Rent-a-Cab, Air Travel, Hotel Services Qualify As Input Services If Used For Business: CESTAT Chennai

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that services such as rent-a-cab, air travel, hotel accommodation, restaurant, telecommunication, insurance and business support services qualify as input services where they are used directly or indirectly for providing output services and are not meant for employees' personal consumption.

The tribunal accordingly allowed a refund of unutilised CENVAT credit claimed by Olam Information Services Pvt. Ltd. under Rule 5 of the CENVAT Credit Rules, 2004.

A bench of Technical Member Rajeev Tandon allowed the appeals filed by Olam Information Services Pvt. Ltd. Clarifying the scope of "input service", the tribunal ruled,

“As long as the said services were used directly or indirectly, in or in relation to the provisioning of the output service and were not covered within the scope of the 'Exclusion', the same are held to be an input service.”

The appellant, a provider of Online Information and Database Access/Retrieval Services to clients located outside India, sought refund of unutilised CENVAT credit for the periods October-December 2012 and January-March 2013 in respect of services used for rendering export services.

The adjudicating authority partly sanctioned the refund claims but rejected credit relating to certain input services on the ground that they were not related to the output services. While the Commissioner (Appeals) restored the amounts rejected on limitation, it upheld the rejection of refund in respect of rent-a-cab, restaurant, accommodation, business support, travel, and travel agent services for want of nexus with the output services.

Before the tribunal, the appellant contended that the services were availed for business purposes, including employee transportation, overseas travel for SAP implementation, official accommodation, business communications, and software support. It also submitted that the relevant invoices had been furnished and that the services were used for providing the output services.

Accepting the submissions, the tribunal held that the disputed services were used for rendering the output services and did not fall within the exclusion clause under Rule 2(l) of the CENVAT Credit Rules.

The tribunal observed, “As long as there is material on record to show that services were not consumed for personal usage but were actually used in the rendering of output service, their entitlement to credit cannot be questioned.”

Holding that the issue was no longer res integra, the tribunal concluded that the denial of the refund was not in accordance with law. It therefore set aside the order of the lower authority and allowed both the appeals with consequential relief as per law.

For Appellant: Advocate Radhika Chandra Shekar,

For Respondent: G. Krupa, Authorized Representative