2016 (6) TMI 473 - AT - Service Tax

Refund claim - unutilized credit accumulated prior to date of registration - Rule 5 of CCR 2004 - 100% EOU - Business Process Outsourcing activities to foreign clients - Held that - by following the decision of Hon ble Karnataka High Court in the case of mPortal India Wireless Solutions P.Ltd. Vs CST Bangalore 2011 (9) TMI 450 - KARNATAKA HIGH COURT the refund of cenvat credit cannot be rejected in absence of any specific provisions which prescribe that registration is mandatory for claim of the refund of the cenvat credit. Eligibility - Refund claim - input service credit availed on service tax paid is in relation to output service - Held that - the services for which the authority has held that they do not have not any direct nexus for providing the output service are outdoor catering transportation of employees office building maintenance and air travel agency services. Rent-a-cab service is found to be essential for the transportation of the employees in the adjudication order itself. When such a service is not found irrelevant to the business credit of input tax cannot be denied since rent-a-cab service is essential for the movement of the employees of company from 2958/- is rejected. Eligibility - Refund claim - Period of limitation - Held that - the situation is not covered under the situation categorized under Section 11B as this is a case pertaining to claim of refund on the unutilized credit or input service. The definition of relevant date also does not cover refund of unutilized credit. Therefore the notification issued under Rule 5 of CCR in my view cannot go beyond the primary Section which is Section 11B. It was also submitted by appellant that there was an amendment brought in the present Budget 2016 wherein there were certain proposals made and it is only prospective in nature and since the period of dispute is only retrospective in their case it would not get covered with the amendment and prayed that this portion of the refund order holding that refund is time-barred be set aside. But I find that the first appellate authority would not have had a chance to look into the amendment to come to the conclusion. In the interest of fairness and justice I remand this aspect of the matter to the Commissioner (Appeals) for him to examine this aspect in the light of the amendment. Appellant is at liberty to furnish all evidence and records before the first appellate authority for him to arrive at a conclusion on this issue.

Summary

Issues:
1. Rejection of refund claim by Revenue.
2. Eligibility for refund of unutilized credit accumulated prior to registration.
3. Eligibility of input service credit for output service.
4. Eligibility for refund on input credit for service tax paid before service became taxable.
5. Claim hit by time limitation.

Issue 1:
The appeal arose from the rejection of a refund claim of ?35,71,413 by the Revenue. The appellant, a 100% export-oriented unit, filed a refund claim for various input services used in exporting services. The adjudicating authority rejected the claim on grounds of eligibility and consumption of certain input services, leading to a partial sanction of ?7,55,114. The Commissioner (Appeals) upheld the rejection, prompting the present appeal.

Issue 2:
The first issue addressed the eligibility of unutilized credit accumulated before registration for a refund under Rule 5 of the CCR. The Tribunal referred to a Karnataka High Court judgment stating that the absence of specific provisions mandating registration for refund does not warrant rejection.

Issue 3:
Regarding the second issue, the Tribunal analyzed the relevance of input services like outdoor catering, transportation, and maintenance for output services. It cited precedents supporting the eligibility of such services for refund, emphasizing the necessity and business relevance of these inputs.

Issue 4:
The third issue focused on the eligibility for refund on input credit for services taxed before becoming taxable. The Tribunal found no substantial counterarguments to support the appellant's claim, leading to the rejection of a refund claim related to computer software services.

Issue 5:
The final issue addressed the time limitation on the claim. The Tribunal remanded this aspect to the Commissioner (Appeals) for re-examination in light of an amendment, emphasizing the need for a comprehensive review based on new evidence and the recent notification.

In conclusion, the Tribunal upheld the appellant's entitlement to refund for unutilized credit prior to registration and validated the credit taken for various output services. However, it rejected a claim related to computer software services due to lack of substantiation. The issue of time limitation was remanded for further examination in consideration of recent amendments, ensuring a fair and thorough review of the claim.