The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has granted significant relief to Capgemini Technology Services India Ltd., holding that a wide range of 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 appeal was partly allowed by a Bench comprising M.M. Parthiban (Member Technical), which set aside most of the disallowance while sustaining a limited portion relating to services falling within the exclusion clause or lacking nexus with output services.
Capgemini, engaged in providing IT and ITES services, had availed CENVAT credit on various input services. The Department disputed the credit on several categories, contending that they did not meet the definition of “input service” under Rule 2(l). The adjudicating authority confirmed the disallowance along with demand of interest and penalty, leading to the present appeal.
Examining the statutory definition, the Tribunal noted that Rule 2(l) contains a “means” clause, an “inclusive” clause and an “exclusion” clause, and that eligibility must be tested within this framework. It observed that Capgemini operates round-the-clock IT and ITES facilities and that many 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 IT infrastructure maintenance, event management, public relations, photography, commercial training, housekeeping and similar support services were integrally connected with the assessee’s business operations. These services were found to be essential for smooth functioning of the business and, therefore, eligible for CENVAT credit.
The Bench also accepted the assessee’s claim for credit on restaurant services and health club or fitness facilities where Capgemini had demonstrated that such facilities were required for 24×7 operations and were linked to specific business projects. In doing so, the Tribunal relied on CBEC TRU Circular No. 120/01/2010-ST and applied the nexus test.
Importantly, the Tribunal noted that identical issues had already been decided in favour of Capgemini in earlier proceedings and remand orders. It held that, in the absence of any change in facts or law, the Revenue could not deny credit on the same services for subsequent periods, emphasizing the need for consistency in tax administration.
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 output services. These included rent-a-cab services, certain restaurant expenses incurred for personal use, outdoor catering for employees and share transfer services unrelated to business operations.
Accordingly, the impugned order was partly set aside and partly upheld, resulting in substantial relief to Capgemini Technology Services India Ltd.
