2017 (8) TMI 636 - AT - Service Tax

100% EOU - Refund of unutilised CENVAT credit - denial on the ground that the appellants are providing software services to their clients in Genova and Texas etc., and the said export is software which is not brought under service tax net and not covered under Rule 2(e) of CCR, 2004 since it is not an exempted service - Held that - in the case of Apotex Research Pvt Ltd. 2015 (3) TMI 346 - CESTAT BANGALORE , the Division Bench of this Tribunal held that CENVAT credit for export of exempted service would be available as refund - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim rejection based on service tax paid on input services for software development exported by a 100% EOU. Denial of refund under Rule 2(e) of CENVAT Credit Rules, 2004. Eligibility for refund under Rule 5 of CCR, 2004 for exported services. Appellant's contention on the non-exempt nature of software development. Interpretation of Rule 6(1) of CCR, 2004 regarding credit on input services for exempted products or services.

Analysis:
The appeal challenged the rejection of a refund claim by the Commissioner (A) concerning service tax paid on input services for software development exported by a 100% EOU. The lower authority denied the claim based on the belief that the software services provided by the appellant were exempted services not covered under Rule 2(e) of CENVAT Credit Rules, 2004. The appellant contended that even though software development was not a taxable service before a certain date, service tax paid on input services is refundable under Rule 5 of CCR, 2004, without exemption being a criteria. The appellant cited various decisions supporting their position, emphasizing that software development is not exempted goods and should be eligible for cash refund under Rule 5 of CCR, 2004.

The respondent argued that the services exported by the appellant, namely software development services, were exempted services under Rule 2(e) of CCR, 2004. They further contended that Rule 6(1) of CCR, 2004 rendered the appellant ineligible to claim credit on input services used for exempted products or services. However, after considering the submissions and case law cited by the appellant, the Tribunal found in favor of the appellant. Citing precedents such as KPIT Cummins Infosystems Ltd., the Tribunal highlighted the objective of promoting exports without imposing tax burdens. The Tribunal concluded that the appellant was entitled to the refund claimed, as the impugned order was deemed unsustainable in law. By following the decisions cited and the policy objective of promoting exports, the Tribunal allowed the appeal, overturning the Commissioner's decision.

In the operative portion of the Order pronounced on 06/07/2017, the Tribunal set aside the impugned order, granting relief to the appellant based on the legal principles and precedents discussed during the proceedings.