2014 (5) TMI 917 - AT - Service Tax

Denial of refund claim - software development services - various input services - Held that - If the credit is availed by the manufacturer, then the said service should have been utilised by the manufacturer directly or indirectly in or in relation to the manufacture of final products or used in relation to activities relating to business. If any one of these two tests is satisfied, then such a service falls within the definition of input service and the manufacturer is eligible to avail CENVAT credit of the service tax paid on such service. As regards the credit in respect of service tax paid subsequent to July 2008 claimed as refund in respect of CENVAT credit accumulated during the month of July 2008, the submissions made by the learned counsel are not acceptable. If the CENVAT credit account is correctly maintained, the credit could not be taken in the account in the month of July 2008. When credit could not have been taken, question of accumulation of credit because of inability to utilize does not arise. Just because of the refund claim filed in November 2008 and because appellant did not follow the correct procedure for availing the CENVAT credit, the appellant find themselves in a situation wherein they have claimed accumulated CNEVAT credit before payment and availment of credit. That being the position, the decision of the lower authorities to disallow the credit cannot be found fault with. . The refund claim amounting to ₹ 3, 39,152/- rejected by the lower authorities being the amount of service tax paid subsequent to July 2008 is held to be inadmissible and the decision of the lower authorities is upheld. The balance amount claimed by the appellant and disallowed by the lower authorities is held as admissible. - Decided partly in favour of assessee.

Summary

Issues involved:
Refund claim under Rule 5 of CENVAT Credit Rules 2004 for software development and IT services exported to group companies, disallowance of refund claim due to payment timing, nexus between input and output services, applicability of service tax on input services, admissibility of CENVAT credit for various services, statutory provisions for refund claims, time-barred refund claims under Section 11B of Central Excise Act 1944.

Analysis:
1. The appellant, engaged in software development and IT services for group companies, filed a refund claim under Rule 5 of CENVAT Credit Rules 2004 for services exported outside India. The claim was partially allowed by the original adjudicating authority, and on appeal, the Commissioner(Appeals) further allowed the refund for renting immovable property service. The appeal was filed against this decision.

2. The disallowance of the refund claim was based on two grounds. Firstly, certain amounts claimed were paid after July 2008, leading to the argument that credits had not accumulated in July 2008. The appellant argued that this was a procedural mistake and the credit should be allowed. Secondly, the lower authorities disallowed credits for services like air travel, consulting engineer, and others, citing a lack of nexus between input and output services.

3. Citing the case of CCE, Bangalore-III Vs. Stanzen Toyotetsu India (P) Ltd., the counsel argued that services not explicitly mentioned may still qualify as input services if used directly or indirectly in manufacturing final products or business activities. Specific decisions like CCE, Nagpur Vs. Ultratech Cement Ltd. were also referenced to support the admissibility of credit for certain services.

4. The judgment upheld the disallowance of the refund claim for service tax paid after July 2008, stating that credits could not have been accumulated in July 2008 if not correctly maintained. The appellant's failure to follow correct procedures for availing CENVAT credit led to the rejection of the claim. The Tribunal clarified that the appellant could file a fresh refund claim, but it would be time-barred under Section 11B of the Central Excise Act 1944.

5. Ultimately, the refund claim amounting to Rs.3,39,152/- for service tax paid after July 2008 was deemed inadmissible, while the balance amount was held as admissible. The decision of the lower authorities was upheld, and the appeal was decided accordingly.