Service tax paid under reverse charge mechanism under the category of “Business Auxiliary Services” whether is a valid input service as defined in Rule 2(l) of the CCR, 2004.

Facts

The Appellant engaged in providing renting of immoveable property and export of customised software appointed Syntel Inc., USA as its agent for identifying customers overseas. Appellant paid commission to Syntel Inc., USA and discharged service tax liability under the category of “Business Auxiliary Services”. Since the Appellant was unable to utilise the total credit, filed refund claim of unutilised CENVAT credit under Rule 5 of CCR, 2004. The Appellant’s claim was rejected on the grounds that no proof was submitted proving the nexus of business auxiliary services to the output services.

Held

On perusal of the Business Associates Agreement between Syntel International Pvt. Ltd. and Syntel Inc., USA, the services were held in the nature of sales promotion and thus covered under “business auxiliary services”, a valid input service and eligible of refund. Further, the department had allowed subsequent refund claim and hence, the above refund was also allowed.