order passed without the proper adjudication process

PJ/Case Law /2016-17/3402

Case-HSBC ELECTRONIC DATA PROCESSING (I) P. LTD. Versus C.C., C. E. & S.T., HYDERABAD-IV

Citation -2014 (34) S.T.R. 577 (Tri. - Bang.)

Brief Facts-The appellant M/s. HSBC Electronic Data Processing (India) Pvt. Ltd. is registered with the department as a provider of output services under the category of Business Auxiliary Service, Business Support Service, Management, Maintenance or Repair Service, Manpower Recruitment Service, Event Management Service and Commercial Training and Coaching Service. The appellant was issued with a show cause notice dated 16-10-2012 proposing to recover an amount of Rs. 31,38,57,638/- being the irregular Cenvat credit availed by them during April, 2011 to March, 2012 under the provisions of Cenvat Credit Rules, 2004 read with the provisions of the Finance Act, 1994 along with interest thereon and also proposing to impose penalties. The ground alleged in the show cause notice is that the services on which the appellant has availed credit of the Service Tax are not used for providing the output service as there is no nexus between the input services on which credit was availed and the output services provided by the appellant. The notice was contested by the appellant explaining the nexus between the input services received and the output services provided. However, their contentions were negated and the Order-in-Original No. 45/2013-Adjn. (Commr.)-S.T., dated 27-6-2013 was passed, confirming the demand for recovery of Rs. 31,38,57,638/- along with interest thereon under the provisions of Cenvat Credit Rules, 2004 read with the provisions of the Finance Act, 1994. Further, a penalty of Rs. 6 crore was imposed on the appellant. Aggrieved of the same, the appellant is before tribunal.

Appellant’s Contention-The appellant submits that they had taken input Service Tax credit on 19 input services such as information technology software service, renting of immovable property service, management consultant service, management, maintenance or repair service, telecommunication service, business support service, security agency service and so on. In the reply to the show cause notice, vide letter dated 11-12-2012 in para 6 thereof, they had explained the nexus between the input services on which credit was taken and the output services rendered by them. However, these contentions were not considered by the adjudicating authority and the said authority has come to the conclusion that there is no nexus between the input services received by the appellant and the output services provided by it without giving any reasons for the said conclusion. Thus, the entire demand confirmed against them is clearly unsustainable in law and therefore, the impugned order deserves to be set aside. In the interim, the learned counsel pleads for grant of stay against recovery of the dues adjudged against the appellant.

Respondent’s Contention-. The learned Dy. Commissioner (AR) appearing for the Revenue reiterates the findings of the adjudicating authority.

Reasoning Of Judgement-TRIBUNAL have carefully considered the submissions made by both the sides. TRIBUNAL observe that the appeal itself can be disposed of at this stage as the issue lies in a narrow compass. Therefore, after dispensing with requirement of pre-deposit and with the consent of both the sides, tribunal take up the appeal for consideration and disposal.
The appellant is registered with the department as an output service provider under the category of business auxiliary services, business support services, etc. as they are providing customer care services to their principals situated abroad. For rendering such services, the appellant has to hire premises, recruit employees, use information technology software, engage management consultant, manage, maintain or repair both movable and immovable properties, use telecommunication services for communication purposes and so on. The appellant in its reply to the show cause notice vide letter dated 11-12-2012 has clearly explained in detail the nexus between input services availed and the output services provided. The same is also mentioned in para 17 of the impugned order along with the reliance placed by the appellant on various case laws in support of their contention. However, these contentions have not been examined by the adjudicating authority point-by-point nor any findings recorded thereon. The adjudicating authority has brushed aside the contentions of the appellant without any preliminary examination in para 32 of the impugned order by observing that :“the definition (input service) though wide, is not meant to cover services that remotely or in a round about way contribute to the output service. Any and every connection, however remote and indirect it may be, is not what is contemplated by the definition. A line has to be drawn somewhere to avoid undue extension of the terms “directly or indirectly” or ‘in relation to’, by adopting a reasonable approach. As such it cannot be said that the services on which credit was availed by the assessees are indirectly used in relation to the output services.” The definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 is worded in a broad manner so as to bring within its ambit services availed by a provider of taxable service, whether directly or indirectly, and also enumerates some of the services which fall within the purview of the input service.

Decision- APPEAL ALLOWED

Comment-The analogy of the case is that , the adjudication process envisages weighing the claims and counter claims, the legal provision, the applicability of ratio of the decisions by the higher forums and thereafter, passing of a speaking order either accepting the contentions of the appellant or rejecting the same. No such exercise has been undertaken in the present case by the adjudicating authority. Therefore the impugned order was set aside and the appeal is allowed by way of remand and stay petition is also disposed of.
Prepared By –ARUNDHATI BAJPAI

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PJ/Case Law /2016-17/3402

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