M/s. Deloitte Tax Services India Pvt. Ltd. is a private limited company under 100% EOU registered with Software Technology Park of India, Hyderabad. They provided various services to M/s. Deloitte Tax LLP in USA
Deloitte Tax Services India Pvt. Ltd wins service tax refund appeal
Deloitte Tax Services India Pvt. Ltd has won service tax refund appeal in Tribunal vide a recent ruling reported by allindiantaxes vide AIT-2008-130-CESTAT.
like back office services and other assistance such as lead tax services, international assignment services, tax services etc. According to the Respondents, these services were covered under Business Auxiliary Services (BAS) and Management Consultancy Services. They had also got themselves registered under the Service Tax Authority. The issue was that they received various input services on which they had paid appropriate Service Tax, on which they availed the input Service Tax credit. According to them these input services were used in relation to providing the output service which is the Business Auxiliary service (BAS). Since the output service has been exported, they applied for refund of Rs.8,57,241/- on 31.3.2006 for the period from May 2005 to February 2006 under Rule 5 of the Cenvat Credit Rules, 2004 and Notification No.5/2006 CE (NP) dated 14.3.2006 issued under Rule 5 ibid.
Revenue filed appeal on the following grounds:
a) That the Commissioner (Appeals) has erred in holding that the services provided by the Respondent are covered under the taxable service of Business Auxiliary Service and Management Consultant Service .
b) That the services provided by the Respondent are covered under Information Technology service and which is excluded from the definition of BAS and hence, not a taxable service.
c) That the Returns filed by the Noticee are self assessed and cannot be an aid to determine the proper classification of the service.
d) That the Commissioner (Appeals) has erred in holding that it was not necessary that the input services should be used directly or relatable directly for the purpose of being qualified as an input service.
e) That the Commissioner (Appeals) has failed to note that input services credit under Rule 5 of the Cenvat Credit Rules, 2004 was eligible for refund only w.e.f 14.03.2006 and as such the services rendered during the period from May 2005 to February 2006 are not eligible for claiming refund.
The description of the services to be provided to the party in USA
reads as follows:
In connection with the Deloitte Tax s business and engagements, Deloitte Tax India will provide preparation and consulting services and back office and technology support as requested by Deloitte Tax for the activities of Deloitte Tax, especially in providing assistance to Deloitte tax with respect to continued support for Deloitte Tax s clients and the design, implementation and upgrade of various Deloitte Tax programme. The services to be provided by Deloitte Tax India to Deloitte Tax under this agreement may include data entry, data processing, and such other incidental and support services as may be requested by Deloitte Tax for preparation and filing of US Federal, State and local tax returns, and property tax returns, as well as for computing advance tax estimates, wage card processing, and transfer pricing planning and execution.
The Tribunal found that the scope of the input service is quite wide. In the present case, it has been submitted that the following input services have been arranged by the respondent.
(i) Equipment hiring charges
(ii) Professional Consultation Service
(iii) Recruitment Services
(iv) Security Services
(v) Telephone Services
(vi) Transport Services
(vii) Training Services
(viii) Facility Operation Service
(ix) Courier Services
(x) Cafeteria Service
(xi) Other input services like advertisement service, recruitment service and security service
It was held that the refund claim was filed on 31.3.2006 which is after 14.3.2006 and the only reason given in the adjudication for rejection of the claim is that it pertains to the year prior to 14.3.2006. In view of the decision of the Mumbai Bench, this objection cannot be sustained. It has also been observed that statute cannot be treated retrospective merely because it relates to the past action. A statute which takes away or impairs vested rights acquired under existing laws, or creates a new obligation or imposes a new duty, or attaches a new disability in respect of transaction already past, alone is called a retrospective legislation.
The Tribunal held that the services rendered would not amount to Information Technology Service , therefore, they are not excluded from the scope of Business Auxiliary Service which is taxable. Once it is held that they are taxable and the credit taken on the input services has not been utilized for payment in respect of output services, they are entitled for the refund of the credit in terms of the Cenvat Credit Rules. Moreover, the department’s objection with regard to the Input Services , entitlement of credit is also not correct because on going through the definition of input service and also the services availed by the Respondent, we find that they are very necessary for providing output services and they satisfy the condition of the input services as given in the Cenvat Credit Rules. In our view, the scope of input services as given in the definition is very wide and the services availed by the Respondent as input services are indeed input services. Further, Rule 5 allows refund in respect of the tax paid on the input services will be available for the Respondent and the grounds taken by the Revenue that they would be available only in respect of exports made after 14.3.2006 is not sustainable in view of the Tribunal s decision quoted supra.