2017 (9) TMI 92 - AT - Service Tax

Refund of unutilised CENVAT credit - Investment Advisory Services - export of services - location of recipient of services - order beyond the scope of show cause notice (SCN) - Held that - there is proper agreement between the parties, for rendering of services by the appellant and receiving of services by the recipient of service, who is located outside India - Clause 3 of the Notification provides that the manner for receipt of foreign exchange by payment in Rupees from the Account of a bank situated in any country other than member Countries of Asian Clearing Union or Nepal or Bhutan - all conditions for export of service, under Export of Service Rules, 2005 have been fulfilled and impugned order is bad for holding that there is no export of service. The appellant as a service provider is entitled to receive both fees and reimbursement of expenses incurred, for rendering the service. As such, the two together form gross amount of service charges, as defined under Section 67 of the Finance Act, 1994. The service has been used and received by the recipient of service located outside India. It is of no consequence, whether such advisory service received by the recipient located outside of India, is used by recipient for making investment decision, for making investment in India. Unjust enrichment - time limitation - Held that - neither there is any question of unjust-enrichment, nor the refunds of Cenvat credit under Rule 5 of CCR, 2004, are hit by time bar, as no time limit has been provided for utilization of Cenvat credit, once it has been taken. The appellant in the facts and circumstances has admittedly proved that due to its business being export of service, have been unable to utilize the Cenvat credit taken. Accordingly, they are entitled to refund of Cenvat credit without any time bar. Jurisdiction - Held that - some of the issue not raised and/or decided in the impugned orders are wholly without jurisdiction being- (i) service provided do not classify as export of taxable service, as per Export of Service Rules, as no such allegation is made in show cause notice for the period July, 2007 to September, 2007. Scope of SCN - Held that - the adjudication orders for the period July 11 to March 12, being refund claim dated 29th June, 2012 for ₹ 11,32,572/-, ₹ 13,43,033/- filed on 28th March, 2013 for the period April 12 to December 12 and claim for ₹ 18,48,921/- dated 29th June, 2012 for the period, April 12 to June 12 are bad, as no show cause notice was issued for these matters and as such, I hold that the adjudication orders are wholly without jurisdiction. Appeal allowed - the adjudicating authority directed to grant the refunds with interest, as per rules - decided in favor of appellant.

Summary

Issues Involved:
1. Qualification of services as export of taxable services under Export of Service Rules, 2005.
2. Documentary evidence for export of banking and other financial services.
3. Receipt of consideration for services rendered.
4. Relationship between appellant and investment manager.
5. Applicability of unjust enrichment.
6. Disclosure of services exported in ST-3 returns.
7. Receipt of full consideration in convertible foreign exchange.
8. Evidence of remittances received as consideration for export services.
9. Tallying of Cenvat credit value with ST-3 return.
10. Applicability of Export Rules during the relevant period for rebate claims.
11. Jurisdictional validity of adjudication orders without show cause notices.

Detailed Analysis:

1. Qualification of Services as Export of Taxable Services:
The appellants provided 'Investment Advisory Services' to recipients located outside India. The services were provided from India, used outside India, and payment was received in convertible foreign exchange. The Tribunal held that these conditions satisfy the Export of Service Rules, 2005. The Tribunal also referenced previous rulings, such as Commissioner of Service Tax, Mumbai-I Vs M/s Bain Capital Advisors Private Ltd., which recognized similar services as exports.

2. Documentary Evidence for Export of Banking and Other Financial Services:
The Tribunal noted that the appellants submitted adequate documentary evidence, including the Cenvat Register, output invoices, Foreign Inward Remittance Certificates (FIRC), and ST-3 returns, supporting their claim for refund under 'Banking and Other Financial Services'.

3. Receipt of Consideration for Services Rendered:
The appellants received consideration in two modes: directly in convertible foreign exchange or through deposits in Nostro Accounts, both recognized under the Foreign Exchange Management Act. The Tribunal held that the gross amount charged, including reimbursement of expenses, constitutes the value of taxable services under Section 67 of the Finance Act, 1994.

4. Relationship Between Appellant and Investment Manager:
The Tribunal found no evidence supporting the revenue's claim that the appellant and the investment manager were related parties with mutual business interests. The Tribunal emphasized that there is no condition in Notification No.27/2012 or Rule 5 of CCR, 2004, disqualifying refund eligibility based on related party transactions.

5. Applicability of Unjust Enrichment:
The Tribunal ruled that the doctrine of unjust enrichment does not apply to refunds of unutilized Cenvat credit related to export of services. The appellants were entitled to refunds as they were unable to utilize the Cenvat credit due to their business being export-oriented.

6. Disclosure of Services Exported in ST-3 Returns:
The Tribunal found that the appellants made proper disclosures in their ST-3 returns regarding export turnover and expenses incurred. The Tribunal dismissed the revenue's allegations of non-disclosure or inadequate disclosure as they were not raised in the show cause notice.

7. Receipt of Full Consideration in Convertible Foreign Exchange:
The Tribunal confirmed that the appellants received full consideration in convertible foreign exchange, as clarified by the Reserve Bank of India under Notification No. FEMA 14/2000-RB. The Tribunal held that all conditions for export of services were fulfilled.

8. Evidence of Remittances Received as Consideration for Export Services:
The Tribunal accepted the appellants' evidence showing that remittances received were towards consideration for export services, not merely reimbursement of out-of-pocket expenses.

9. Tallying of Cenvat Credit Value with ST-3 Return:
The Tribunal found that the value of Cenvat credit as per the Cenvat register tallied with the value shown in the ST-3 return, supporting the appellants' claim for refund.

10. Applicability of Export Rules During the Relevant Period for Rebate Claims:
For the rebate claim period April 2012 to June 2012, the Tribunal held that the Export Rules applicable during this period should be considered, not those from the credit period. The Tribunal affirmed that the investment advisory services qualify as exports.

11. Jurisdictional Validity of Adjudication Orders Without Show Cause Notices:
The Tribunal declared that adjudication orders for periods without proper show cause notices were without jurisdiction. The Tribunal emphasized that a proper show cause notice is essential for assuming jurisdiction to pass an order.

Conclusion:
The Tribunal set aside all impugned orders and allowed the appeals with consequential benefits to the appellants. The adjudicating authority was directed to grant refunds with interest within 45 days from the receipt of the order.