2019 (1) TMI 720 - AT - Service Tax

Refund claim - export of service - intermediary - place of provision of service - Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No.27/2012-C.E. (N.T.), dated 18.6.2012 - denial on the ground that the services provided by the appellant are not to be considered as export of service inasmuch as the services were executed in India and since, the appellant was the intermediary, the place of provision of service should be considered as provided in India - Held that - It is an admitted fact on record that the consideration received by the appellant for providing the services was based upon cost plus markup and is nowhere connected with the main supply of goods. In other words, the main supply may or may not happen and thus, cannot be directly correlated with the service provided by the appellant. Thus, the appellant is not acting as a bridge between the overseas group entities and supplies made to their customers in India and accordingly, it cannot be said that the appellant has provided intermediary service and should be governed under the provisions of Rule 9 of the rules. The services were in fact used for business purpose and not for the personal use or for providing welfare measures to the employees. Thus, there is nexus between the input services and the output service provided by the appellant. Since the appellant was not in a position to utilize the accumulated cenvat credit, it should be entitled for refund of service tax under Rule 5 of the Cenvat Credit Rules. Input tax credit - unregistered premises - Rule 3 of the Cenvat Credit Rules - Held that - Rule 3 provides that service tax paid on input service by the service provider of output service should be allowed for cenvat benefit. The said rule nowhere specifies that credit should only be available for the services used/utilized in the registered premises alone. Since registration of premises is not a pre-requisite condition for claiming input tax credit, denial of the refund benefit on such ground is not legally sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Refund of accumulated cenvat credit for services considered as export, denial of refund benefit, classification as intermediary, nexus between input and output services, denial of cenvat credit for services at unregistered premises.

Analysis:
1. Classification as Intermediary:
The appellant claimed refund of accumulated cenvat credit for services provided to overseas group entities, considering them as export of service. The original authority rejected the refund application, classifying the appellant as an intermediary due to services being executed in India. The Commissioner (Appeals) extended the benefit of export under Place of Provision of Services Rules, 2012 but denied it from 1.10.2014, stating the appellant facilitated goods supply, thus being an intermediary under Rule 9. However, the Tribunal found the appellant not acting as an intermediary as the service fee had no direct nexus with goods supply, being based on cost plus markup, and provided on principal to principal basis. The main supply was not directly correlated with the service, leading to the appellant not being a bridge between overseas entities and Indian customers.

2. Nexus Between Input and Output Services:
The appellant argued the input services had a business purpose and were not for personal use, establishing a nexus with the output service. The Tribunal examined the nature of disputed services and confirmed their business use, making the appellant eligible for refund under Rule 5 of the Cenvat Credit Rules. The denial of refund benefit on the ground of lack of nexus between input and output services was deemed legally unsustainable.

3. Denial of Cenvat Credit for Services at Unregistered Premises:
Regarding the denial of cenvat credit for services utilized at unregistered premises, the Tribunal highlighted that Rule 3 of the Cenvat Credit Rules allows service tax paid on input services by the service provider of output service to be eligible for cenvat benefit. The rule does not mandate credit availability only for services used in registered premises, making the denial of refund on this basis legally unsustainable.

4. Conclusion:
After thorough analysis, the Tribunal found no merits in the impugned order denying the refund benefit to the appellant. The order was set aside, and the appeals were allowed in favor of the appellant. The judgment emphasized the appellant's non-intermediary role, the nexus between input and output services, and the eligibility for cenvat credit irrespective of the premises' registration status.