IT & ITES Support Services Qualify As “Input Services” For CENVAT Credit; CESTAT Mumbai Grants Major Relief To Capgemini
Pranav B Prem
The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has granted substantial relief to Capgemini Technology Services India Ltd., holding that most of the input services used in providing Information Technology and Information Technology Enabled Services qualify as “input services” under Rule 2(l) of the CENVAT Credit Rules, 2004. The Bench comprising M.M. Parthiban (Member – Technical) partly allowed the appeal filed by the assessee while sustaining a limited disallowance in respect of certain services.
Capgemini Technology Services India Ltd. is engaged in providing IT and ITES services and had availed CENVAT credit on various input services in terms of the CENVAT Credit Rules, 2004. The Department disputed the admissibility of credit on several categories of services on the ground that they did not fall within the definition of “input service” under Rule 2(l). The adjudicating authority confirmed the proposed disallowance along with consequential demand, interest and penalty, prompting the assessee to approach the Tribunal.
The Tribunal examined the scope and structure of the definition of “input service” under Rule 2(l) and observed that it consists of a “means” portion, an “inclusive” portion and an “exclusion” portion, and that each disputed service must be tested within this statutory framework. The Bench noted that Capgemini’s business involves round-the-clock IT and ITES operations and that several of the disputed services had a direct and proximate nexus with the provision of output services.
On merits, the Tribunal held that services such as maintenance of IT infrastructure, event management, public relations, photography, commercial training, housekeeping and similar support services were integrally connected with the assessee’s business operations and were essential for providing IT and ITES services to clients. The Bench observed that these services facilitate smooth business functioning and therefore qualify as input services eligible for CENVAT credit.
The Tribunal also accepted the assessee’s claim for credit on restaurant and health club or fitness services in cases where Capgemini had demonstrated that such facilities were necessary for running 24×7 operations and were linked to specific business projects. In this regard, reliance was placed on CBEC TRU Circular No. 120/01/2010-ST to apply the nexus test for determining eligibility of input services.
Significantly, the Bench noted that similar issues had already been decided in favour of Capgemini in earlier proceedings and remand orders passed by the Tribunal. It held that the Revenue could not selectively deny CENVAT credit on identical services for subsequent periods without any change in facts or law, and that consistency in tax administration must be maintained.
However, the Tribunal upheld disallowance of CENVAT credit amounting to ₹4,39,177 in respect of services that either fell within the exclusion clause or were not shown to have any nexus with the provision of output services. These included rent-a-cab services, certain restaurant expenses incurred for personal use, outdoor catering for employees and unrelated share transfer services. In view of the above findings, the Tribunal partly set aside the impugned order and partly upheld the disallowance. The appeal was accordingly partly allowed, granting substantial relief to Capgemini Technology Services India Ltd.
Appearance
Appearance for Appellants: Shri Mihir Mehta
Appearance for Respondent: APS Parihar
Cause Title: Capgemini Technology Services India Limited Vs. Pr. Commissioner of CGST & Central Excise Mumbai East Commissionerate
Case No: Service Tax Appeal No. 86740 of 2022
Coram: M.M. Parthiban (Member – Technical)
