2018 (4) TMI 1399 - AT - Service Tax

Refund claim - export of service/goods - as per the Revenue, the appellant have not actually exported their services and/or products, but have given services and or sold their products to Jubilant Biosys Ltd., as a sub-contractor or agent of theirs - Whether the appellant-assessee M/s Jubilant Chemsys Ltd. have exported their service and received convertible foreign exchange as required under the Export of Service Rules? Held that - identical issue decided in the case of Jubilant Chemsys Limited Versus C.C. & C.E. & S.T. - Noida And (Vice-Versa) 2017 (7) TMI 62 - CESTAT ALLAHABAD , where it was held that the appellant have been verified and examined the payments made by Jubilant Biosys Limited to Jubilant Chemsys Ltd for its share of activities under the work orders received from the parties located outside India. The appellant have satisfied both the conditions for export of service, namely rendering of service from India and receipt of the service by the client outside India of consideration in convertible foreign currency in India Applicability of proviso to Section 73(1) of the Finance Act, 1994 - Held that - it is not a case of mis-declaration or suppression of facts but a case where there is a change of opinion on the manner of assessment by the Department - proviso to Section 73(1) and provisions of Section 78 of the Finance Act, 1994 are not applicable. Penalty u/s 76 - Held that - there is no contumacious conduct on the part of the Assessee and the entire issue involves interpretation of the legal provisions. Moreover, the assessee has paid service tax to avoid any further dispute, in a revenue neutral situation - penalty set aside by invoking section 80. Demand of interest - Held that - the issue is squarely covered by the decision in the case of Oil and Natural Gas Corporation Limited Vs CCE Surat 2015 (1) TMI 41 - CESTAT AHMEDABAD , where it was held that nterest is not payable with respect to duty required to be debited in the Cenvat Credit Account provided sufficient balance was available in the Cenvat Credit Account. Nothing has been brought on record that such a credit was not available in the Cenvat Account during the relevant period for debit - interest is not payable by the Appellant on the amount of duty paid through CENVAT account. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the appellant exported their services and received convertible foreign exchange as required under the Export of Service Rules.
2. Whether the appellant is liable to pay service tax under Section 73 of the Finance Act, 1994.
3. Applicability of extended period of limitation under Section 73(1) of the Finance Act, 1994.
4. Imposition of penalty under Sections 76 and 78 of the Finance Act, 1994.
5. Payment of interest on the duty paid through the CENVAT account.

Issue-wise Detailed Analysis:

1. Export of Services and Receipt of Convertible Foreign Exchange:
The appellant, M/s Jubilant Chemsys Ltd., engaged in research and development of drug chemicals, claimed they exported services and received payment in convertible foreign exchange. The Revenue contended that the appellant acted as a sub-contractor for Jubilant Biosys Ltd. (JBL) and did not actually export services. The Tribunal found that the appellant was a co-venture with JBL in executing research and development assignments for clients like Eli Lilly and Company, USA, and satisfied both conditions for export of service: rendering services from India and receipt of payment in convertible foreign exchange. The Tribunal referenced a previous decision (Final Order No. ST/A/70562-70564/2017-CU(DB) dated 02/05/2017) which supported this conclusion.

2. Liability to Pay Service Tax:
The Revenue demanded service tax under Section 73 of the Finance Act, 1994, asserting that the appellant provided services to JBL and not directly exported services. The appellant argued that they provided services under agreements similar to those in the earlier proceedings, which were held to be exports. The Tribunal held that the appellant exported their services and received payment in convertible foreign exchange, thus not liable for service tax as per the precedent.

3. Applicability of Extended Period of Limitation:
The Revenue invoked the extended period of limitation, alleging suppression of facts by the appellant. The Tribunal found that the appellant disclosed the value of services in ST-3 returns and claimed refunds of accumulated CENVAT credit, which were verified by the Jurisdictional Range Superintendent. The Show Cause Notice was issued based on an audit objection, indicating a difference of opinion rather than suppression of facts. Thus, the Tribunal held that the extended period of limitation and provisions of Section 78 were not applicable.

4. Imposition of Penalty:
The Tribunal found no contumacious conduct by the appellant and noted that the issue involved interpretation of legal provisions in a revenue-neutral situation. Invoking Section 80 of the Finance Act, 1994, the Tribunal set aside penalties under Sections 76 and 78, citing reasonable cause for any failure to pay service tax.

5. Payment of Interest on Duty Paid Through CENVAT Account:
The Tribunal referred to the decision in Oil and Natural Gas Corporation Limited Vs CCE Surat (2015 (38) S.T.R. 867 (Tri-Ahem)), which held that interest is not payable if sufficient balance was available in the CENVAT account when the duty liability crystallized. The Tribunal concluded that interest was not payable by the appellant on the amount of duty paid through the CENVAT account.

Conclusion:
The Tribunal allowed the appeal, setting aside the demand for service tax, penalties, and interest, and confirmed that the appellant had exported their services and received payment in convertible foreign exchange, thus satisfying the conditions for export of services under the Export of Service Rules.