Foundever CRM India Private Limited Vs Commissioner of Service Tax (CESTAT Bangalore)
Summary: The appeal was filed by M/s. Foundever CRM India Pvt. Ltd., formerly known as M/s. Sitel Operating Corporation India Limited, against Order-in-Appeal No. 58-62/2010 dated 11.02.2010 passed by the Commissioner (Appeals-II), Bangalore. The appellant was rendering Business Auxiliary Service and, on account of export of services, had accumulated CENVAT credit on various input services. Refund claims were made under Notification No. 5/2006-CE (NT) dated 14.03.2006.
The appellant subsequently restricted the appeal to Order-in-Original No. 08/2009 dated 12.01.2009 for July 2007 to December 2007 involving refund of Rs.98,07,520/-. The refund was partly rejected on the ground that several input services did not have nexus with the exported output services. The disputed services included Advertising Agency Services, Travel Agency Services, Sample Analysis Services, Business Auxiliary Services, Management Consultancy Service, Manpower Recruitment Service, Rent-a-Cab Service, Security Services, Cargo Services, Maintenance or Repair Services, Outdoor Catering Services, Insurance Services and Commercial Coaching and Training Services.
Revenue relied upon the Supreme Court decision in Maruti Suzuki Ltd. Vs. Commissioner of Central Excise, Delhi-III, whereas the appellant submitted that the decision concerned the definition of “inputs” and could not be mechanically applied to “input services”.
The Tribunal considered the Bombay High Court judgment in Commissioner of Central Excise, Nagpur Vs. Ultratech Cement Ltd., which explained that the definition of “input service” was wider than the definition of “input” and covered services integrally connected with business. The Tribunal also relied on its earlier decision in Deloitte Tax Services India Pvt. Ltd., which held that the scope of input services was wide and that services necessary for providing output services could qualify for CENVAT credit and refund under Rule 5.
The Tribunal found that the disputed services were essential services for rendering the appellant’s output services and that there could not be a one-to-one nexus between each input service and the exported output service. It held that the appellant was eligible for refund as long as eligibility of input service credit had not been questioned at the time of availing the credit. The Tribunal accordingly held that the input services listed in paragraph 6 were eligible input services and allowed the refund to that extent. The appeal was partially allowed.
Cases Discussed
- Maruti Suzuki Ltd. Vs. Commissioner of Central Excise, Delhi-III: 2009-TIOL-94-SC-Cx.
- Ramala Sahkari Chinni Mills Ltd. Vs. Commissioner of C.Ex. Meerut-I: 2010 (260) ELT 321 (S.C.), Larger Bench
- Union of India Vs. Hansoli Devi: 2002 (7) SCC 273
- CCE Vs. GTC Industries Ltd.: 2008 (12) STR 468
- Semco Electrical (P) Ltd. Vs. CCE, Pune: 2010 (24) STR 508
- Commissioner of C. Excise, Nagpur Vs. Ultratech Cement Ltd.: 2010 (260) ELT 369 (Bom.)
- Commr. of C. EX., Hyderabad-IV Vs. Deloitte Tax Services India Pvt. Ltd.: 2008 (11) S.T.R. 266 (Tri. – Bang.)
FULL TEXT OF THE CESTAT BANGALORE ORDER
This appeal is filed by the appellant M/s. Foundever CRM India Pvt. Ltd. (formerly known as M/s. Sitel Operating Corporation India Limited) against Order-in-Appeal No. 58- 62/2010 dated 11.02.2010 passed by the Commissioner (Appeals-II), Bangalore.
2. Briefly the facts of the case are that the appellant had filed rebate claims under Notification No. 12/2005-ST dated 19.04.2005 which was rejected on the ground that the conditions of the Notifications were not satisfied and also certain refund claims were rejected on the ground that the input services do not qualify as input services vis-à-vis the output services i.e., said to have been used in the export of taxable service. Accordingly, the rebate and refund claims were rejected. The appellant vide Miscellaneous Application No.20777/2024 amended the prayer to set aside the impugned order pertaining to only Order-in-Original No. 08/2009 dated 12.01.2009 for the period July 2007 to December 2007 involving the refund amount of Rs.98,07,520/-. Accordingly, this Tribunal vide Miscellaneous Order No. 20460/2024 dated 19.11.2024 accepted the same and hence, this appeal is limited to Order-in-Original No.08/2009 only which is part of the impugned order.
3. The Learned Chartered Accountant for the appellant submitted that appellants are rendering of Business Auxiliary Service and on account of export of services, they had accumulated cenvat credit on various input services for which refund claims were made in terms of Notification No. 05/2006- CE (NT) dated 14.03.2006. However, the refund applications were partially disallowed on the ground that the input services do not have nexus with the output services. It is submitted that reliance placed on the decision of the Hon’ble Supreme Court in the case of Maruti Suzuki Ltd. Vs. Commissioner of Central Excise, Delhi-III: 2009-TIOL-94-SC-Cx. is misplaced since the issue therein was with regard to inputs and the same has been distinguished in the case of Ramala Sahkari Chinni Mills Ltd. Vs. Commissioner of C.Ex. Meerut-I: 2010 (260) ELT 321 (S.C.), Larger Bench. In the instant case, the refund related to input services stands settled in the case of Union of India Vs. Hansoli Devi: 2002 (7) SCC 273; CCE Vs. GTC Industries Ltd.: 2008 (12) STR 468, and Semco Electrical (P) Ltd. Vs. CCE, Pune: 2010 (24) STR 508.
4. The Authorised Representative reiterated the findings of the original authority and requested to deny the refund on the ground that appellants are ineligible to avail credit on various input services and other reasons such as the invoices are not related to the specified period and are not related to the services that are exported. Referring to the definition of input services as it existed prior to 01.04.2008 and referring to the decision of the Hon’ble Supreme Court in the case of M/s. Maruti Suzuki Ltd. (supra) submitted that the intension of the legislature is that inputs falling in the inclusive part must have nexus with the manufacture of the final products, hence. the input services which do not have any nexus with the output services will not be eligible for refund as rightly held by the authorities below.
5. Heard both sides. The original authority vide Order-in- Original No.08/2009 rejected refund of Rs.98,07,520/- upheld by the Commissioner (Appeals) in the impugned order relying on the decision of the Hon’ble Supreme Court in the case of Maruti Suzuki Ltd. (supra). The original authority had rejected the refund claim on the certain input services on the ground that they are not directly used for export services nor in relation to providing export services. However, allowed refund on input services namely Telephone service, Courier Service (International), Leased Circuit Service, Maintenance and Repair of Computer services and denied the credit on rent on immovable property services on the ground that the rent does not pertain to the relevant period of the refund claim.
6. We find that the appellant in his grounds is aggrieved only to the extent of rejection of refund claim on all the services which are held to be neither directly or indirectly used in the export services. We find that the original authority had rejected on the following input services. • Advertising Agency Services • Travel Agency Services • Sample Analysis Services • Business Auxiliary Services • Management Consultancy Service • Manpower Recruitment Service • Rent-a-Cab Service • Security Services • Cargo Services • Maintenance or Repair Services • Outdoor Catering Services • Insurance Services • Commercial Coaching and Training Services
7. The Hon’ble High Court in the case of Commissioner of C. Excise, Nagpur vs. Ultratech Cement Ltd.: 2010 (260) ELT 369 (Bom.) dated 25.10.2010 observed as follows:
“33. It is argued on behalf of the Revenue that not only the ratio but the decision of the Apex Court in the case of Maruti Suzuki Ltd. (supra) must be applied ipso facto to hold that the credit of service tax paid on outdoor catering services is allowable only if the said services are used in relation to the manufacture of final products. That argument cannot be accepted because unlike the definition of input, which is restricted to the inputs used directly or indirectly in or in relation to the manufacture of final products, the definition of “input service’ not only means services used directly or indirectly in or in relation to manufacture of final products, but also includes services used in relation to the business of manufacturing the final products. Therefore, while interpreting the words used in the definition of ‘input service’, the ratio laid down by the Apex Court in the context of the definition of ‘input’ alone would apply and not the judgment in its entirety. In other words, by applying the ratio laid down by the Apex Court in the case of Maruti Suzuki Ltd. (supra), it cannot be said that the definition of ‘input service’ is restricted to the services used in relation to the manufacture of final products, because the definition of ‘input service’ is wider than the definition of ‘input’.
34. Therefore, the definition of input service read as a whole makes it clear that the said definition not only covers services, which are used directly or indirectly in or in relation to the manufacture of final product, but also includes other services, which have direct nexus or which are integrally connected with the business of manufacturing the final product. In the facts of the present case, use of the outdoor catering services is integrally connected with the business of manufacturing cement and therefore, credit of service tax paid on outdoor catering services would be allowable.
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.
37. In the case of Coca Cola India Pvt. Ltd. (supra) a Division Bench of this Court has considered scope of the expression “input service” as defined in Rule 2(l) of 2004 Rules. In that case, the question for consideration was, whether a manufacturer of non- alcoholic beverage bases (concentrates) is eligible to avail credit of service tax paid on advertisement, sales promotion, market research etc. The argument of the revenue in that case was that the advertisements are not relatable to the concentrate manufactured by Coca Cola India Pvt. Ltd. (supra) and hence, the credit in respect thereof cannot be allowed. Considering the Finance Minister’s Budget Speech for 2004-05, press note issued by the Ministry of finance along with the Draft 2004 Rules and various decisions of the Apex Court, this Court held that the expression ‘activities in relation to business’ in the inclusive part of the definition of ‘input service’ further widens the scope of input service so as to cover all services used in the business of manufacturing the final products and that the said definition is not restricted to the services enumerated in the definition of input service itself. The Court rejected the contention of the revenue that a service to qualify as an input service must be used in or in relation to the manufacture of the final products and held that any service used in relation to the business of manufacturing the final product would be an eligible input service”.
7.1 This Tribunal in the case ofCommr. of C. EX., Hyderabad-IV Vs. Deloitte Tax Services India Pvt. Ltd. 2008 (11) S.T.R. 266 (Tri. – Bang.) as also vide Final Order No. 455/2008, dated 13-3-2008 observed as follows:
“6. On a very careful consideration, we do not find any merit in the Revenue’s appeal. In our view the services rendered would not amount to “Information Technology Service”, therefore, they are not excluded from the scope of “Business Auxiliary Service” which is taxable. Once it is held that they are taxable and the credit taken on the input services has not been utilized for payment in respect of Output services, they are entitled for the refund of the credit in terms of the Cenvat Credit Rules. Moreover the department’s objection with regard to the ‘Input Services’, entitlement of credit is also not correct because on going through the definition of input service and also the services availed by the Respondent, we find that they are very necessary for providing output services and they satisfy the condition of the input services as given in the Cenvat Credit Rules. In our view, the scope of input services as given in the definition is very wide and the services availed by the Respondent as input services are indeed input services. Further, Rule 5 allows refund in respect of the tax paid on the input services will be available for the Respondent and the grounds taken by the Revenue that they would be available only in respect of exports made after 14-3-2006 is not sustainable in view of the Tribunal’s decision quoted supra. The respondents have taken several other contentions which in our view need not be dealt with in depth. Hence, the appeal filed by the Revenue does not have any merit. The impugned order of the Commissioner (A) is legal and proper. Therefore, Revenue’s appeal is dismissed.”
8. In view of the above, the above input services as listed at paragraph 6 are eligible input services inasmuch as they are the essential services to render the output services and as held by various decisions relied upon by the appellant, there cannot be one-to-one nexus between the input services and output services. Therefore, the appellant is eligible for the refund as long as the eligibility of input service credit was not questioned at the time of availing the credit. Accordingly, we do not find any reason to sustain the order to the extent of denying the benefit on the input services specified at Para 6 (supra); hence to that extent the refund is allowed.
Appeal is partially allowed.
(Order pronounced in Open Court on 04.06.2025.)
