Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  Missing seized records must be considered while testing ITC claim; duplicate GST demands ordered corrected: Delhi High Court. *  GST appeal can’t be rejected without addressing taxpayer’s grounds: Allahabad High Court. *  Surplus IGST credit can offset CGST, SGST shortfall: GSTAT. *  GST refund can’t be denied when cancelled airfares are returned with tax: GSTAT. *  3 Hearing notices issued within 2 minutes: Gujarat High Court flags portal flaw, seeks report. *  GSTR-9, GSTR-9C filing for FY 2025-26 enabled; pending GSTR-1 and GSTR-3B must be filed first. *  Dupattas are exempt fabrics, can’t be taxed as fibres at 4%: Madras High Court. *  Full transitional credit allowed on capital goods received after GST rollout: GSTAT denies Rs. 6.99 lakh export duty credit. *  GST return mismatch alone can’t justify fraud proceedings: GSTAT orders fresh adjudication under section 73. *  Supplier found non-existent later can’t alone justify input tax credit denial: GSTAT. *  GST interest stops once tax reaches government account, can’t run until return filing: GSTAT. *  Cancelled flat booking- GST refund can’t be denied without excluding COVID period from limitation: GSTAT. *  India notifies rules of origin for India–New Zealand FTA. *  Incomplete E-bike kits classifiable as complete vehicles, but not eligible for CKD duty concession: CESTAT. *  Same GST rate on main input and output can’t by itself bar inverted duty refund: GSTAT. *  Unjust enrichment doesn’t apply to customs refunds from assessments finalised before July 13, 2006: Gujarat High Court. *  CENVAT credit can’t be denied solely because plant And machinery are embedded in earth: Karnataka High Court. *  DFIA exports ineligible for RoDTEP benefits; customs directs repayment with applicable interest. *  Second E-Way bill alone doesn’t prove another supply: GSTAT. *  Bail denied in Rs. 1.19 crore fake GST refund case over risk of accused absconding again: Punjab and Haryana High Court. *  GST registration can be restored after revocation deadline if outstanding dues are paid: Gauhati High Court. *  Multiple GST proceedings over same suppliers: Calcutta High Court directs dept. to share findings for adjudication. *  E-Governance portal services not OIDAR, fixed deposit interest not taxable: CESTAT. *  Rs. 500 Stamp duty required on authority letters for CAs, CMA and GST practitioners in Pune GST division.  *  Rs. 1.10 crore GST refund must be paid in cash after business closure: Allahabad High Court. *  Godown rent attracts 18% GST even when used exclusively for exempt agricultural warehousing: AAR. *  GST portal launches "Multi-State Registration" facility: one master TRN for registration applications across multiple States/UTs. *  RoDTEP scheme extended till 31st December, 2026.  *  Mere disagreement with order can’t override Rs. 20 lakh appeal limit: GSTAT. *  Customs interest can’t be backdated before confiscation liability is determined; nearly 8 year period excluded: Delhi High Court.
Subject News *  GST summons: anticipatory bail maintainable without arrest order, but relief denied in evasion case: Allahabad High Court. *  GST Appeal can’t be decided without hearing taxpayer’s objections to fresh evidence: Allahabad High Court. *  GST ITC can’t be reversed merely because supplier grants discount without reducing tax liability: GSTAT. *  Mere quoting of GST provision is not a valid charge: GSTAT quashes ITC denial. *  Personal hearing mandatory before adverse GST order, even without taxpayer’s request: Rajasthan High Court. *  Parallel bail pleas without full disclosure amount to abuse of process Rs. 43.08 crore GST case sent for fresh hearing: Supreme Court. *  GST refund based on unchallenged advance ruling can’t be recovered using later circular: GSTAT. *  Payment of GST alone doesn’t end interest and penalty liability when tax and interest remain unpaid beyond 30 days of notice: GSTAT. *  GST demand over builders’ 80% procurement rule requires reasoned adjudication: GSTAT. *  Eligible ITC doesn’t automatically entitle taxpayers to compensation cess refund on domestic sales: GSTAT. *  GST confiscation order passed before reply deadline invalid: GSTAT. *  GST interest can’t be retained after tax refund on delayed export receipts: Punjab & Haryana High Court. *  GST appeal can’t be dismissed over pre-deposit shortfall without opportunity To respond: Bombay High Court. *  DGGI SCN can’t be challenged before reply and adjudication:Chhattisgarh High Court. *  GST input tax credit can’t be denied solely due to supplier’s retrospective registration cancellation: GSTAT. *  GST notice must explain fraud allegations; merely repeating section 74 Is not enough:  Himachal Pradesh High Court. *  Audit detection alone can’t justify GST fraud penalty; specific suppression must be proved: GSTAT. *  GST order uploaded only under ‘Additional Notices’ tab without separate intimation set aside: Calcutta High Court. *  Service Tax appeal can’t be rejected for missing pre-deposit proof when payment is already recorded: CESTAT. *  SGST dept. can’t hear appeal against CGST order: Calcutta High Court. *  Mere dispatch of tax order can’t prove service or make appeal time-barred: CESTAT. *  Dealer incentives can’t be taxed merely on ledger entries: CESTAT. *  DGFT orders quashed for failure to supply DRI letter relied upon in SCN: Bombay High Court. *  GST penalty u/s 122(1A) can’t apply to Pre-2021 transactions; unregistered beneficiaries also covered: Delhi High Court. *  Expired E-way bill caused by wrong PIN code can’t justify GST penalty without intent to evade tax: GSTAT. *  Used railway rails can’t be taxed as track material without proof they are fit for reuse: CESTAT. *  Earlier DGGI notice doesn’t bar separate GST demand on different issue: Delhi High Court. *  ITC dispute involves no question of law: GSTAT directs appeal to Vice-President. *  Earlier DGGI notice doesn’t bar separate GST demand On different issue: Delhi High Court. *  No E-way bill required for interstate goods movement in november 2017: GSTAT quashes detention and penalty.  

Comments

Print   |    |  Comment

PJ/Case Law/2016-17/3347

whether cenvat credit of Health and fitness service, Transport service, Electricity charges can be admissible?
Case:- SITEL INDIA LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI-II
 
Citation:- 2016 (43) S.T.R. 424 (Tri. - Mumbai)

Brief facts:-This appeal is directed against Order-in-Original No. 33/ST/RN/CMR/MII/13-14, dated 28-3-2014 passed by the Commissioner of Central Excise, Mumbai Zone-II.
 
The facts of the case is that the appellant isengaged in the provision and export of various services namely Business Auxiliary Services, Business Support Services, Manpower Recruitment Agency and Information Technology Software Services. Against the export of the services they have filed various refund claims of accumulated Cenvat credit of various services under Rule 5 of Cenvat Credit Rules, 2004 read with Notification No. 5/2006-CX (N.T.) issued thereunder. On adjudication, the Commissioner disallowed the Cenvat credit in respect of services namely Health Club and Fitness Centre, Transport Goods by Road and Electricity Expenses on the ground that these services are not falling under the definition of input service and the same has no nexus with the export of service. The appellant aggrieved by the impugned order of Commissioner, filed this appeal for an amount of Rs. 3,75,513/-.
 
Appellant’s contention:-Shri Keval Shah learned Chartered Accountantappearing on behalf of the appellant submits that in appellant’s own case for the same period the Commissioner (Appeals) vide Order dated 31-3-2011 allowed the Cenvat credit as well as refund in respect of the same services and the said order was accepted by the Revenue. Therefore, in the present case, the Commissioner (Appeals) could not have taken altogether different view for disallowing the credit. In this situation, a fresh show cause notice for the same period on the different grounds should not have been issued. In this regard, he place reliance on the following judgments :
(i)    CCE v. Siddharth Tubes Limited - 2004 (170)E.L.T.331 (Tri. - Del.).
(ii)   Radhasoami Satsang v. CIT - 1992 (193) ITR 321 (SC).
He submits that the appellant is BPO outfit providing business support services for various clients. For providing these services, the services in question is used only for providing the said output services. He refers to the C.B.E. & C. Circular No. 120/01/2010-S.T., dated 19-1-2010 according to which in case the absence of any input service adversely impacts the quality and efficiency of the provision of service exported are to be considered as input services. Fitness service is essential particularly for a BPO service provider. As regards Transport of Goods by Roads these services were used for carrying out day-to-day activities of the business like transportation of equipment like computers, etc., which are used for providing the BPO services. He submits that the Commissioner alleged that transportation is used for household goods of the employees which is baseless, as no evidence to this allegation was adduced. As regard electricity expenses, he submits that these expenses is towards the services provided by the landlord for common area maintenance which includes repairs to facilities, maintenance of the premises, cleaning services, electricity and other related services. These expenses have been accounted for under the heads like repairs and maintenance, electricity expenses in the books of account. Therefore, these services are directly used for up keeping the premises which in turn used for providing output services. He also submits that as per the inclusion clause of the definition of input service, one of the service is “activities relating to business”. All the above services are undisputedly used by the appellant in relation to their business activities only therefore, it is input service. He place reliance on the following judgments :
(i)    Coca Cola India Pvt. Ltd. v. CCE - 2009 (15)S.T.R.657 (Bom.) = 2009 (242)E.L.T.168 (Bom.)
(ii)   Commissioner of Central Excise, Nagpur v. Ultratech Cement Ltd. - 2010 (20)S.T.R.577 (Bom.) = 2010 (260)E.L.T.369 (Bom.)
(iii)  Tata Steel Limited v. Commissioner of Central Excise, Mumbai - 2011 (21)S.T.R.444 (Tri. - Mumbai)
(iv)  L’Oreal India Pvt. Ltd. v. Commissioner of Central Excise, Pune - 2011 (22)S.T.R.89 (Tri.-Mumbai)
(v)   Commissioner of Central Excise, Rajkot v. Rolex Rings Pvt. Ltd. - 2008 (230)E.L.T.569 (Tri.-Ahmd.).
He submits that certain services were carved out from the definition of input service w.e.f. 1-4-2011. But in the present case, the period involved is prior to 1-4-2011, and therefore, the services, i.e., Health and Fitness Services, Transport of Goods by Road and Electricity Services were received and consumed before 1-4-2011, hence the same should be allowed. As regard penalty, he submits that the issue involved is the interpretation of definition of input service as has been decided by various High Court in this type of cases mala fide intention cannot be alleged and therefore, penalty should not have been imposed in terms of Section 80 of the Finance Act, 1994.
 
 
Respondent’s contention:- On the other hand Shri Sanjeev Nair, learned Examiner (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order. He submits that the services in question have no nexus with the export services. Health and Fitness Services and Transport of Goods by Road were used for the individual employees in their personal use therefore, the same was not used for providing output service. Hence, the lower authority has rightly denied the credit. Similarly, the electricity service is as general use and the same was not used for providing the output service. He submits that it is not correct to say that the adjudicating authority has allowed the benefit in the earlier proceedings. The authority in respect of health club and fitness centre, the refund had rejected and the other two services, i.e., transport of goods and electricity expenses were never a part of the refund proceedings and has been examined for the first time only in the present proceedings. He further submits that the transport of goods service was consumed personally by the employees. Electricity expenses is an input service for landlord and not for the tenant, i.e., appellant therefore, it is not admissible input service.
 
Reasoning of judgment:-Hon,ble judges havecarefully considered the submissions made by both the sides. They find that to decide whether service is an input service or otherwise. It cannot be decided only by the nomenclature of the service. It is necessary to ascertain what is the output service and whether the service in question is required for providing the output service. In the present case, the appellant is providing the BPO services. In the BPO services the major involvement is manpower who are required to perform their duties on 24x7 basis when the manpower work in odd times during the 24 hours it adversely affects the health of the employee which directly affects the performance of the services. In the BPO companies the health and fitness of the employees is very essential factor in order to run the function of a BPO company. Therefore, health and fitness services availed by the company for their employee is a necessity for providing the better quality of output service. It is to be kept in the mind that business organization is not meant for an entertainment of the employees but the ultimate objective is to achieve optimum performance by the employee. For that purpose health and fitness of the employees are very necessary. The judgments relied upon by appellant directly support the case of the appellant. As regard transport of goods as per the submission of appellant the transportation was used for the various activities of the appellant such as transportation of equipment like computers, etc. Therefore, these services are input services even as per the inclusion clause of the definition of input service. As regards, the allegation that the transport service was used for transporting the household goods of employees. There is no evidence available as per show cause notice or as per the proceedings before the adjudicating authority and Commissioner (Appeals). They, therefore, do not agree with the contention of the Revenue. The Cenvat credit in respect of electricity expense was denied only on the ground that this service was received by the landlord and not by the tenants, i.e., appellant. It is very surprising that when the premises was occupied by the appellant and day-to-day repairs and maintenance are carried out in that premises, obviously, the said services are received and used by the tenant only, i.e., the appellant and not by the landlord. The services like repair, maintenance, electricity are directly used by the BPO service provider in order to carry out their day-to-day business activity. Therefore, in their view it is an input service and credit is admissible. As per the above discussion, they find that all the three services are used in the business activity of the appellant. Needless to say that the expenses towards these services are absorbed by the appellant and in turn the same has been absorbed in the value of output service which is exported. Therefore, in their view, these three services are input services and Cenvat credit is admissible to the appellant and consequently they are entitled for the refund of the service tax of services used in the exported service. The impugned order is modified in the above terms, the appeal is allowed. The adjudicating authority shall process the refund claim accordingly.
 
Decision:- Appeal allowed
 
Comment:- The analogy of the case is that Health and fitness service is provided to BPO’s employees. Employees of BPO are to perform duties on 24x7 basis which adversely affects health of employees which directly affects performance of services. Health and fitness of employees is very essential factor in order to run function of a BPO company. Health and fitness services are a necessity for providing better quality of output service. Business organisation is not meant for entertainment of employees but its ultimate objective is to achieve optimum performance by the employee. Therefore, Health and fitness service are to be considered as input service. Hence Credit is not deniable.
For Cenvat credit of Transport of goods by road, Revenue alleged that transport service was used for transporting household goods of employees. There is no evidence available to substantiate such allegation. Hence, Credit cannot be denied.
For Cenvat credit of Electricity charges for consumption of electricity by appellant, Revenue alleged that electricity was consumed by landlord and not tenants, i.e., appellants. Premises were occupied by appellants, hence, such services received by tenants and not by landlord. Therefore, Credit is not deniable.

Prepared by:- Monika Tak
Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com