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2020 (11) TMI 240 - AT - Service Tax100% EOU - Refund of CENVAT Credit - denial on the ground that both the input service and output service fall under the information technology services and also on the ground that the amounts credited as per Foreign Inward Remittance Certificates (FIRC) are prior to the date of export invoices - proper proof of export was not provided and there was no clarification as to whether the software is an input service for the services exported by them - HELD THAT - From the documents presented including the agreement which the appellant had with M/s Softential Inc USA, the invoices , the FIRCs, the statement by the banker and the set off letter issued by the RBI we were convinced that what the appellant had imported is a software which they used to produce their export services. In fact, the service tax on the imported input service was paid by the appellant themselves under reverse charge mechanism under section 66A of the Finance Act, 1994. They have reflected this payment of service tax in their ST-3 returns. There is nothing on record or in the submissions made by both parties before us to show that the Department has objected to they paying service tax. After paying the service tax the appellant has taken Cenvat Credit of the service tax paid treating the same as input service and showed it in their ST-3 returns. The Department has not objected to the appellant s taking Cenvat Credit. It is evident that the Department has accepted that the Cenvat Credit has been taken on the input service by the appellant. It is now a well established principle that once Cenvat Credit is allowed on any goods or services as inputs or input service they do not cease to be so while processing a refund claim under Rule 5 of Cenvat Credit Rules, 2004. There is no separate definition of input or input service either in Rule 5 of Cenvat Credit Rules, 2004 or in Notification No. 5/2006-CE. Therefore, the definition under Rule 2 of Cenvat Credit Rules, 2004 applies both to taking CENVAT credit and claiming its refund under Rule 5. Whether the input service so used is an input service used for export service or it is an input service used for some other service, such as domestically sold services? - HELD THAT - During the relevant period, only refund of Cenvat Credit on input service used in providing output service which was exported was allowed. Therefore, there can be cases where the input service was for output service A which is domestically sold but not an input service for output service B which is exported. However, in this particular case the unit is a 100% export oriented unit and there is no domestic sale. Therefore, there is no scope for such an apprehension. Export proceeds were realised even before the invoices were issued - HELD THAT - The FIRCs do not show the invoice numbers and therefore there is doubt whether any foreign exchange has been realised at all against the so called exported services. Learned Counsel clarified that they had got a certificate from the Chartered Accountant certifying that the FIRCs pertain to receipts of foreign exchange for the exports concerned - The FIRCs, in the standard format, do not usually indicate the invoice numbers. If the importer or exporter has a running account the exports may take place continuously and the overseas buyer may keep remitting from time to time. It can only be clarified by the Chartered Accountants or the banks or auditors as to which payment the remittances in the FIRCs pertain to. In this case, such a statement was provided by the bank. A set off letter has been received in respect of appellant from the RBI. Therefore, this apprehension of the Department that the export proceeds have not been realised is not well founded. Grant of Interest - HELD THAT - Hon ble High Court of Gujarat, has, in the case of Reliance Industries Limited., 2011 (7) TMI 1141 - SC ORDER held that refund of Cenvat Credit under Rule 5 of Cenvat Credit Rules, 2004 is also a refund under section 11B of the CEA, 1944 and therefore, the provisions of interest under Section 11BB apply and this decision was upheld by the Hon ble Supreme Court by dismissing the SLP filed by the Revenue. Therefore, the appellant is also entitled to interest on refund under Rule 5 of Cenvat Credit Rules, 2004. The appellant is entitled to refund under Rule 5 of Cenvat Credit Rules, 2004 along with interest under Section 11BB as applicable - Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Eligibility for refund of CENVAT credit under Rule 5 of Cenvat Credit Rules, 2004. 2. Proof of export and linkage between FIRCs and export invoices. 3. Validity of input service used for exported services. 4. Entitlement to interest on delayed refund under Section 11BB of the Central Excise Act, 1944. Issue-wise Detailed Analysis: 1. Eligibility for Refund of CENVAT Credit: The appellant, a 100% Export Oriented Unit, claimed a refund of CENVAT credit for the service tax paid on imported software used in providing exported services. The lower authorities denied the refund on grounds including the mismatch between input and output service categories and the timing of foreign remittances. The appellant argued that once CENVAT credit is taken and not disputed by the department, its refund cannot be denied. The Tribunal agreed, citing precedent cases, and emphasized that the definition of input service under Rule 2 of CCR applies to refunds under Rule 5. The Tribunal concluded that the appellant is entitled to the refund claimed. 2. Proof of Export and Linkage between FIRCs and Export Invoices: The lower authorities questioned the linkage between FIRCs and export invoices, noting that remittances were received before the export invoices were issued. The appellant provided a Chartered Accountant's certificate and bank statements to establish this linkage. The Tribunal found these documents satisfactory and noted that advance payments and partial receipts are common in international transactions, thereby dismissing the department’s apprehensions regarding the realization of export proceeds. 3. Validity of Input Service Used for Exported Services: The Tribunal examined whether the imported software (Netcool Suite) was used as an input service for exported services. The appellant, being a 100% EOU with no domestic sales, used the software exclusively for exports. The Tribunal found that the service tax was paid under the reverse charge mechanism, and CENVAT credit was duly reflected in the appellant’s ST-3 returns without any objection from the department. Hence, it was established that the software was indeed an input service for the exported services, making the appellant eligible for the refund. 4. Entitlement to Interest on Delayed Refund: The appellant claimed interest on the delayed refund based on the Gujarat High Court’s decision in the Reliance Industries case, which was upheld by the Supreme Court. The Tribunal agreed that the provisions of interest under Section 11BB of the Central Excise Act, 1944 apply to refunds under Rule 5 of CCR, 2004, thus entitling the appellant to interest on the delayed refund. Conclusion: The Tribunal set aside the impugned order, holding that the appellant is entitled to the refund under Rule 5 of Cenvat Credit Rules, 2004, along with interest as per Section 11BB of the Central Excise Act, 1944. The appeal was allowed, and the order was pronounced on 04/11/2020.
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