Claiming refund of service tax charged by cab vendors

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We develop software for our overseas clients in Gurgaon. We understand that our services should qualify as export of services for service tax purposes from this year onwards under the new taxable category of information technology services. We are proposing to file refund claims with respect to the service tax charged on our input services used to provide the exported services. The most significant service on which we pay service tax is transportation (cab services). We have made arrangements with cab operators for transporting our employees from their residences to our office and back on a daily basis. We have been given to understand such cab services might not be construed as an ‘input service’ and the department is likely to disallow the same. Hence, we seek your advice on the possibility of availing credit of the service tax paid by us on such services and subsequently also claiming refund of the same.

As per the Cenvat Credit Rules, ‘cab services’ can be construed as an ‘input service’ if it can be established that such service is being used ‘in relation’ to activities related to business. In a recent judicial pronouncement of M/s Cable Corporation of India Ltd vs CCE, it has been held by the Mumbai tribunal that rent-a-cab service is an eligible input service, being used indirectly in relation to the manufacture or as part of business activity provided to employees resulting in greater efficiency and promotion of business. In view of the above, you should be eligible for Cenvat credit with respect to ‘rent-a-cab services’ provided to you if you are able to establish that the said services are being used in relation to your business activity. You should also be able to claim refund of such service tax amount charged by your cab vendors.

We are a vocational training institute registered with the service tax authorities under the category of ‘commercial training or coaching service’. Recently, we entered into an arrangement with a customer whereby few faculty members have been sent on deputation for four months to develop an in-house training programme. The salary paid to the faculty shall be reimbursed by the company and in addition, our customer shall pay an additional 15% fee. Are we required to pay service tax on the reimbursement of salary of faculty members by the customer.