Eligibility of input services for claiming Refund of accumulated credit.

PJ/CASE LAW/2015-16/2757

Case:-KIJIJI (INDIA) PVT. LTD. VERSUSCOMMISSIONER OF C. EX., MUMBAI-I

Citation:-2013 (32) S.T.R. 661 (TRI. - MUMBAI)

Brief facts:- The appeal is directed against Order-in-Appeal No. YDB/36/2012, dated 30-4-2012 passed by the Commissioner of Central Excise (Appeals), Mumbai.
The facts of the case are as follows.
The appellant M/s. Kijiji (India) Pvt. Ltd. (now Quikr India Pvt. Ltd.) are engaged in providing Business Auxiliary Services to their customers. Their customers are located abroad. For rendering aforesaid services, they used various input services such as legal services, market data, payroll processing, customers support activities etc. The appellant filed a refund claim for the Service Tax paid on input services under Rule 5 of CENVAT Credit Rules, 2004, on the ground that they are unable to utilize the credit inasmuch as all their output services are exported. The same was examined and rejected by the adjudicating authority on two grounds namely (i) there is no nexus between input services and output services and (ii) they have not submitted the invoices for the Service Tax paid on input services. The appellant preferred an appeal before the lower appellate authority who held that the appellant has submitted invoices in majority of the cases in respect of the input services on which they have claimed refund. However the Commissioner (Appeals) rejected the refund claim only on the ground that there is no direct nexus between input services received and output service rendered, hence the appellant is in appeal before tribunal.

Appellant’s contention:- The learned Counsel for the appellant raises the following submissions :
The input service on which they availed the credit are office utilities, infrastructure support service for running office, Chartered Accountant Service for account advisory/conducting tax audit, pay roll processing service for payment of wages and salaries of their employees, management consultancy services for computation of advance tax liability for running the business, insurance auxiliary service for payment of gratuity to the employees, advertisement service in respect of activities undertaken by the appellant and professional services utilized for facilitate agreement with the clients and so on. All these services have direct nexus and are integrally connected with the output service undertaken by them namely ‘Business Auxiliary Service’ for the foreign customers and accordingly they are rightly entitled for the credit. Inasmuch as their entire output service is exported, they are unable to utilize the credit, and therefore, they have filed the refund claim under Rule 5 of the CENVAT Credit Rules, 2004 in respect of input services which have been used in relation to rendering of the output service. She also relies on the decision of this Tribunal in the case of Commissioner of Service Tax v. Convergys India Pvt. Ltd. - 2009 (16)S.T.R.198 (Tri.-Del.)wherein it has been held that when cost of goods and services becomes part of cost of final product or output services, such goods and services are understood in common parlance as input or input services in relation to final product/output service as defined in Rules 2(k) and 2(l) of CENVAT Credit Rules, 2004 and when services are exported, the appellants are rightly eligible for refund of the credit of duty taken under CENVAT Credit Rules, 2004.

Respondent’s contention:- The learned A.R. appearing for the Revenue reiterates the findings of the lower authorities.

Reasoning of judgement:- From the perusal of the input services received by the appellant and the nature of the services received, it is evident that all the services are essential in running the business of rendering the output service “Business Auxiliary Service” which is exported. If that be so, all the services come within the purview of Rule 2(l) of CENVAT Credit Rules, 2004 which defines the input service. This Tribunal in the case of Convergys India Pvt. Ltd. cited supra, held that when cost of goods and services becomes part of cost of final product or output services, such goods and services should be treated as input or input services for the purposes of CENVAT Credit Rules, 2004. The Hon’ble High Court of Bombay in the case of Ultratech Cement Ltd. - 2010 (260)E.L.T.369 (Bom.) = 2010 (20)S.T.R.577 (Bom.) held that any service which has nexus with the business activity of the appellant, whether it is manufacturing or rendering service, has to be treated as “input service” coming within the purview of Rule 2(l) of the CENVAT Credit Rules, 2004. The ratio of the decisions squarely applies to the facts of the present case. Accordingly, they are of the view that the appellant is rightly entitled for the refund of the Service Tax paid on input services which have been used in the rendering of output services has been exported.
Accordingly, they allow the appeal with consequential relief, if any.

Decision:-Appeal allowed

Comment:- The analogy of the case is that credit can be taken of all the services that are essential in running business and consequently, the refund of accumulated cenvat credit can be filed for the same. As per the Rule 5 of Cenvat Credit Rules, 2004 assessee is rightly entitled for refund of Service Tax paid on input services which have been used in rendering of output services that are exported.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2757

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