2015 (10) TMI 226 - AT - Service Tax

Denial of refund claim - Notification No. 12/2005 - appellant had claimed rebate of Service Tax on bills which are prior to the date of declaration under Notification No. 12/2005 and also prior to the date of export, which is October, 2010 - Held that - Rebate has been sought under the provisions of Notification No. 12/2005 issued in terms of Rule 5 of the Export of Service Rules, framed under Notification No. 9/2005, dated 3-3-2005. I find that there is no dispute on the fact that the appellant had followed the procedure laid down in the notification regarding filing of declaration giving all requisite details such as description, value, amount of duty payable on input services actually required to be used in providing taxable services to be exported. I find inconsistency between the order of the adjudicating authority and that of the Appellate Authority. - No doubt regarding actual use, as has been raised. The fact that the date of input service invoices need not be of the same date or of around the same date as the date of the export is a very natural and normal phenomena. When the whole process of receiving input service and providing output service is a continuous ongoing process, it is quite natural that there will be time lag. The appellants have been providing all the details of input service and the output service and a major portion of the refund claim amounting to ₹ 9,08,188/- was sanctioned based on same facts of use of input services for providing output service. The amount of ₹ 1,47,539/- was rejected only on the ground that the period of export is October 10, whereas the period of invoice relating to input service is different. There is no requirement under Notification No. 12/2005 that the period should be same or that the declaration should be filed before the date of the input invoice. Therefore, I allow the rebate claim as valid in law - refund claim was rejected without the proper show cause notice proposing rejection and the whole process violates the principles of natural justice. - Decided in favour of assessee.

Summary

Issues:
Appeal against Order-in-Appeal upholding rejection of refund claim under Notification No. 12/2005 on services used in export; Adjudicating authority's rejection based on bills pre-export date; Commissioner (Appeals) upholding finding; Appellant's submissions on actual use of input services; Discrepancy between adjudicating authority and Appellate Authority; Applicability of Board's Circular No. 120/01/2010/Service Tax; Allegation of violation of principles of natural justice in rejecting refund claim.

Analysis:
The appellant, a 100% EOU under STPI scheme, appealed against the rejection of refund claim of &8377; 1,47,539 out of a total claim of &8377; 10,55,727 under Notification No. 12/2005 for input Service Tax used in exported services. The adjudicating authority denied the claim citing bills predating the export date and lack of proof of input services' use in exported services. The Commissioner (Appeals) upheld this decision, emphasizing the need to prove actual use of input services in exported services.

The appellant argued that they followed the procedure under Notification No. 12/2005, ensuring correct use of input services in exported taxable services. They highlighted the time lag between input service invoice and payment to the provider, citing Board's Circular allowing refund claims in subsequent quarters. The appellant also referenced a Tribunal judgment supporting their position.

The Appellate Tribunal noted the inconsistency between the adjudicating authority and the Appellate Authority regarding the actual use of input services in exported services. The Tribunal emphasized the continuous nature of input service receipt and output service provision, acknowledging the natural time lag between invoice dates and export dates. Quoting the Board's Circular, the Tribunal rejected the Commissioner (Appeals)' unfounded doubts on input service use and allowed the rebate claim as valid in law.

Additionally, the appellant raised concerns about the lack of a proper show cause notice before the refund claim rejection, alleging a violation of natural justice principles. The Tribunal agreed with this contention, further supporting the validity of the refund claim in law. Consequently, the Tribunal allowed the appeal, setting aside the impugned order.

In conclusion, the Tribunal's detailed analysis addressed the discrepancies in the lower authorities' decisions, emphasizing the procedural adherence under Notification No. 12/2005 and the natural time lag in input service utilization for exported services. The Tribunal's ruling upheld the appellant's refund claim validity and highlighted the importance of following due process and principles of natural justice in such matters.