2017 (3) TMI 1364 - AT - Service Tax

Refund claim - Rule 5 of CCR, 2004 - CENVAT credit lying unutilised - Call centre services - Back office data processing services - denial on the ground that Revenue could not identify the specific classification of services rendered by the appellant to the foreign affiliates and as such these services were held as non-taxable - Held that - on the same set of facts the Department sanctioned refund claims for the subsequent periods and accepted the fact that the appellants are providing taxable service for foreign clients and the accumulated Cenvat credit availed on input services are to be refunded to them. On this ground alone, the stand taken by the lower Authorities in the impugned order is liable to be set aside - matter is remanded back to the Original Authority who will examine the claim for sanction - appeal allowed by way of remand.

Summary

Issues:
Appeal against rejection of refund claims for services provided to foreign affiliates under various categories like business auxiliary service, business support service, management consultancy service, etc.

Analysis:
The appellants provided services to overseas affiliates categorized as call centre services and back office data processing services, availed tax credit on input services, and paid service tax on output services in India. The refund claims for unutilized credit were rejected by the lower authorities, stating the services to foreign affiliates were not taxable. The appellants argued that services provided qualified as export of service and relied on precedents and circulars supporting their claim.

The appellants contended that services provided to Indian and foreign clients were similar, falling under taxable categories. They highlighted the acceptance of their service tax payments by the Department for services to Indian clients, questioning the rejection of refund claims for services to foreign affiliates. They emphasized the legal untenability of the dual approach adopted by the lower authorities.

The Tribunal noted that the lower authorities failed to identify the specific classification of services provided to foreign affiliates, leading to the rejection of refund claims. However, the agreement and documents submitted clarified the nature of services as call centre or BPO services. The Tribunal found the lower authorities erred in not recognizing the tax liability for services provided to foreign affiliates, especially when similar services to Indian clients were accepted as taxable.

The Tribunal observed that the Department had sanctioned refund claims for subsequent periods, acknowledging the taxable nature of services to foreign clients and the eligibility for Cenvat credit refund. The Tribunal deemed the lower authorities' decision as legally unsustainable and remanded the matter to the Original Authority for reevaluation in line with the observations. The appellants were instructed to be given a fair opportunity to present their case, emphasizing the need for prompt disposal of the claims dating back to April 2006.

In conclusion, the Tribunal allowed the appeals by remanding the case for reconsideration, highlighting the inconsistency in the Department's treatment of refund claims for services provided to foreign affiliates despite accepting similar claims for services to Indian clients in subsequent periods.