2015 (12) TMI 1165 - AT - Service Tax

Denial of rebate of Service Tax - no nexus between the input services and the exported output service - whether the appellant is eligible for the rebate of Service Tax paid at the time of export of their services under Notification No. 11/2005-S.T - Held that - while considering the rebate claim for output service, the nexus issue cannot be raised. The only thing that can be considered is whether the tax has been paid or not. The proper course of action would have been to propose to denial of the Cenvat credit which has been used for payment of Service Tax on the output service on the ground that there is no nexus. There is no clear proposition or proposal for this in the show cause notice. In the absence of a clear proposal, the ground of nexus to reject the rebate claim of tax paid on output service, in my opinion, could not have been used. - I do not consider it appropriate that the rebate claim could have been rejected. - Decided in favour of assessee.

Summary

Issues:
1. Eligibility for rebate of Service Tax paid at the time of export of services under Notification No. 11/2005-S.T.
2. Rejection of rebate claim based on nexus between input services and exported output service.
3. Interpretation of show cause notice and its relevance to the decision-making process.

Issue 1: Eligibility for Rebate of Service Tax:
The judgment revolves around the question of whether the appellant is entitled to a rebate of Service Tax paid during the export of services under Notification No. 11/2005-S.T. An amount claimed by the appellant was rejected due to a perceived lack of nexus between input services and the exported output service.

Issue 2: Nexus between Input and Output Services:
The appellant contended that they were only claiming a rebate on the Service Tax paid on the output service, not on input services, as addressed in Notification No. 12/2005. The show cause notice did not specifically propose the rejection based on nexus. The Commissioner (Appeals) in a subsequent order for the same appellant and issue held that the nexus between input and output services was irrelevant for rebate claims.

Issue 3: Interpretation of Show Cause Notice:
The AR argued that the show cause notice required the appellant to provide details of input services used for exporting services, which were not adequately furnished. The absence of such information allowed the authorities to reject the rebate claim. However, the Tribunal noted that the nexus issue should not be raised while considering a rebate claim for the output service. The absence of a clear proposal in the show cause notice regarding the nexus issue rendered its usage to reject the rebate claim invalid.

In conclusion, the Tribunal allowed the appeal as it found that the rejection of the rebate claim based on the nexus between input and output services was unwarranted. The Tribunal emphasized that once the claimant demonstrated sufficient credit and paid tax on exported services, they should be entitled to a rebate, provided all conditions of the relevant notification were met. The non-submission of the rebate claim copy was deemed irrelevant to the rebate claim issue.