2025 (6) TMI 1581 - AT - Service Tax

100% EOU - refund of service tax paid on input services under Rule 5 of the Cenvat Credit Rules 2004 read with N/N. 5/2006-CE (NT) dated 14.03.2006 - Event Management Services - Pandal and Shamiana Services - HELD THAT - This Tribunal in CST BANGALORE VERSUS M/S. JUNIPER NETWORKS INDIA PVT LTD 2014 (3) TMI 819 - CESTAT BANGALORE allowed the appeals filed by the appellant stating that the appellant is eligible for the benefit of refund in respect of all the services and one of the services was Event Management Services which is in dispute in the present appeal. Further it is seen that the Commissioner (Appeals) vide Order-in-Appeal No. 14/2023 dated 12.01.2023 in the appellant s own case had allowed availment of cenvat credit on Pandal and Shamiana Services hence the question of rejecting refund on these services cannot be sustained. The Tribunal in the case of Dell International Services India P. Ltd. Versus C.C.E. Bangalore 2009 (6) TMI 447 - CESTAT BANGALORE observed while allowing refund on various input services under Rule 5 of the Cenvat Credit Rules 2004 that Once the taxable service is exported and various input services have been utilized for providing the output service the appellants could be entitled for the rebate which is equal to the service tax paid on the input services. Going by the definition of the input service under Rule 2(l) of the Cenvat Credit Rules 2004 the service utilized by the appellants for providing output service can indeed be considered as input services. We also take note that the definition of input service indicates that the interpretation should be done in a liberal way in view of the phrase activities relating to business there cannot be any dispute that the input services rendered by the appellants are all activities relating to the output services exported by the appellant Conclusion - i) The refund claim for Event Management Services is allowed overruling the Commissioner (Appeals) s rejection. ii) The refund claim for Pandal and Shamiana Services is also allowed. The impugned order set aside - appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this appeal are:

- Whether the appellant, a 100% Export Oriented Unit (EOU) providing customer care services categorized as 'Business Auxiliary Services', is entitled to refund of service tax paid on input services under Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No. 5/2006-CE (NT) dated 14.03.2006.

- Specifically, whether the refund claim can be allowed for input services such as Event Management Service and Pandal and Shamiana Service, which were disallowed by the Commissioner (Appeals) on the ground that these services do not have sufficient nexus with the output services and are not essential for the output service.

- The broader issue of the interpretation of "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004, particularly whether the definition should be construed liberally to include services that relate to the business activities supporting the output services exported by the appellant.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Refund under Rule 5 of Cenvat Credit Rules, 2004 for Input Services

Relevant legal framework and precedents: The refund claim is governed by Rule 5 of the Cenvat Credit Rules, 2004, which allows refund of service tax paid on input services used in providing taxable output services that are exported. Notification No. 5/2006-CE (NT) dated 14.03.2006 further regulates such refunds. The definition of "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004 is crucial, as it encompasses services used by the provider of output services in relation to business activities.

The Tribunal referred to its earlier decisions in Final Order Nos. 20114-20115/2014 and 21415/2016, where refund claims on Event Management Services were allowed. Additionally, the Tribunal relied on the precedent set in the case of Dell International Services India P. Ltd. versus C.C.E., Bangalore, where it was held that input services utilized in providing exported output services are eligible for rebate, emphasizing a liberal interpretation of "input service" to include all activities relating to business.

Court's interpretation and reasoning: The Tribunal emphasized that once the taxable service is exported and input services are utilized in providing the output service, the appellant is entitled to rebate equal to the service tax paid on such input services. The phrase "activities relating to business" in the definition of "input service" mandates a liberal interpretation, and there cannot be a dispute that the input services rendered are activities relating to the exported output services.

Key evidence and findings: The appellant's own prior orders, including the Commissioner (Appeals)'s Order-in-Appeal No. 14/2023 dated 12.01.2023, allowed Cenvat credit on Pandal and Shamiana Services, car parking, and renting of immovable property. This evidences consistency in recognizing these services as input services eligible for credit/refund.

Application of law to facts: The Tribunal applied the liberal interpretation of "input service" and the principle that services supporting the output services exported by the appellant should qualify for refund. The prior decisions in the appellant's own case and the Dell International Services case were pivotal in concluding that Event Management Services and Pandal and Shamiana Services are integral to the business auxiliary services exported.

Treatment of competing arguments: The Commissioner (Appeals) had rejected refund claims for Event Management and Pandal and Shamiana Services on the ground that these are not essential services for the output service. The Tribunal rejected this narrow view, holding that such services are indeed related to the business activities and support the output services, thus qualifying as input services.

Conclusions: The Tribunal concluded that the appellant is entitled to refund on all input services, including Event Management and Pandal and Shamiana Services, as these are essential and related to the exported output services.

3. SIGNIFICANT HOLDINGS

The Tribunal's crucial legal reasoning is encapsulated in the following verbatim excerpt from the Dell International Services case, which it adopted:

"Once the taxable service is exported and various input services have been utilized for providing the output service the appellants could be entitled for the rebate, which is equal to the service tax paid on the input services. Going by the definition of the 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004 the service utilized by the appellants for providing output service can indeed be considered as input services. We also take note that the definition of 'input service' indicates that the interpretation should be done in a liberal way in view of the phrase 'activities relating to business', there cannot be any dispute that the input services rendered by the appellants are all activities relating to the output services exported by the appellant."

The core principles established are:

• The definition of "input service" under the Cenvat Credit Rules must be interpreted liberally to include all services relating to business activities that support the output services.
• Input services that are utilized in providing exported taxable services are eligible for refund of service tax paid under Rule 5 of the Cenvat Credit Rules, 2004.
• Services such as Event Management and Pandal and Shamiana Services, even if not directly part of the output service, are integral and essential support services qualifying as input services.

Final determinations on each issue:

• The refund claim for Event Management Services is allowed, overruling the Commissioner (Appeals)'s rejection.
• The refund claim for Pandal and Shamiana Services is also allowed, based on the appellant's own prior orders and consistent legal principles.
• The appeal is allowed in entirety with consequential relief, setting aside the impugned order.