R. Kumar, B.Com. MBA (Finance)
WNS Global Services (P.) Ltd. is a service provider company and falls under the category of “Business Auxiliary Services”. It has been exporting services to their clients abroad. The appellant claimed refund of input service tax credit which they did not utilize under Rule 5 of the CENVAT Credit Rules, 2004. These refund claims were partly sanctioned and partly rejected.
The reason for rejection is Point-1: ‘Input Service’ on which credit have been taken are not in fact input services for rendering of the output services. Point-2: The export of the service did not take place directly from the premises of the WNS but were routed through telecom service provider who uplinked the data from their service centre to the clients abroad. Point-3: It has been mentioned that the service undertaken by the WNS was correctly classifiable under Information Technology services which came into tax net with effect from 16.05.2008 and therefore, credit could not have been availed on a service which was not an output service at the relevant time. Point-4: Another ground for rejection mention is that the WNS had taken credit on the basis of input service distribution and the Head Office of the WNS was not registered as input service distributor prior to 16.05.2006 and therefore, they could not have availed CENVAT credit.
The Tribunal gave its observations as under:
Observation to Point No.1- That input services on which credit taken have a direct nexus with the output service rendered considering the nature of the service itself such as auditing and accounting, advertising, rent-a-cab, outdoor catering service, cleaning service, security services, tour operator services, GTA services etc. Some of these services are also specifically included in the definition of ‘input service’ under Rule 2(1) of the CENVAT Credit Rules, 2004. Tribunal also relied in the case of CCE Vs. Ultratech Cement Ltd. [(2010) 29-STT-244 (Bom.)] in same Court held that the definition of input service under Rule 2(1) of the CENVAT Credit Rules, 2004 is very wide and any service which has a nexus with the business of manufacturing or business of providing output service can be considered as an eligible input service. Tribunal further observed that there are also a large number of decisions of various Hon’ble High Courts and this Tribunal wherein it has been held that outdoor catering services, rent-a-cab service, GTA service, cleaning service, security service, accounting and auditing service, advertising service etc., are eligible input services. Therefore, rejection on this ground is clearly unsustainable in law.
Observation to Point No.2- Tribunal further observed that, as regards the argument of the department that the services are not directly exported from the premises of the WNS but were routed through telecom service provider, this ground is totally unsustainable.
When an exporter undertakes exports electronically, the data has to be delivered to the telecom authorities for transmission of the same abroad. That does not mean that export has not been taken place. So long as the data has been transmitted abroad and the WNS has received the consideration in convertible foreign exchange the export is deemed to have been taken place.
Observation to Point No.3- Further in another point the argument that the IT services were not taxable prior to 16.03.2008 and therefore CENVAT credit could not be taken. Tribunal observed that in the case of an export transaction, it is immaterial whether the output service is exempt or not taxable. What is required to be seen is that the input service which has been utilized in rendering the output service is a taxable service on which service tax has been paid. Hon’ble Bombay High Court in the case of Repro India Ltd. v. Union of India [(2009) 235-ELT-614 (Bom.)] held that in respect of export transaction even if the same is exempted refund of service tax paid on input service could be rightly availed. Relying on mentioned case WNS would be rightly entitled for the service tax paid on input service which has been used in rendering of the output service which has been exported.
Observation to Point No.4- There is one more ground on which the refund claim has been rejected i.e. prior to 16.05.2006 the appellant did not have registration as an input service distributor and hence the appellant could not have availed service tax credit on input service distributor (ISD) basis. However, what is required to be seen is whether the WNS received the services at Nasik and if so the WNS used the same for rendering of the output service.
The Tribunal referred the cases back to respective adjudicating authorities.
The argument in budget speech that the definition of ‘Input service’ has been rationalize to settle legal disputes relating to admissibility of Inputs (except for the one used in construction/foundations) and Input services are in fact imaginative efforts by the field formations to deny refunds of the service tax to the exporters of the services on one or the other pretext or for extracting illegal gratification, that were explained by the Central Board of Excise and Customs vide circular numbers 111 dated 24-09-2009 covering export of services and 120 dated 19-01-2010 related to eligible ‘Input services’. The legal disputes were almost settled in view of the amendment in the definition of ‘Input services’ in the Budget 2010.
The amended definition of ‘Input services’ in the Budget 2011 has unsettled the settled position that would create complete anarchy and encourage spate of avoidable litigation. This has also sent wrong signals to foreign investor that the Government of India does not believe in following stable Indirect tax policy because the perception changes with the change in incumbent. Such an impression is dangerous and is also against national financial health.
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