2016 (4) TMI 691 - AT - Service Tax

Refund of Cenvat credit - Notification No.27/2012-CE (NT) dt. 18.6.2012 read with Rule 5 of CENVAT Credit Rules, 2004 - Export of service and receiving foreign exchange as consideration - Lower authority rejected the claim on certain procedural lapses - Held that - on the objection that invoice submitted by the service provider does not indicate all particulars could have been avoided if the lower authority had called for the details of the purchase order and other correspondence and the terms of understanding between the appellants and service providers. Appellants have consistently taken a stand that sub agents were engaged by them for procuring orders relating to export of services provided by the appellants. Once the service in question had been held to be eligible for the credit, the lower authorities should have verified the nature of payment effected on such services and the appointment of said sub agents who had provided such service. It should not be difficult for the appellants to give the particulars of such sub agents and the manner in which such services were to be provided. Therefore the rejection of invoices on the ground of lack of particulars is not correct. On the ground that there was no agreement between the service providers and the appellants for providing the service. It is the ground of the Assistant commissioner that the copy of the agreement was given only after issue of Show cause notice. This ground for rejection is also not tenable as the genuineness of the documents has not been disputed. It is also noticed that the claim is rejected for want of methodology for the quantification of the commission paid. It is observed that so long as the commission paid is not disputed, which can even be verified from the bank statements or certificates from the bank, the rejection of claim for want of quantification of the commission paid is not legally tenable. Another ground of rejection is that the services exported are treated as exempted services for which no credit is admissible. It is observed that under Rule 6(8) of the Cenvat credit rules, services provided will not be an exempted service, if conditions prescribed under Rule 8(a) and (b) are satisfied. The lower authority had not examined whether these conditions are satisfied. Also bank realisation certificates has not been correlated with the export invoices. In the event of non-realisation of remittances for export of services which is also governed under FEMA Act, the lower authority should have examined whether any action was taken under the FEMA against the appellants. In absence of any such proceedings, It cannot be presumed that the remittances of export of services are not correlatable. Keeping in view that claim of refund under Cenvat Credit Rules is part of the export promotion scheme without properly examining the records, such benefits cannot be denied, since the records in question can be properly verified by the Assistant commissioner, who had passed the order-in-original. I, therefore, remand the entire matter to the original authority for examining the issue afresh. Appeal disposed of

Summary

Issues: Refund of Cenvat credit under Rule 5 of CCR 2004 for export of services.

Analysis:
1. The appellant, engaged in providing taxable services as commission agents for textile machineries, filed refund claims under Rule 5 of CCR read with Notification No.27/2012-CE (NT) due to exporting services and receiving consideration in foreign exchange. The claims were rejected for lack of documentary evidence and non-compliance with notification conditions, leading to four show cause notices and two separate Orders-in-Original (OIOs).

2. The appellant's counsel argued that the adjudicating authority accepted the submissions and status of the appellant, highlighting relevant documents such as tax invoices, Bank Realization Certificates (BRC), and agreements to support the refund claims. The counsel emphasized that all conditions were fulfilled, urging the Tribunal to set aside the impugned order based on a previous favorable decision in the appellant's case.

3. The Revenue contended that the refund claims were rightly rejected as the appellant failed to reconcile multiple export invoices in a single BRC, did not debit the full refund amount from the cenvat account, and lacked proper documentation as required by Rule 5 of CCR 2004 and Notification No.27/2012-CE (NT).

4. The Tribunal noted that Rule 5 of CCR 2004 aims at promoting exports by refunding unutilized Cenvat credit. While the service provided was eligible for credit, procedural lapses led to the denial of refunds. The lower authority's objections regarding invoice particulars, absence of agreements, and quantification of commission paid were deemed unjustified.

5. The Tribunal emphasized the need for verifying the nature of services, payment details, and appointment of sub-agents by the appellant. It found the rejection based on lack of agreement and quantification of commission paid legally untenable. Additionally, it highlighted that services exported were not exempted if specific conditions under Rule 6 (8) of Cenvat credit rules were met.

6. Ultimately, the Tribunal remanded the matter to the original authority for a fresh examination, directing the appellant to provide all necessary documents for verification. It stressed the importance of cooperation and proper documentation to establish entitlement to the refund, underscoring that export promotion benefits should not be denied without thorough verification.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, and the Tribunal's decision regarding the refund of Cenvat credit for exported services under Rule 5 of CCR 2004.