Refund of Service tax on various service such as Chartered Accountant,General Insurance,Security, Asset Management used in export of services

PJ/Case Laws/2011-12/1270

Case: UTHOPIA INDIA PVT LTD v/s COMMISSIONER OF SERVICE TAX, BANGALORE

Citation: 2011(23) S.T.R. 25 (Tri.-Bang.)

Issue:- Whether assessee is liable for refund of service tax paid on export of services, on services such as Chartered Accountant services, General Insurance services, Security service, Asset Management service?

Brief Facts: -These appeals are filed by M/s. Utopia India Pvt. Ltd. against the impugned Order-in-Appeal No. 17 & 18/2010 dated 11-1-2010. The appellants were engaged in export of 'Business Auxiliary Services' and 'Business Support Services'. These were data retrieval and migration on behalf of the clients abroad. According to the assessee, it had availed input service falling under the following categories for providing the output services and paid service tax on these services:

Telecom service , IT service , Management and maintenance & repair service , Chartered Accountant service , Manpower recruitment and supply service , Outdoor catering service , General insurance service , Security service , Technical inspection & certification service , Asset management service

As the entire output services of the assessee were exported, the assessee accumulated credit in its account and claimed refund of the same under Rule 5 of Cenvat Credit Rules, 2004 read with Notification No. 5/2006-C.E. (N.T.), dated 14-3-2006. The original authority allowed credit pertaining to Telecom service, IT service and Management, Maintenance & Repair service. He denied credit relatable to the remaining services. The amounts denied are Rs. 1,20,257/- and Rs. 50,679/- under the Orders-in-Original No. 174/08, dated 30-9-2008 and 11/09 dated 13-1-2009 respectively. Vide the impugned order, relying on the judgment of the Hon'ble Supreme Court in the case of Maruti Suzuki Ltd. [2009 TIOL-94-SC CX. = 2009 (240) E.L.T. 641 (S.C.)], the Commissioner (Appeals) concurred with the original authority and held that the input services were not used in relation to provision of output service.

Appellant’s Contention: -The leamed Counsel for the appellants reiterated the arguments taken in the appeals as regards the said services and argued that these services were availed and tax was incurred for provision of the assessee's output services. They were legitimately entitled to claim refund of service tax accumulated in their Cenvat account. He relied on various case laws in support of the claim in respect of the input services involved.

Respondent’s Contention: -The learned JDR reiterated the reasoning followed by the lower authorities. It is submitted that justification as regards the entitlement of the said services is advanced first time before the Tribunal and that the lower authorities had rightly passed the impugned orders.

Reasoning of Judgement: -Tribunal have considered the case records and rival submissions. Tribunal also found that the 'Chartered Accountant's service' involved accounting and auditing of the transactions of the assessee. Auditing and accounting are specifically included in the definition of input service. The learned Counsel relied on the decision of the Tribunal in CST, Delhi v. Convergys India Pvt. Ltd. [2009 (16) S.T.R. 198 (Del.)]. Tribunal found that in the above judgment, Tribunal allowed credit of service tax paid on real estate agent service, Chartered Accountant's service, asset management service, among others, as input service of the appellant, a call centre.

As regards the 'manpower recruitment and supply service', Tribunal found that major inputs of the assessee are skilled manpower, mainly qualified engineers who are engaged in data retrieval. The assessee recruits qualified personnel to render its output service. The learned Counsel has sought to contest the impugned order as regards this service relying on the decision of this Bench in the case of CCE, Hyderabad v. Deloitte Tax Services India Pvt. Ltd. [2008 (11) S.T.R. 266 (Tri.-Bang.)]. Tribunal found that this service is an essential input and the assessee is entitled to credit of the service tax paid.

As regards the 'outdoor catering service' provided to the staff of the assessee, the learned Counsel relied on the judgment of the Hon'ble High Court of Bombay in the case of Commissioner of C. Excise, Nagpur v. Ultratech Cement Ltd. [2010 (20) S.T.R. 577 (Bom.) = 2010 (260) E.L.T. 369 (Bom.)]. The assessee provides the service to its staff, but recovers 50% of cost from them. In the Ultratech Cement Ltd. case (supra), the Hon'ble High Court of Bombay had held that once the service tax is borne by the ultimate consumer of the service, namely worker, the manufacturer cannot take credit of that part of service tax which is borne by the consumer. It is accordingly held that the assessee is entitled to credit of actual service tax incurred by it under this head.

As regards the 'general insurance service', it is submitted that this service is availed to insure the assets of the assessee such as computers, equipment, building, etc. and cannot be denied on the basis that insuring the premises and the equipment from which output service is provided is not an activity connected to the business of the appellants. Therefore, the service tax paid under the insurance service for insuring the assets in the premises is an eligible input service. The learned Counsel relies on the decision of this Bench in the case ofC.C.E. & C., Guntur v. CCL Products (India) Ltd. [2009 (16) S.T.R. 305 (Tri.-Bang.)]. Tribunal found that insuring the property and premises of the service provider is an activity related to its business. It is an eligible input service.

As regards the 'security services', Tribunal found that the assessee employs security staff to guard the premises from where it operates. This is an activity which cannot be dispensed with by the assessee to carry on its activities. Therefore, the tax paid under the head 'security service' qualifies as input service.

As regards the 'technical inspection service', the assessee produced documents to show that the performance of the assessee was being assessed by M/s. Bureau Veritas Certification India Ltd. to assess its credential to qualify for grading ISO 9001 2000. The tribunal finds that this certification will enable the assessee to market its services successfully. The service is akin to 'credit rating' covered by the definition of input service in Rule 2(1) of Cenvat Credit Rules, 2004. This technical inspection certification therefore is an admissible input service for the assessee.

As regards the 'asset management service', the assessee had justified its claim before the original authority. The assessee relies on the decision in Convergys India Pvt. Ltd. case (supra) wherein the Tribunal held that services of asset management used in connection with procurement of other input services were input services and allowed credit. In the circumstances, the dispute regarding admissibility of tax paid under this head is remanded to the original authority to examine the case afresh after hearing the appellant.

Decision: - Appeals disposed off.

Comments: - The refund on export of service is being denied to assessee by department on various reasons, in the given case the tribunal has nicely distinguished each and every service and held that since they are used for export of service either directly or indirectly the same are liable for refund.

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PJ/Case Laws/2011-12/1270

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