2016 (4) TMI 67 - AT - Service Tax

Rejection of refund claim - Unutilized CENVAT credit filed under Rule 5 of CCR, 2004 read with Notification No.5/2006 CE(NT) dt. 14/03/2008 - Business Auxiliary Service and Information Technology Software Services exported out of India - Refund claim rejected on the ground that services exported are not taxable services, time barred, no one-to-one correlation between the inward and remittances (FICR) and export invoices and no nexus between the input services and the services exported - Held that - the Commissioner(Appeals) has examined the issue and held that most of the activities/services rendered would fall within the taxable category of ITSS. As per judgment of mPortal India Wireless Solutions Pvt. Ltd., Bangalore Vs. CST, Bangalore 2011 (9) TMI 450 - KARNATAKA HIGH COURT and KPIT Cummins Infosystems Ltd. Vs. CCE, Pune-I 2013 (7) TMI 124 - CESTAT MUMBAI , even if the IT enabled services i.e. software consultancy services exported during the impugned period, was classifiable as an exempted service, the benefit of refund under Rule 5 of CCR cannot be denied. If the period of one year is computed from the date of receipt of the FICR, the refund claims would be within the time limit followed by the judgment of Jurisdictional High court in the case of CC.CE&ST, Hyderabad-IV Vs. Hyundai Motor India Engg. (P) Ltd. 2015 (3) TMI 1049 - ANDHRA PRADESH HIGH COURT and in the case of Market Tools Research (P) Ltd. Therefore, the refund claim is not time-barred. There is no dispute with regard to services exported or the inward remittances received. So, there is no requirement that there should be one-to-one correlation between the remittances and the export documents.Therefore, the denial of the refund on the ground that FICR and export invoices did not show one-to-one correlation is not justifiable. Also the period involved is prior to 01/04/2011 when the definition of input services had a wide ambit as the definition included the words activities relating to business . So, the services if necessary for business of the appellant would qualify as input services. therefore, the refund cannot be denied for the reason that input services do not have nexus with the output services. - Decided in favour of appellant with consequential relief

Summary

Issues involved:
1. Rejection of refund claim of unutilized CENVAT credit under Rule 5 of CENVAT Credit Rules, 2004.
2. Taxability of services exported by the appellants.
3. Time-barred refund claims.
4. One-to-one correlation between inward remittances and export invoices.
5. Nexus between input services and services exported.

Analysis:

1. The appellants filed refund claims of unutilized CENVAT credit under Rule 5 of CENVAT Credit Rules, 2004, for the Service Tax paid on input services exported out of India. The original authority rejected the refund claims citing reasons like services exported not being taxable, time-barred claims, lack of correlation between remittances and export invoices, and absence of nexus between input and output services.

2. The Commissioner(Appeals) remanded the matter to the adjudicating authority to examine the taxability of services exported by the appellants. The Commissioner(Appeals) concluded that the services fall under the taxable category of Information Technology Software Services (ITSS). However, the Commissioner(Appeals) remanding the matter was challenged by the appellants citing a lack of power to remand post an amendment in Section 35A.

3. The time-barred nature of the refund claims was also a key issue. The appellants argued that the relevant date for computing the one-year period under Section 11B should be the receipt of Foreign Inward Currency Remittance (FICR) or the filing of ST3 returns, not the date of providing the service. The Tribunal agreed, citing precedents and held that the refund claims were not time-barred.

4. The lack of one-to-one correlation between inward remittances and export invoices was raised as a ground for denying the refund. The Tribunal found this reasoning unjustifiable as there is no requirement for a strict one-to-one correlation in such cases.

5. The final issue revolved around the nexus between input services and services exported. The Tribunal noted that the definition of input services before 01/04/2011 had a broad scope including activities relating to business. Therefore, if the services were necessary for the appellant's business, they would qualify as input services, and the denial of refund on this ground was deemed unjustified.

In conclusion, the Tribunal found the denial of refund unjustified and set aside the impugned order, allowing the appeal with consequential reliefs.