2017 (2) TMI 1150 - AT - Service Tax

Refund claim - Rule 5 of the CCR, 2004 - rejection on the ground that the output service i.e. IT service was made liable for payment of service tax only with effect from 16.5.2008, whereas the refund claims are pertaining to the period prior to 16.5.2008 - time limitation - Held that - appellant cannot be denied the refund of accumulated CENVAT credit only on the ground that software services were made liable to payment of service tax only w.e.f 16.5.2008. Time limitation - Held that - refund claims should be considered as filed within time as long as they have been filed within the period of one year from the date of receipt of the consideration for the services exported. Matter on remand to decide that the nexus between the input services with the service exported as well as verification whether the claims have been filed within the period of one year from the date of receipt of consideration - appeal allowed by way of remand.

Summary

Issues:
1. Refund claims rejected due to output service not being taxable before a specific date.
2. Refund claims rejected as time-barred under Section 11B.
3. Nexus between input and exported services not established.

Analysis:
1. The appellant, engaged in software engineering services, filed refund claims for accumulated service credit due to export of services. The claims were rejected by the Deputy Commissioner citing limitation and non-taxability of output service before 16.05.2008. Appellate Commissioner and Tribunal rejected appeals. High Court remanded the case, criticizing the Tribunal's practice of passing non-speaking orders based on interim orders, directing a detailed speaking order with reasons.

2. The issues in the refund claims were twofold: Firstly, rejection based on non-taxability of output service before 16.05.2008. Secondly, rejection on grounds of time limitation under Section 11B. The appellant argued that even though the output service was not taxable until the specified date, CENVAT credit and refund should not be denied. Citing precedents, the appellant contended that limitation does not apply to refund of accumulated CENVAT credit. The High Court, following a similar case, ruled in favor of the appellant, stating that the refund claims should be considered timely if filed within one year from the date of receipt of consideration for the exported services.

3. The Tribunal, after considering relevant legal positions and precedents, held that the appellant cannot be denied the refund of accumulated CENVAT credit solely based on the non-taxability of software services before a specific date. Additionally, the Tribunal emphasized the importance of establishing a nexus between input services and services exported, directing the original adjudicating authority to verify this nexus and the timely filing of refund claims. The impugned order was set aside, and the matter was remanded for further consideration in line with the Tribunal's observations.

In conclusion, the judgment addressed the issues of non-taxability of output service before a specified date, time limitation under Section 11B for refund claims, and the necessity of establishing a nexus between input and exported services. The High Court's directions for a detailed speaking order and the Tribunal's emphasis on legal precedents and verification requirements ensure a fair and thorough consideration of the appellant's refund claims.