial Services o. Professional Consultancy Services p. Customs House Agent Services q. House Keeping and Pest Control r. Rent-a-cab Services s. Security Services
4. Further, JBL has also filed appeal against the impugned order No. 42 to 44/2010 dated 19.01.2010 (listed as Appeal No. ST/782/2010) on the ground that rejection of refund claim on time bar issue is not appropriate in all the cases, since the claim application in most of the cases were filed within the stipulated time frame prescribed in the statute.
5. The Revenue has filed the aforementioned appeals (9 nos.) on the ground that there are no nexus between the disputed services and the service exported by the appellant. Thus, according to the Revenue, the disputed services cannot be considered as input service for the purpose of taking Cenvat credit and therefore, claiming of refund under Rule 5 of the Cenvat Credit Rules, 2004 is not legal and proper.
6. Shri Devendra Sharma, the ld. Advocate appearing for the appellant submitted that the disputed services are confirming to the definition of input service contained in Rule 2(l) of the Cenvat Credit Rules, 2004. He further submitted that since the disputed services have been used for the business related activities of JBL, service tax paid on those services qualify for availment of Cenvat credit. To support his submissions that Cenvat credit cannot be denied on the aforementioned disputed services, the ld. Advocate has placed reliance on the Final Order No. 26721-26723/2013 dated 09.01.2013 passed by this Tribunal in their own case. Further, the ld. Advocate also relied on the decisions of this Tribunal in the case of Dell International Services India Pvt. Ltd. Vs. CCE, Bangalore [2010(17) STR 540 (Tri. Bang.)], Convergys India Services Pvt. Ltd. Vs. CST, New Delhi [2012(25) STR 251 (Tri. Del.)] and in the case of CCE, Hyderabad Vs. Deloitte Tax Services India Pvt. Ltd. [2008(11) STR 266 (Tri.)], to justify his stand that denial of Cenvat credit on the disputed services is not justified, and thus, JBL is entitled for refund claim filed under Rule 5 of the Cenvat Credit Rules, 2004.
7. With regard to appeal No. ST/782/2010, the submissions of the ld. Advocate are that the refund applications in most of the cases were filed within the prescribed time limit, and thus, rejection of the same on the ground of limitation is not proper. For consideration of relevant date for the purpose of computation of limitation period, in case of exportation of services, the ld. Advocate has relied on the decisions of this Tribunal in the case of CCE, Goa Vs.- Ratio Pharma India Pvt. Ltd., reported in 2015 (38) STR 83 (Tri.-Mumbai), Bechtel India Pvt. Ltd. Vs. CCE, Delhi, reported in 2014 (34) STR 437 (Tri.-Del.) and Business Process Outsourcing (I) Pvt. Ltd. Vs. CCE, Bangalore, reported in 2014 (34) STR 364 (Tri.-Bang.).
8. Shri Ganesh Havanur, the ld. D.R. appearing for the Revenue reiterated the grounds urged in the appeal memorandum and with regard to the appeals filed by JBL, he submits that refund of service tax on the disputed services are not admissible in absence of any nexus thereto with the taxable service exported.
9. I have heard the ld. counsel for both the sides and perused the records.
10. The definition of input service under the Cenvat Credit Rules, 2004 includes services used in relation to the business activities of the output service provider. The expression: 'activity relating to business' has not been defined in the Rules. Such an expression is also not defined in the Central Excise Act, 1944 and in the Finance Act, 1994. Hence, in absence of any specific meaning being assigned to the said phrase/expression in the relevant statutes, the true assertion of the same can be used for resolution of concerned dispute from the other statute. In this context, reliance is placed on Section 37 of the Income Tax Act, 1961, which contains the term - "wholly and exclusively for the purpose of the business or profession", and the said expression has the subject matter of detailed scrutiny by the courts in various decisions. Section 37 of the Income Tax Act, 1961 was the subject matter of litigation due to the following reasons:-
(i) Necessity of the expenditure;
(ii) Reasonableness of the expenditure;
(iii) Purpose of the expenditure; and
(iv) Nexus of the expenditure with income.
In interpreting the true scope and meaning of the above expression contained in the Income Tax statute, the Hon'ble Supreme Court in the case of CIT - Vs. - Malayalam Plantation Ltd., 53 ITR 140 (SC) and CIT - Vs. - Nainital Bank, 62 ITR 638 (SC) have discussed the basic principles of 'commercial expediency'. The Hon'ble Apex Court have laid down the law that if an expenditure is commercially required to be incurred with a view to benefit the trade and to facilitate the carrying on the business, such expenditure will be allowed as deduction under Section 37 of the Income Tax Act, 1961.
11. The business activities in the case of a service provider are not only confined to mere proving the service directly, but also include other activities, which he may be required for accomplishing the purpose of business. For smooth functioning of the business of providing the service and other like activities, the service provider may use other services, which are ancillary and incidental for accomplishing the main purpose. In such an eventuality, it cannot be said that the function of those ancillary services are not connected to the business purpose of the assessee. On perusal of the definition of 'input service', it would transpire that the substantive part covers services used directly or indirectly, in or in relation to manufacture of final product/provision of service; whereas, the inclusive part covers various services used in relation to the business of manufacturing the final product/provision of service. In other words, the services envisaged in the inclusive part of the definition is very broad and a narrow interpretation cannot be placed to infer that the services used only in the manufacture of final product/provision of service will qualify as 'input service' for the purpose of taking Cenvat credit. In this context, the Hon'ble Bombay High Court in the case of Coca Cola India Pvt. Ltd. - Vs. - Commissioner of Central Excise, Pune - III [2009 (242) ELT 168 (Bom.)], while conveying the true meaning of the phrase 'activities relating to business' in background of the rules, has held as follows :-
26.?The definition of input service employs the phrase activity relating to business. The words relating to further widens the scope of the expression activities relating to business. This is in view of following observations of Supreme Court in Doypack Systems (P) Limited v. Union of India - 1988 (36) 201 (S.C.), interpreting the expression in relation to :
48.?The expression in relation to (so also pertaining to), is a very broad expression which pre-supposes another subject matter. These are words of comprehensiveness which might both have a direct significance as well as an indirect significance depending on the context, see State Wakf Board v. Abdul Aziz (A.I.R. 1968 Madras 79, 81 paragraphs 8 and 10, following and approving NitaiCharanBagchi v. Suresh Chandra Paul (66 C.W.N. 767), ShyamLal v. M. Shayamlal (AIR 1933 All. 649) and 76 Corpus JurisSecundum 621. Assuming that the investments in shares and in lands do not form part of the undertakings but are different subject matters, even then these would be brought within the purview of the vesting by reason of the above expressions. In this connection reference may be made to 76 Corpus JurisSecundum at pages 620 and 621 where it is stated that the term relate is also defined as meaning to bring into association or connection with. It has been clearly mentioned that relating to has been held to be equivalent to or synonymous with as to concerning with and pertaining to. The expression pertaining to is an expression of expansion and not of contraction.
The expression Relating to thus widens the scope of the definition.
27.?Similarly, the use of the word activities in the phrase activities relating to business further signifies the wide import of the phrase activities relating to business". The Rule making authority has not employed any qualifying words before the word activities, like main activities or essential activities etc. Therefore, it must follow that all and any activity relating to business falls within the definition of input service provided there is a relation between the manufacturer of concentrate and the activity. Therefore, the phrase activities relating to business are words of wide import.
12. Further, on perusal of the statute book, it reveal that 'input service' is not restricted to services used in or in relation to providing the output service, but the same extends to all the services used by the service provider, in relation to business of providing the output service, involving numerous activities. It is not practically possible to specify each and every activity of business in the definition clause, for which, the words 'such as' have been used, meaning thereby that the list provided therein is only illustrative and not exhaustive. In the case of Commissioner of Central Excise, Nagpur - Vs. - Ultratech Cement Ltd., reported in 2010 (260) ELT 69 (Bom.), the Hon'ble Bombay High Court has discussed the meaning of 'such as' in context with the definition of 'input service', the relevant paragraphs in the said judgement are extracted below:-
"35. ?The argument of the Revenue, that the expression such as in the definition of input service is exhaustive and is restricted to the services named therein, is also devoid of any merit, because, the substantive part of the definition of input service as well as the inclusive part of the definition of input service purport to cover not only services used prior to the manufacture of final products, subsequent to the manufacture of final products but also services relating to the business such as accounting, auditing..... etc. Thus the definition of input service seeks to cover every conceivable service used in the business of manufacturing the final products. Moreover, the categories of services enumerated after the expression such as in the definition of input service do not relate to any particular class or category of services, but refer to variety of services used in the business of manufacturing the final products. There is nothing in the definition of input service to suggest that the Legislature intended to define that expression restrictively. Therefore, in the absence of any intention of the Legislature to restrict the definition of input service to any particular class or category of services used in the business, it would be reasonable to construe that the expression such as in the inclusive part of the definition of input service is only illustrative and not exhaustive. Accordingly, we hold that all services used in relation to the business of manufacturing the final product are covered under the definition of input service and in the present case, the outdoor catering services being integrally connected with the business of the manufacture of cement, credit of service tax paid out on catering services has been rightly allowed by the Tribunal.
36.? The argument of the Revenue that the expression such as in Rule 2(l) of 2004 Rules is restricted to the categories specified therein, runs counter to the C.B.E.C. Circular No. 97, dated 23rd August, 2007. In that Circular the C.B.E.C. (vide para 8.3) has held that the credit of service tax paid in respect of mobile phone service is admissible provided the mobile phone is used for providing output service or used in or in relation to manufacture of finished goods. Mobile phone service is neither used in the manufacture of final product nor it is specifically included in the definition of input service. Even then, the C.B.E.C. has construed the definition of input service widely so as to cover not only the services specifically enumerated in the definition of input service but also cover all services which are used in relation to the business of manufacturing the final products. Therefore, the argument of the revenue which runs counter to stand taken by the C.B.E.C. cannot be accepted."
13. The ratio laid down by the Hon'ble Bombay High Court as referred above in context with the definition of 'input service' is that the definition is exhaustive and is not confined to the services itemized therein after the phrase such as; rather the said definition takes within its ambit every possible service used by the service provider in providing the output service. It has been ruled that the term 'business' in context with the definition of 'input service' cannot be given restricted definition to say that business of providing service is linked only to the services used directly therein.
14. In view of above, I am of the firm opinion that any service received and which is commercially required for the purpose of carrying on the business of the service provider, will be covered by the expression 'activity relating to business' contained in Rule 2(l) of the Cenvat Credit Rules, 2004.
15. The nature, purpose and use of the disputed services by JBL as explained in the grounds of appeal, in my opinion, establish the fact that the expenditure incurred for those purported disputed services are commercially required to be incurred with a view to facilitate the carrying on the business of providing the taxable service, and thus, confirming to the expression 'activities relating to business' as contained in the definition clause of 'input service'; as the word 'business' is one of wide import and in fiscal statutes, it must be construed in a broad rather than a restricted sense.
16. I find that this Tribunal in the decisions (supra) cited by the ld. Advocate for the appellant has appropriately interpreted the position of law in arriving at the conclusion that the claimant is entitled for refund of service tax on the taxable services, even if those services are not directly related to the provision of output service, but used for accomplishing the purpose of business or for achieving the objective of business. Further, I find that in those decided cases, including the case of the appellant itself that most of the disputed services involved in the present case, have been held to be the input service, on which the exporter of service is entitled for refund of accumulated Cenvat credit on account of exportation of the taxable service, in terms of Rule 5 of the Cenvat Credit Rules, 2004.
17. In view of the above discussions, I am of the opinion that denial of refund benefit to JBL under Rule 5 of the Cenvat Credit Rules, 2004 by the authorities below is not justified. I am also of the considered view that there are no merits in the appeals filed by the Revenue, because of the fact that the nexus between the input services and the output service exported by the appellant is duly established by JBL for claiming of refund of accumulated Cenvat credit.
18. So far as the appeal No. ST/782/2010 filed by JBL against the impugned order No. 42 to 44/2010 dated 19.01.2010 is concerned, the submission of the ld. Advocate is that the refund applications were filed within the prescribed time limit, which were not properly verified by the refund sanctioning authority. At this juncture, it is not appropriate for the Tribunal to ascertain the dates, when the refund applications were filed by JBL for the purpose of computation of the limitation. Therefore, I am of the opinion that the matter should be remanded back to original authority for ascertainment of fact regarding the date of filing of the refund applications and if the applications were filed within the stipulated time limit, then to decide the matter in line with the observations recorded above.
19. In view of the foregoing, the appeals filed by both JBL and the Revenue Department are disposed of in the following terms:
(a) Appeal Nos. ST/783, 784, 1392, 1390, 1419, 1388, 1393, 1394/2012 filed by JBL are allowed.
(b) Appeal No. ST/782/2010 filed by JBL is allowed by way of remand to the original authority for de-novo adjudication in the light of the observations in para 18 above. The appellant should be given opportunity of hearing before adjudication of the matter.
(c) Appeals (9 nos.) filed by the Revenue are dismissed.
(Operative portion of the order has been pronounced in open court) (S.K. MOHANTY) JUDICIAL MEMBER Raja..
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