2014 (12) TMI 1043 - AT - Service Tax

Denial of refund claim - CENVAT Credit - refund claim has arisen because the appellants have accumulated credit since the CENVAT credit cannot be utilized by them in the absence of provision of service in domestic tariff area - No nexus between the output service and the input service - Held that - prima facie the appellant is eligible for the credit of service tax paid on input services and the matter had not attained finality as regards the decision relied upon by the Revenue. Accordingly we consider that appellant has made out a prima facie case for complete waiver. - Stay granted.

Summary

Issues:
Refund claims rejection based on nexus between input and output services; Accumulated credit due to inability to utilize CENVAT credit; Denial of refund claim citing Maruti Suzuki Ltd. case; Reference to Ramala Sahkari Chini Mills Ltd. case; Initiation of proceedings to reverse CENVAT credit on rejected refund claims.

Analysis:
The judgment deals with the rejection of refund claims by the appellant, a captive software development center, for services provided to Safran Group. The rejection was based on the alleged lack of nexus between the input services and the output service. The period in question is from July 2009 to March 2011. The appellants had accumulated credit as they were unable to utilize CENVAT credit in the absence of service provision in the domestic tariff area. The refund claim denial was justified by citing the Maruti Suzuki Ltd. case, which emphasized the importance of the nexus between input and output services. However, the learned CA argued that the decision in the Ramala Sahkari Chini Mills Ltd. case disagreed with the Maruti Suzuki Ltd. case and referred the matter to a Larger Bench. Additionally, the CA relied on the CCE, Nagpur Vs. Ultratech Cement case to support the admissibility of service tax credit on input services.

The demand in the case arose from the rejection of refund claims for various input services. Subsequently, proceedings were initiated to reverse the CENVAT credit availed by the appellant, as the services related to the rejected refund claims were deemed not to be 'input services.' The learned counsel's submissions indicated that the appellant was prima facie eligible for the credit of service tax paid on input services. The matter was not finalized regarding the decision relied upon by the Revenue. Consequently, the Tribunal considered that the appellant had established a prima facie case for complete waiver. As a result, the requirement of pre-deposit was waived, and a stay against the recovery of balance dues was granted for a period of 180 days from the date of the order. The operative part of the order was pronounced in open court on 28.05.2014.