2020 (3) TMI 1342 - AT - Service Tax

Refund of Service tax - export service or not - intermediary as defined under Place of Provision of Service Rules 2012 or not - HELD THAT - According to the said service agreement the appellants had undertaken research activity related to the market scenario of steel sector in India and supplied the same to their parent company. They were not involved in any manner regarding execution of sale arranging of customer in India or providing any guarantee for and on behalf of the company. Intermediary Service has been defined under Rule 2(f) of the Place of Provision of Service Rules 2012 - As per Rule 2(f) of the Place of Provision of Service Rules 2012 to attract the said definition there should be two or more persons besides the service provider. In the present case the appellants are providing services to their parent company at Japan and they did not involve in any manner in the activity of negotiation for sale and purchase of goods in India or collection of sale proceeds from customers on behalf of the parent company hence cannot be called as an intermediary and accordingly do not fall under Rule 9(c) of the Place of Provisions of Service Rules 2012 - denying the cash refund of the accumulated Cenvat credit for the intervening period is bad in law. The order of Learned Member (Judicial) as well as of Learned Member (technical) are on same lines - refund is to be allowed - appeal allowed - decided in favor of appellant.

Issues:
1. Denial of cash refund of accumulated Cenvat credit for services provided to the parent company.
2. Classification of services as 'export service' or 'intermediary service'.
3. Interpretation of the Place of Provision of Service Rules, 2012.
4. Consistency in Departmental decisions regarding the appellant's status as an 'intermediary'.
5. Applicability of Rule 6 of the Cenvat Credit Rules, 2004 for refund claims.

Issue 1: Denial of Cash Refund of Accumulated Cenvat Credit:
The appellants filed cash refund claims under Rule 5 of the Cenvat Credit Rules, 2004 for services provided to their parent company, JFE Steel Corporation, Japan. The refund claims were rejected by the adjudicating authority on the grounds that the services provided did not qualify as 'export service' and fell under the scope of 'intermediary' as per the Place of Provision of Service Rules, 2012. The Learned Commissioner (Appeals) upheld this decision, leading to the present appeals.

Issue 2: Classification of Services:
The appellants argued that they were engaged in market research and information collection activities related to the steel sector, providing general information without involvement in marketing, sales promotion, or supply of steel products in India. They contended that denying the cash refund was contrary to precedents set by the Tribunal. The service agreement between the appellants and their parent company outlined the nature of services provided, emphasizing research activities and assistance in marketing and promotion, without involvement in sales execution or customer arrangements in India.

Issue 3: Interpretation of Place of Provision of Service Rules:
The Tribunal analyzed the definition of 'intermediary' under Rule 2(f) of the Place of Provision of Service Rules, 2012, which requires involvement of two or more persons besides the service provider to qualify as an intermediary. Since the appellants provided services directly to their parent company in Japan without participating in negotiations, sales transactions, or collection of sale proceeds in India, they could not be categorized as an 'intermediary' under Rule 9(c) of the said Rules.

Issue 4: Consistency in Departmental Decisions:
The appellants highlighted that for the same services provided in earlier and subsequent periods, the Department had allowed cash refund of accumulated Cenvat credit by not considering them as an 'intermediary'. Therefore, denying the refund for the intervening period was deemed legally incorrect by the Tribunal, leading to the setting aside of the impugned orders and allowing the appeals with consequential relief.

Issue 5: Applicability of Rule 6 of the Cenvat Credit Rules:
The Tribunal, in concurring with the order, emphasized that Rule 6 of the Cenvat Credit Rules, 2004 governs the refund of accumulated credit for exported goods and services. It clarified that even if the refund is denied, the amount remains in the Cenvat account of the claimant. The Revenue was advised that if the services provided were not considered as export of services, proceedings should be initiated for demanding service tax, as no such actions had been taken in the present case.

This comprehensive analysis of the judgment addresses the issues involved in the denial of cash refund of accumulated Cenvat credit for services provided by the appellants, focusing on the classification of services, interpretation of relevant rules, consistency in Departmental decisions, and the applicability of specific rules governing refunds.

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