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2016 (12) TMI 1524 - AT - Service Tax100% EOU - Rejection of refund claim - input services availed for export of services - N/N. 5/2006-CE (N.T) dated 14.03.2006 - rejection on the ground that software services were not taxable during the relevant time - Held that - The lower authorities have taken the view that input services availed during April 2006 to March 2007 are not relatable to the services exported in September 2007. This situation has arisen from the fact that the credit of input services has not been taken during the period for which the refund has been claimed. This brings us to the question whether credit availed for a period prior to the quarter/month for which the refund has been claimed is eligible for refund or not? This specific issue has been considered at length and decided in favor of the appellant in the case of Sai Advantium Pharma Ltd. 2015 (3) TMI 1230 - CESTAT BANGALORE , where it was held that Once credit was admissible and unless there was no nexus between the output service exported and input services were used when credit was taken, the refund of the same also could not have been denied since the substantive ground of taking CENVAT credit in the first place being correct would lead to the obvious conclusion that ultimately if it gets accumulated the refund has to be sanctioned - rejection of the refund claim filed under Notification 5/2006-CE (NT) is without justification - appeal allowed - decided in favor of appellant.
Issues:
1. Rejection of refund claim for unutilized cenvat credit of service tax for export of services. 2. Grounds for rejection of the refund claim. 3. Appellant's arguments for the refund of input tax credit. Issue 1: Rejection of refund claim for unutilized cenvat credit of service tax for export of services The appeal challenges the rejection of a refund claim amounting to ?3,06,51,324 for unutilized cenvat credit of service tax related to export activities. The dispute arose from the rejection of the claim by the original authority and subsequent affirmation by the Commissioner (Appeals), leading to the current appeal before the Tribunal. The appellant, a 100% EOU registered for various services, filed the refund claim citing Notification No. 5/2006-CE (N.T) for input services utilized in the export of services in September 2007. Issue 2: Grounds for rejection of the refund claim The authorities rejected the refund claim on multiple grounds: (i) Exported software services were deemed non-taxable during the relevant period, rendering the refund inadmissible. (ii) Failure to file refund claims on a quarterly or monthly basis as required by Notification No. 5/2006. (iii) Discrepancy in connecting the input services availed between April 2006 to March 2007 with the services exported in September 2007, lacking documentary evidence. Issue 3: Appellant's arguments for the refund of input tax credit The appellant contended that the refund should be granted as the input tax credit was utilized in the export of services, even if the software service was non-taxable. They relied on case laws to support their claim and highlighted that there is no restriction on claiming a refund of accumulated cenvat credit for exported services. The appellant also referenced CBEC Circular No. 334/1/2010 and retrospective amendments clarifying the eligibility for refunds on input services used for exported output services. Additionally, the appellant cited a previous Tribunal order in a similar case, emphasizing the admissibility of credit and subsequent refunds. In the final judgment, the Tribunal addressed each ground for rejection. It clarified that the export of non-taxable services does not preclude the refund eligibility under Notification No. 5/2006. The failure to file claims on a quarterly or monthly basis was deemed a procedural matter, not a basis for rejection. The Tribunal also ruled in favor of the appellant regarding the connection between input services availed and services exported, citing a previous order to support the admissibility of refunds for credits utilized even before the claimed period. Consequently, the Tribunal set aside the impugned order, allowing the appeal with consequential benefit to the appellant.
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