2013 (4) TMI 104 - AT - Service Tax

Refund claim under Rule 5 of the CENVAT Credit Rules, 2004 read with the Notification No. 05/2006-CE(NT) - CENVAT credit - Regarding condition required to constitute export of service as provided in Rule 3(2) for the period post 27/02/2010 - Held that - There is no dispute in the present case that the appellant has received the consideration for the service rendered from the service recipient abroad in convertible foreign exchange both in respect of offshore services and onsite services rendered by them - the appellant will be eligible for the refund amounts covered by these orders. Regarding condition required to constitute export of service as provided in Rule 3(2) for the period post 27/02/2010 - Held that - Two conditions were required (i) such service provided from India and used outside India and (ii) payment for such service provided outside India is received by the service provider in convertible foreign exchange. In the present case, there is no dispute about satisfaction of the second condition. It is clear that in respect of overseas customers, the subsidiaries performed the onsite services on behalf of the appellant at the customers premises abroad. The appellant subsidiaries located outside India are independent entities and they are not appellant s agents - Therefore, it cannot be said that the onsite services provided by the subsidiary have been rendered from India to the appellant s customers abroad. Thus the first condition that the service should be provided from India to constitute export is not satisfied. Regarding allowing CENVAT credit - Duty paying documents - Held that - On the ground that PAN based registration nos. were not mentioned in the input invoices - The matter needs to be considered by the adjudicating authority in the light of Board s Circular No. 112/6/09-ST dated 12/03/2009 and 120/01/10-ST dated 19/01/2010. If payment of service tax can be confirmed from the particulars available in the invoices and receipt of input services by the appellant can be established, there is no reason to deny the CENVAT credit merely because the PAN based registration number is not quoted in the input service invoices. Similarly, in the case of Manikchand Galaria unit which was earlier not included in the centralized registration, the department has to verify whether the said unit was used for the purpose of export of services and if so, the rent paid for the said premises would be an eligible input service and the appellant would be eligible for the CENVAT credit of the service tax paid on the renting of the said property. Therefore, we direct the adjudicating authority to verify the particulars as discussed above and if found satisfactory, to allow the CENVAT credit in accordance with law. - Decided partly in favor of assessee.

Issues Involved:
1. Eligibility for refund claims under Rule 5 of the CENVAT Credit Rules, 2004.
2. Determination of whether services provided onsite by subsidiaries abroad constitute export of services from India.
3. Admissibility of CENVAT Credit for input services with procedural discrepancies.
4. Alternative claim for refund under Section 11B of the Central Excise Act, 1944.

Detailed Analysis:

1. Eligibility for Refund Claims Under Rule 5 of the CENVAT Credit Rules, 2004:
The appellant, M/s. Tech Mahindra Ltd. (TML), filed refund claims for unutilized CENVAT Credit on input services used in providing output services, which were exported. The Tribunal examined the claims under Rule 5 of the CENVAT Credit Rules, 2004, read with Notification No. 5/06-CE(NT) dated 04/03/2006. The Tribunal noted that the definition of 'export' as per Rule 5 is "the output service exported in accordance with the Export of Services Rules, 2005."

2. Determination of Whether Services Provided Onsite by Subsidiaries Abroad Constitute Export of Services from India:
For the period post 27/02/2010, the Tribunal concluded that the only condition required for export of services was the receipt of payment in convertible foreign exchange. Since TML received such payments, the Tribunal allowed the refund claims for this period. However, for the period prior to 27/02/2010, the Tribunal emphasized that services must be "provided from India and used outside India." The onsite services performed by TML's subsidiaries abroad did not meet this criterion, as the subsidiaries were independent entities and not agents of TML. The Tribunal cited the agreement between TML and its American subsidiary, which explicitly stated that the subsidiary was an independent contractor, not an agent. Therefore, the Tribunal denied the refund claims for the period prior to 27/02/2010.

3. Admissibility of CENVAT Credit for Input Services with Procedural Discrepancies:
The Tribunal addressed the denial of CENVAT Credit amounting to Rs. 4,33,90,810/- on various grounds, including discrepancies in input service invoices and non-inclusion of certain premises under centralized registration. The Tribunal directed the adjudicating authority to verify the payment of service tax and receipt of input services by TML. If verified satisfactorily, the CENVAT Credit should be allowed, especially in light of CBEC Circulars No. 112/6/2009-ST and 120/01/10-ST, which emphasize that minor procedural infractions should not result in denial of credit.

4. Alternative Claim for Refund Under Section 11B of the Central Excise Act, 1944:
TML argued that if their refund claims were not allowable under Rule 5, they should be considered under Section 11B of the Central Excise Act, 1944. The Tribunal rejected this argument, stating that if the services did not constitute export, no refund could be claimed under Section 11B. The Tribunal noted that TML had paid service tax on services received from its subsidiaries under the reverse charge mechanism, and there was no contention that this did not amount to import of services.

Conclusion:
The Tribunal allowed the refund claims for the period post 27/02/2010, as the condition of export was satisfied. For the period prior to 27/02/2010, the Tribunal denied the refund claims for onsite services rendered abroad, as they did not meet the export conditions. The Tribunal also directed the adjudicating authority to verify and allow CENVAT Credit for input services with procedural discrepancies. The alternative claim for refund under Section 11B was rejected. The appeal was disposed of accordingly.

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