BCH Electric Ltd. Vs. CCE, Delhi-IV 2013 (31) STR 68 (Tri.-Delhi),

KPMG Vs. CCE, New Delhi 2014 (33) STR 96 (Tri.-Delhi),

CST, Bang. Vs. Mercedes Benz Research & Devlp.

India Pvt. Ltd. 2013 (30) STR 257 (Tri.-Bang.). 

In these cases it has been held that the service of renting Car parking space used for parking of the vehicles of the Officers/Employees of the assessees Company has nexus with the business of the assessee and has to be treated as an activity related to business.  Applying the ratio laid in the above judgments, it was held that the Appellant is entitled to credit towards such input services.

The payment, according to the Appellant, is made towards hotel bills for stay of auditor when he visited Chennai for audit of the Appellant’s Company.  The inclusive part of the definition of input service includes auditing.

Department’s view

According to the learned DR, this would be the fee/charges paid to the auditing firm/company and does not have any intentions to include everything in the name of audit.

Held

Auditing is an essential activity for the Company.  The definition of input services is so wide, and it does not restrict or confine the scope of the service mentioned in the inclusive part.  Therefore, it was held that the Appellant is entitled to credit towards such input services.

The credit/refund was denied for the reason that the invoices suggest that these activities relate to parties, entertainment activities, corporate tournaments and that there is no nexus between the input services and the services exported.

The Appellant submitted that such events were for promoting sales, for staff development and augmenting the business of the company.

Appellant relied on the judgments in Toyota Kirloskar Motor Private Ltd. Vs. CCE., LTU. Bangalore 2011 (24) STR 645 (Kar.) and Endurance Technologies Pvt. Ltd. Vs. CCE., Aurangabad 2012 (32) STR 95 (Tri.-Mum.) in which cases the issue has been decided in favour of the assessee.

The types of input services covered for the purpose of allowing Cenvat Credit of service tax paid is very wide.  In a catena of decisions it has been laid that any service in relation to the business of providing the output service would get covered.

Department’s contention

The credit was denied observing that these services were availed for promotion of the appellants brand HCL which includes hardware for which, the brand HCL is well known.

It is the case of the Department that the Appellant being a software company engaged in export, these input services pertains to brand HCL which is widely known for hardware and therefore the Appellant is not entitled to credit.

The Original Adjudicating Authority has taken this view which was upheld by the Commissioner (Appeals).  The Original Adjudicating Authority for that matter has placed reliance on the reply filed by the Appellant.  From the Order-in-Original it is seen stated that from the reply submitted, it is clearly evident that the above services are for promotion of their Brand, and brand HCL also includes hardware for which brand HCL is well known.

The learned DR submitted that the advertisements were for the brand HCL, as the Company is well known for hardware and therefore these services have no nexus with the services of the Appellant company who is engaged in software alone.

Appellant’s submissions

The Counsel for Appellant submitted that the Appellant has nowhere stated in the reply that these input services were availed for promotion of hardware.

Held

The authorities have denied the credit basis on assumptions and presumptions.  In my opinion they have wrongly entered into conclusion that the benefit of advertisement services must be confined to HCL hardware alone, as the brand HCL is more popular for its hardware, and the Appellant being a company engaged in software, is not entitled to the credit.  Further the observation of the adjudicating authority that it is reflected from the written reply submitted by Appellant is factually wrong.  For these reasons, it was held that the Appellant is entitled to the refund/credit towards Advertisement and Sponsorship Services.