The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that Cognizant Technology not liable to reverse cenvat credit on exempted service of ‘onsite development of software services’ to branch office situated abroad.
The Appellants availed Cenvat Credit of Service Tax paid on their input services like Banking & Other Financial Service, Chartered Accountant Service, Courier Service, and Insurance Service, Security Agency Service, Renting of Immovable Property Service, Manpower Service, Management/ Business Consultancy Service, etc., and has utilized the same for payment of Service Tax on their output services.
Accordingly, the appellant was issued show cause notice no. LTUAC/CHN/11/2016-(C) in C.NO III/10/79/2016-LTU Audit dated 12.07.2016, demanding an amount of Rs. 12,93,23,935/-being the amount payable by them under Rule 6(3)(i) of the Cenvat Credit Rules, 2004, for the period from July 2012 to March 2015, under proviso to Section 73(1) of the Finance Act, 1994, read with Rule 14(1)(ii) of the Cenvat Credit Rules, 2004.
After due process of law, the said demand was confirmed vide Order in Original No. 51/2018-CH-N-GST dated 27.03.2018 along with appropriate interest under Section 75 of the Finance Act, 1994. Equal penalty under Section 78(1) of the Finance Act, 1994, read with Rule 15(3) of the Cenvat Credit Rules, 2004, was also imposed for the aforesaid contravention.
The consultant explained that the demand raised cannot sustain as there is no services provided by the appellant, to the overseas branch. It was argued that it is amply clear from these documents that the subject transactions are not services rendered by the Appellant, and hence ought not be held as “exempt services rendered by the Appellant. The very basis of SCN being erroneous, the SOD ought to be quashed and the Impugned Order be set aside.
A Two-Member Bench comprising Vasa Seshagiri Rao, Technical Member and CS Sulekha Beevi, Judicial Member observed that “It is seen that the issue that arises for consideration in this appeal as to whether the appellant is liable to reverse the CENVAT credit alleging that they have provided exempted service of ‘onsite development of software services’ to their branch office situated abroad, has been considered by the Tribunal in the appellant’s own case and has set aside the demand vide Final Order No. 40529/2023 dated 28.6.2023. We are of the considered opinion that the demand, interest or penalties cannot sustain and requires to be set aside.”
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