Relief to Capgemini Technology Services, ITC cannot be denied due to procedural lapses: CESTAT [Read Order]

In ruling in favour of Capgemini Technology Services, the Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that input tax credit (ITC) cannot be denied due to procedural lapses and set aside the order denying the same.

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The appellants, M/s Capgemini Technology Services India Limited, contested the original order issued by the Commissioner of Central Tax & Central Excise at Navi Mumbai.  The appellants' business activities include management consulting, IT and IT-enabled services in a variety of technical domains, and other services that are subject to service tax under the Finance Act of 1994.  The appellants have secured service tax registration certificate No. AAACK2632BST002 and registered with the jurisdictional service tax authorities for this purpose.  In accordance with the terms of the CENVAT Credit Rules, 2004 (the "CCR"), the appellants also claim CENVAT credit for service tax paid on input services. 

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During the Department's EA-2000 audit of the appellants' books of accounts, the Department asked if the appellants were using the Cenvat Credit and the exemption advantage on exporting services by submitting periodic refund claims to the Department.  After examining the records and the books of accounts for the 2007–2008 to 2008–2009 period, the Department concluded that the appellants had irregularly claimed CENVAT service tax credits for certain input services, which are not covered by Rule 2(l) of the CCR of 2004's definition of input services. As a result, the appellants are not eligible for these credits.

The appellants' show-cause notices were resolved by the ruling in which the Mumbai Commissioner of Service Tax denied a Cenvat credit of Rs. 3,30,85,645 in response to a proposed demand of Rs. 45,79,21,556.  Since the criteria for eligibility of such credit vary from case to case and standard practice cannot be adopted uniformly in judging such eligibility to the CENVAT benefit, the Tribunal noted in its Final Order that in order to determine whether a particular service qualifies as a "input service" under the definition found in Rule 2(l) ibid, the nature and purpose of the service in the ultimate provision of the output service must be examined.

In accordance with the observations expressed therein, the Tribunal had thus granted the appellants' appeal by remanding the case to the original authority for appropriate and efficient adjudication.  Additionally, the Tribunal's aforementioned judgment instructed the initial authority to review the case laws cited by both parties in order to determine if the appellant might be eligible for CENVAT credit.

Accordingly, the Tribunal had granted the appellants' appeal by remanding the case to the original authority for a correct and efficient resolution, in accordance with the observations stated therein.  The Tribunal's  judgment further mandated that the originating authority review the case laws cited by both parties in order to determine if the appellant should be eligible for CENVAT credit.

Concerning denial of input credit on the ground that the address of the premises are not included in the registration certificate,

the two member bench of S.K. Mohanty, Member (Judicial) and M.M. Parthiban, Member (Technical) found that the appellants had submitted a letter for inclusion of unregistered premises in the Service Tax Registration certificate by submission of their application for addition of such addresses to the jurisdictional authority on 17.10.2008. 

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Inasmuch as the process of revising or updation of registered certificate with additional/new addresses for new branches/ office is a deemed approval procedure on intimation basis as priced under Service Tax Rules, 1944. Further, as the appellants is a regular assessee/ registrant with the Service Tax authorities, the input credit cannot be denied on such procedural lapses and that too for the failure to approving such amendments by the department within the prescribed time.

The bench held that to the extent the input services amounting to Rs.3,49,78,125/- have been confirmed in the impugned order, it does not stand the legal scrutiny. However, the demand of CENVAT credit in respect of ineligible input service to the extent of Rs.11,03,689/- as confirmed in the impugned order is not interfered with. The impugned order is partly set aside to the extent it had confirmed the adjudged demands proposed in the SCNs for Rs.3,49,78,125/-.

To Read the full text of the Order CLICK HERE

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