2012 (6) TMI 606 - AT - Service Tax

Cenvat credit Process Outsourcing and Collection of Services - appellant availed input service credit, but as their service was exempt by Notification No. 8/2003 dated 20/06/2003 they could not utilise the CENVAT credit - refund claim under Rule 5 of the CENVAT Credit Rules, 2004 - Held that - Once the taxable service is exported and various input services have been utilised for providing the output service the appellants could be entitled for the rebate, which is equal to the service tax paid on the input services. appellants had fulfilled the five conditions of Notification No. 12/2005 already enumerated in the submission of the appellants. appellants are entitled for the rebate in respect of all the rebate claims filed by them during the relevant period. appellant are entitled for input service credit which they have availed for providing the service, which is exempt by way of Notification No. 8/2003 but have been exported. Appeal allowed

Summary

Issues:
1. Early hearing application for appeal
2. Denial of input service credit under CENVAT Credit Rules, 2004
3. Export of taxable service exempted by notification
4. Entitlement to input service credit for exported services

Early Hearing Application for Appeal:
The appellant filed an application for early hearing of their appeal, which was granted due to the significant revenue involved. The appeal was taken up for disposal along with the stay application without the requirement of pre-deposit.

Denial of Input Service Credit under CENVAT Credit Rules, 2004:
The appellant, engaged in Business Process Outsourcing and Collection of Services, classified their services as Business Auxiliary Services. They availed input service credit but could not utilize it due to their services being exempt under Notification No. 8/2003. A show cause notice was issued for denying the credit, which was confirmed by the adjudicating authority. The Tribunal noted that if the assessee provides taxable services, even if exempt by notification but exported, they are entitled to input service credit as per Rule 5 of the CENVAT Credit Rules, 2004.

Export of Taxable Service Exempted by Notification:
The Tribunal referred to a previous case law where it was established that services provided by the appellant, such as call center services, back office accounting, and IT support services, qualified as Business Auxiliary Services. The Tribunal highlighted that the services exported by the appellant were taxable, and the input services utilized for providing the output service could be considered as input services. The Tribunal emphasized a liberal interpretation of the definition of 'input service' and found that the appellant fulfilled all conditions for rebate claims during the relevant period.

Entitlement to Input Service Credit for Exported Services:
Based on the case law and the interpretation of the CENVAT Credit Rules, the Tribunal concluded that the appellant was entitled to input service credit for the services provided, which were exempt but exported. Consequently, the impugned order denying the credit was set aside, and the appeal was allowed with consequential relief.