2007 (3) TMI 36 - Commissioner - Service Tax

Rebate Department contended that appellant not eligible for rebate of service tax and cess paid on input services used in providing output services to various countries Lower Authority declared that restrict the rebate only on such quantum of services which are export

Summary

Issues Involved:
1. Jurisdiction of the adjudicating authority.
2. Eligibility for rebate claims on input services used for exported output services.
3. Interpretation of "taxable service" and its implications.
4. Compliance with procedural requirements for rebate claims.

Analysis of the Judgment:

Jurisdiction of the Adjudicating Authority:
The appellants contested the jurisdiction of the lower authority to adjudicate the case related to rebate under Notification No. 12/2005-S.T. The Board's Circular No. 828/5/2006-CX and Circular No. 31/2003-Customs were cited, which clarified that the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise having jurisdiction over the factory of the manufacturer or EOU or respective maritime Commissioner is authorized to sanction unutilized input/input service credit. Since all 100% EOUs in Bangalore are under the administrative control of customs authorities, the customs authorities were deemed the appropriate jurisdictional officers for the appellants, who are an STP unit registered in the customs division.

Eligibility for Rebate Claims:
The lower authority had rejected the rebate claims on the grounds that the call center services provided by the appellants were exempt from service tax, and therefore, they were not eligible for input credit refund. The appellants argued that despite the exemption, they were eligible for rebate as the services rendered were taxable. The judgment clarified that services listed under Clause (105) of Section 65 of the Finance Act, 1994, are considered taxable unless exempted by notification. The call center services, classified under business auxiliary services, fall under this category and are therefore taxable services eligible for rebate under Notification No. 12/2005-S.T.

Interpretation of "Taxable Service":
The judgment emphasized that the term "taxable service" includes all services listed under Clause (105) of Section 65 of the Finance Act, 1994, irrespective of any exemption notifications. The call center services provided by the appellants were taxable under sub-clause (zzb) and sub-clause (zzzq) of Clause 105 of Section 65, even though they were exempted from payment of service tax under Notification No. 8/2003-S.T. Therefore, the appellants' services were still considered taxable services eligible for rebate.

Compliance with Procedural Requirements:
The lower authority had rejected the rebate claims due to non-production of evidence of export proceeds realization and non-availability of input credit on exempted output services. The judgment noted that procedural requirements should not overshadow the substantial benefit intended for the appellants. The lower authority was directed to verify the nature of the export services and ensure they were not information technology services, and to grant rebate based on the satisfaction of bank realization details.

Order:
The Order-in-Original No. 05/R/ST/AC/2006, dated 4-10-06, passed by the Assistant Commissioner of Customs, Customs Division, Bangalore, was set aside. The appeal was allowed with the direction to the lower authority to grant rebate after verifying the nature of the export services and ensuring compliance with bank realization requirements.