No CENVAT Credit On Training Of Employees Of GAIL By Training Institutes: CESTAT

The Bench of Dilip Gupta (President) and P.V. Subba Rao (Technical) has observed that, “The term “coaching and training” must be “coaching and training” of the employees of the assessee. Merely because the bills were paid by the assessee, the services provided by way of coaching and training of employees of GAIL do not become input services of the assessee.”

In this case, the assessee/Gail Training Institute is an institute of the Gas Authority of India Ltd. (GAIL) and is responsible for providing training to the employees of GAIL. It also provides training to other persons for which it charges a fee and such training is “commercial coaching and training”.

It has also been availing CENVAT credit on the inputs and input services. Undisputedly, the employees who were trained were not the employees of the assessee but of GAIL and after training, they go back to their respective jobs in GAIL.

The case of the Revenue is that since the service provided by the other training institutes in training employees of GAIL is not an “input service” for the output services (commercial training and coaching services) provided by the assessee, the assessee had wrongly taken CENVAT credit of the service tax so paid.

The department issued show cause notice to the assessee. By the impugned order, the Commissioner (Appeals) denied CENVAT credit taken by the assessee and ordered its recovery. The assessee has challenged the order passed by the Commissioner (Appeals) before the Tribunal.

The assessee contended that service tax is to be construed on basis of the entire legal entity and the assessee was not a separate legal entity. It is part of GAIL, so it was entitled to take credit of the service tax paid on training employees of GAIL.

The Tribunal noted that, not every invoice on which an assessee pays service tax qualifies as input service; it must be a service used to provide output service. And these must be the services used by the assessee - the service provider. It is not sufficient if the bill is paid by the assessee if the service is not used by the assessee either in providing the output service or otherwise.

The Tribunal observed that Revenue was correct in denying CENVAT credit of the service tax on the training provided to the employees of GAIL because it was not the input service for the assessee.

The Tribunal opined that “every unit is entitled to take CENVAT credit on the inputs and input services which it uses in providing output services, but it cannot take CENVAT credit of some input services used by some other unit of the same corporate entity. Simply because the bills are paid by the assessee, the training service will not become an input service for its output service which is commercial coaching and training.”

In view of the above, the Tribunal partly allowed the appeal by upholding the denial and recovery of CENVAT credit availed on training services and set aside the rest of the demand and remanded the matter to the Commissioner.

Counsel for Appellant/ Assessee: Shagun Arora and Kunal Agarwal

Counsel for Respondent/ Department: Rajeev Kapoor

Case Title: M/s Gail Training Institute Versus Commissioner, Central Excise and Service Tax, LTU

Case Number: Service Tax Appeal No. 50632 OF 2017