2016 (11) TMI 146 - AT - Service Tax

Denial of Refund of CENVAT credit under Rule 5 - export of services under Rule 3(iii) of Export of Services Rules, 2005 - information technology software services - ineligible input service, scientific and technical consultancy service - Held that - the learned Commissioner (Appeals) has wrongly rejected the CENVAT credit on scientific and technical consultancy services without any basis holding that the said service is not an input service. Whereas in my opinion, this service is very much a part of the input service and it is directly linked with the output service of the company and therefore, I allow the appeal of the appellant and set aside the impugned order with consequential relief if any - appeal allowed - refund allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against order-in-appeal No. 229-234/2013 dated 28.06.2013 passed by Commissioner (Appeals-II), Bangalore.
- Denial of refund of CENVAT credit under Rule 5.
- Rejection of refund claim amounting to ?4,94,049 for service tax on input service of scientific and technical consultancy.

Analysis:

1. Appeal against Order-in-Appeal:
The appellant, engaged in providing information technology services to a group company outside India, filed an appeal against the order-in-appeal dated 28.06.2013 passed by the Commissioner (Appeals-II), Bangalore. The appellant had provided services to M/s Daimler AG, qualifying as exports under Rule 3(iii) of Export of Services Rules, 2005. The Assistant Commissioner of Service Tax had sanctioned a partial refund, which was further appealed by the appellant. The Commissioner (Appeals) granted the balance claim disallowed by the order-in-original and considered scientific and technical consultancy service as an ineligible input service for providing exported output services. The appellant appealed against the rejection of a refund claim amounting to ?4,94,049.

2. Denial of Refund of CENVAT Credit:
The appellant contended that the impugned order denying the refund of CENVAT credit under Rule 5 for scientific and technical consultancy services lacked a cogent reason. The appellant argued that these services were essential and directly related to designing automobiles, which was an output service of the company. The appellant cited various judgments in support of their claim. After hearing both parties and considering the records and judgments, the Judicial Member found that the Commissioner (Appeals) wrongly rejected the CENVAT credit on scientific and technical consultancy services without a proper basis. The Judicial Member held that these services were indeed part of the input service directly linked to the output service of the company. Consequently, the appeal of the appellant was allowed, and the impugned order was set aside with any consequential relief.

3. Rejection of Refund Claim for Scientific and Technical Consultancy:
The main issue revolved around the rejection of the refund claim amounting to ?4,94,049 for service tax on the input service of scientific and technical consultancy. The appellant argued that these services were crucial for designing automobiles, which formed the output service of the company. The Judicial Member, after reviewing the arguments and relevant judgments provided by the appellant, concluded that the scientific and technical consultancy services were indeed essential input services directly related to the output services exported by the appellant. As a result, the rejection of the refund claim was deemed incorrect, and the impugned order was set aside in favor of the appellant.