‘Ship Management Services’ by Capgemini Technology Services, Not amounts to Input Service In absence of Documents: CESTAT [Read Order]

In a recent case on Capgemini Technology Services India ltd, the Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that ‘ship management services’ not amounts to input service in absence of documents  to substantiate usage in provision of output service.

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.

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Furthermore, CENVAT credit was irregularly obtained for several branch offices that were not listed on the Centralized Registration Certificate that the department issued in favor of the appellants.  Therefore, the audit wing came to the conclusion that the services that the appellants used to obtain Cenvat credit did not meet the criteria for "input service" as defined in Rule 2(l) of the Cenvat Credit Rules, 2004 in order to receive CENVAT credit for service tax paid on those services.  The department started show cause proceedings against the appellants in response to audit complaints, requesting that the improperly used or obtained CENVAT credit be disallowed and recovered.

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.

 The appellants have claimed that photography service, video tape service have been used for picturisation of various events organized by the appellants and video tape and pictures are projected at various commercial events and seminars which promote their output services.

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.

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Regarding the Rent-a-Cab service, the adjudicating body had determined that, despite the fact that the services were used before April 1, 2011, this might not be sufficient justification to accept them as qualifying input services.  The appellants' use of these services for the purpose of claiming an eligible input credit up until March 31, 2011, and not after, is an undeniable truth.  In its Circular No.943/4/2011-CX, dated April 29, 2011, the CBIC made it clear that, even though the invoices might have been received later, that is, after April 1, 2011, the credit available on rent-a-cab service received prior to April 1, 2011, should be available as input credit if its provision had been completed prior to April 1, 2011.

In respect of ‘ship management services’, transport services through waterways’ and ‘sound recording service’, the adjudicating authority had found that no invoice have been produced by the appellants before him to substantiate the nature of such service and its usage in provision of output service. Further, in respect of ‘short term accommodation service’, the adjudicating authority had found that such stays by the employees traveling for work are more in the nature of personal consumption.

A two member bench of S.K. Mohanty, Member (Judicial) and M.M. Parthiban, Member (Technical) could not examine  the factual aspect as no invoices or supporting documents have been produced by the appellants for such services. The bench viewed that these services are not eligible to be considered as eligible input service.

To Read the full text of the Order CLICK HERE

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