2017 (1) TMI 434 - AT - Service Tax

Rejection of refund claim - denial of CENVAT credit - Rule 5 of Cenvat Credit Rules, 2002 - denial on the ground that turn over of the services provided by the appellant branches located in abroad is not qualified for export turnover of the appellant - interpretation of statute - Held that - as regard the inclusion of turnover of the services provided by the foreign branches of the appellant to the foreign service recipient in export turnover by the appellant and/or in the total turnover, this issue has been decided by this Tribunal in the appellant s case 2016 (9) TMI 324 - CESTAT MUMBAI , where it was held that the value of service provided by the overseas branch office of the appellant to the foreign base service recipient is neither includible in the export turnover nor in total turnover of the appellant. As regard the issue of denial of Cenvat credit on certain input service on the ground of inadmissible input service, the appellant do not contest the same, I uphold the impugned order limited to the said issue of Cenvat credit. Appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
1. Inclusion of turnover of foreign branches in export turnover and total turnover.
2. Denial of Cenvat credit on certain input services.

Issue 1: Inclusion of turnover of foreign branches in export turnover and total turnover:
The appellant, engaged in IT services exports, claimed a refund under Rule 5 of Cenvat Credit Rules, 2002 for service tax on input services used for export services. The dispute arose when the adjudicating authority rejected part of the refund, stating that the turnover of services provided by the appellant's branches abroad did not qualify as export turnover. The Commissioner(Appeals) upheld this but added the turnover of services provided by foreign branches to the appellant's total turnover. The Tribunal analyzed legal provisions and held that the branches in South Africa and UK, being distinct persons per Explanation 3(b) of section 65B (44), did not constitute export turnover for the appellant. The Tribunal also found that the service value was received by the overseas branches only, making it inapplicable to include in the total turnover of the appellant. Consequently, the Tribunal dismissed both the appellant's and Revenue's appeals, upholding that the turnover of services provided by overseas branches should not be included in export or total turnover.

Issue 2: Denial of Cenvat credit on certain input services:
The appellant conceded not to contest the denial of Cenvat credit on certain inadmissible input services due to the small amount involved. The Tribunal upheld the impugned order limited to the issue of Cenvat credit, modifying the order to partly allow the appeals based on this concession. The Tribunal concluded that the value of services provided by the overseas branch office of the appellant to foreign-based service recipients is neither includible in the export turnover nor in the total turnover of the appellant. The impugned order was upheld on this issue, and the appeals were partly allowed accordingly.

In summary, the Tribunal resolved the issues related to the inclusion of turnover of foreign branches in export and total turnover, as well as the denial of Cenvat credit on certain input services, based on legal interpretations and precedents, ultimately dismissing the appeals and partly allowing them, respectively.