2022 (8) TMI 874 - AT - Service Tax

Refund of un-utilised Cenvat credit of Service Tax - Input Service used in provision of Business Support Service(BSS) exported outside India - intermediary services - place of provision of services - rejection on the ground that the service rendered is not BSS but intermediary service and hence the place of provision of service is in India and not outside - HELD THAT - Commission is being paid to an intermediary not the transfer pricising, whereas the appellant herein was getting transfer pricising. There is nothing on record to show that the appellant is liasioning or acting as intermediary between the HLX and its clients. Therefore, the finding of the lower authorities that the appellant is an intermediary is misplaced. It is astonishing to notice that although for earlier periods the then adjudicating authority allowed the refund claim of the appellant, but without looking into those orders and without giving any reason for not following the earlier orders, this time the concerned Authorities held otherwise by denying the credit. It is observed that the learned Commissioner in the impugned order has also places reliance on the website without confronting the appellant with the said material, which is completely in violation of the principle of natural justice and also beyond the show cause notice as the show cause notice did not rely upon any such website. Admittedly the refund claims have been filed by the appellants under Rule 5 ibid r/w Notification No. 27/2012 dated 18/06/2012. The said rule provides for refund of accumulated Cenvat Credit in respect of goods and services exported under bond or undertaking. This rule is very specific and lays down how to determine the quantum of admissible refund from the accumulated cenvat credit - If the Revenue is not in agreement with the claims of the appellants and if, according to Revenue, the services in issue do not fall within the ambit of export of service then the Revenue ought to have initiated the proceedings against the appellants for demanding the Service Tax in respect of taxable service provided by the appellants. Admittedly no such proceedings have been initiated by the Revenue as borne out from the records of the case and therefore in a way Revenue itself has allowed this taxable service provided by appellants as export of service. If that is so then in the proceeding under Rule 5 ibid revenue cannot deny refund by treating the service provided not to be export of service. The orders of lower authorities denying Cenvat credit on impugned services are not sustainable in law and therefore the appeals filed by the appellant deserve to be allowed - appeals are accordingly allowed subject to calculation of refund of un-utilised Cenvat credit by the adjudication authority on the basis of the documents submitted by the appellants and for this limited purpose these appeals are remanded to the original authority.

Summary

Issues:
1. Refusal of refund of Cenvat Credit on Input Service used in provision of Business Support Service exported outside India.
2. Determination of whether services provided by the appellant to an overseas client fall within the category of Business Support Service (BSS) or intermediary service.

Issue 1: Refusal of refund of Cenvat Credit
The appeals challenged orders rejecting the refund of Cenvat Credit on Input Service used in providing Business Support Service exported outside India. The Adjudicating Authority rejected the refund on grounds that the service provided was intermediary service, with the place of provision in India. The Commissioner upheld this decision. The appellant argued that the services qualified for refund claims under Rule 5 of Cenvat Credit Rules, 2004. The authorities' rejection was based on the misconception that the appellant acted as an intermediary, denying the refund claim.

Issue 2: Classification of Services
The main issue was whether the services provided by the appellant to its overseas client fell within the category of Business Support Service (BSS) or intermediary service. The appellant contended that the services were BSS, involving IT support and services related to information technology, provided on a principal-to-principal basis. The Revenue argued that the appellant acted as an intermediary due to involvement with setting up client accounts and resolving client queries, indicating three-party involvement. The definition of an "intermediary" under Rule 2(f) of Place of Provision of Services Rules, 2012 was crucial in determining the classification.

The Tribunal clarified that an intermediary arranges or facilitates the main supply between two or more persons, excluding the person providing the main supply. The appellant's services were found not to fall under the intermediary category as they provided services on a principal-to-principal basis. The Tribunal noted discrepancies in the authorities' reasoning, emphasizing that burden of proof lies on the department to substantiate claims with evidence. The Tribunal highlighted violations of natural justice in relying on external sources without proper confrontation.

The Tribunal emphasized that the denial of refund should not affect the claimant's Cenvat account balance. It was noted that if services did not qualify as export of service, the Revenue should initiate proceedings for demanding Service Tax. Precedents were cited to support the view that the services provided by the appellant qualified as export of service. The applicability of Rule 3 of Place of Provision of Services Rules, 2012 was crucial in determining the location of service provision, supporting the appellant's claim for export of services.

In conclusion, the Tribunal found the lower authorities' denial of Cenvat credit unsustainable in law. The appeals were allowed, subject to recalculating the refund by the adjudication authority based on documents submitted by the appellants. The original authority was directed to dispose of the refund claim within three months from the date of the order, ensuring proper opportunity for the appellants.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, the arguments presented by both parties, and the Tribunal's findings and reasoning in reaching its decision.