In the case of Capgemini Technology Services, the Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that CENVAT credit to ‘interior decorator service’ is not admissible as eligible input service in absence of evidence to consider so.
M/s Capgemini Technology Services India Limited, the appellants challenged the order-in-Original the impugned order passed by the Commissioner, Central Tax & Central Excise, Navi Mumbai. The appellants are engaged in the business of providing IT and IT enabled services in various technology areas, Management Consultancy and other services which are taxable under the Finance Act, 1994 for payment service tax. For this purpose the appellants have registered themselves with the jurisdictional service tax authorities and have obtained service tax registration certificate No.AAACK2632BST002. The appellants also avail CENVAT credit of service tax paid on input services as per the provisions of CENVAT Credit Rules, 2004 (‘CCR’).
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During EA-2000 audit conducted by the Department on the books of account maintained by the appellants, the Department had enquired about the appellant’s availing of Cenvat Credit and the exemption benefit availed on export of services by way of filing periodical refund claims with the department. On scrutiny of the documents and the books of accounts for the period 2007-2008 to 2008-2009, the Department had interpreted that the appellants have taken CENVAT credit of service tax on some of the input services in an irregular manner as these are not covered within the scope of input service’ under Rule 2(l) of CCR of 2004 and therefore the appellants are not eligible for such credits.
Further, some of the branch offices were not included in the Centralized Registration Certificate issued by the department in favour of the appellants, for which CENVAT credit have also been taken irregularly. Thus, the audit wing concluded that the services on which Cenvat credit was availed by the appellants were not confirming to the definition of ‘input service’, contained in Rule 2 (l) of the Cenvat Credit Rules, 2004 for the purpose of availment of CENVAT credit of service tax paid thereon. Further, the audit wing also observed that the appellants had contravened the provisions of Rule 9 (2) ibid read with Rule 4A of the Service Tax Rules, 1994. On the basis of audit objections, the department initiated show cause proceedings against the appellants, seeking for disallowance and recovery of wrongly availed/utilized CENVAT credit.
The show cause notices issued to the appellants were adjudicated vide the order where the Commissioner of Service Tax, Mumbai had rejected Cenvat credit amounting to Rs.3,30,85,645/-, against proposed demand of Rs.45,79,21,556/- made. The appellants had preferred appeal before the Tribunal earlier in the first round of litigation. The Tribunal had allowed the appeal filed by the appellants, by way of remand to the original authority for proper and effective adjudication of the matter, in line with the observations made therein. Further, the said order of the Tribunal also directed that the original authority should examine the case laws relied upon by both sides for the fact finding, whether the benefit of CENVAT credit should be available to the appellant.
The commissioner had confirmed the demand of service tax amounting to Rs. 3,60,81,814/- along with interest; and imposed penalties under Section 77, 78 of the Finance Act, 1994. Feeling aggrieved with the impugned Order, the appellants have filed this appeal before the Tribunal.
The appellants are engaged in providing various IT and IT-enabled services for various technology like SAP/Oracle/Microsoft/Java/business intelligence/testing and other data processing support services to its worldwide group companies and certain domestic clients. For the purposes of provision of taxable output services, the appellants had used several taxable services and availed service tax paid thereon as CENVAT credit under the scheme of CENVAT Credit Rules, 2004.
He further submitted that the details of CENVAT credit availed on various services procured by the appellants were correctly reported in their periodical returns filed with the jurisdictional Service Tax Commissionerate for the disputed period April, 2007 to March, 2013 on various dates within the prescribed period.
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As the appellants are primarily engaged in export of services and is unable to utilise the credit availed on various input services, they had filed refund claim in terms of Rule 5 ibid. Further, Advocate stated that appellants having filed service tax returns periodically in the past as well as having claimed refund of service tax which could not be utilised on account of exports, there was proper disclosure of service tax payment and CENVAT credit utilization on the appellants’ side, and therefore there was no suppression of facts before the Department and there was no intention for availing CENVAT credit in an irregular manner.
On the other hand,the Authorized Representative for Revenue reiterated the findings of the Commissioner in the impugned order, and submitted that in order to claim input credit of CENVAT, the input services is required to be covered under the definition of Rule 2(l) of CCR of 2004 and these have been examined in detail by the Commissioner. Therefore, he prayed that the appeal preferred by the appellants is liable to be set aside. Further, in support of the case for denial of input credit on Rent-a-Cab service and outdoor catering, learned AR stated that these services are specified in the definition of Rule 2(l) ibid under the exclusion clause.
The issue for consideration in the case is to examine, whether or not, the disputed services on which the CENVAT credit is taken by the appellants is duly covered under the scope and definition of Rule 2(l) of the CENVAT Credit Rules, 2004 as ‘input service’, in order to decide on the eligibility for availing CENVAT credit on the service tax paid thereon. The disputed period covered in the two SCNs are from 2007-08 to 2011-12 and 2012-13.
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In respect of ‘interior decorator service’, it has been claimed by the appellants on the ground that these are in relation to modernization, renovation or repair of premises of service provider. In the representative sample invoice submitted by the appellants, it is shown as the renovation works under taken for the guest house at Vikhroli.
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A two member bench of S.K. Mohanty, Member (Judicial) and M.M. Parthiban, Member (Technical) observed that no other details are available to relate such renovation or interior decoration work having a relation to the provision of output service, either directly or indirectly.
Since there is sufficient evidence to consider the interior decorator service as an eligible input service, the Tribunal held that CENVAT credit to the extent of Rs.6,93,107/- relatable to the ‘interior decorator service’ is not admissible as eligible input service.
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