2024 (6) TMI 845 - AT - Service Tax

Refund of service tax paid - refund claims were rejected on the ground that output services were not exported in accordance with the Export of Services Rules, 2005 and on the ground that nexus between input and output services was not established - Board Circular No.111/5/2009-ST dated 24.02.2009 and Board Circular No. 120/1/2010 dated 19.01.2010 - Order-in-Original beyond the scope of the show-cause notice. Whether the Order-in-Original has traversed beyond the show-cause notice? - HELD THAT - The original authority has rightly observed that the Order-in-Original has not traversed beyond the scope of show-cause notice as apparently the essential facts required to process the refund claims were not produced and admittedly due to very high volume of transactions covering about 45,000 export invoices, equal number of input invoices and certified copies of FIRCs were not filed along with the claim and filed only along with their reply to the notice. Therefore, the order issued cannot be held as having traversed beyond the notice. Whether the appellant satisfied the conditions of Rule 5 of the Cenvat Credit Rules, 2004 read with the Export Service Rules, 2005? - HELD THAT - In the instant case, admittedly, the services are not provided from India but are provided from their subsidiary units situated in Australia, USA and China. Even with regard to the payments, the Commissioner (Appeals) has observed that the remittances for the output services that were rendered by establishments situated outside India, remittance instructions for depositing in Bank of America, Chicago and the Deutsche Bank Amsterdam, which has not been disputed by the appellants. Therefore, having not satisfied the conditions laid down in the Export of Service Rules, 2005, the appellants cannot claim that they have exported the services for the period October 2008 to June 2009. Correlation between the inputs and output services - Board vide Circular dated 19.1.2019 - HELD THAT - The Board vide Circular dated 19.1.2019 suggested that in Budget 2009, the scheme was simplified by making a self-certification whereunder an Exporter or its Chartered Accountant is required to certify the invoices about correlation and the nexus between the inputs/input services and the exports. The Board had directed to be liberal and accept the correlation as certified by the Chartered Accountant as above even in cases of Rule 5 refund claims. The question of correlation arises only when the accumulation of input credit is on account of export of services. In the instant case, since the services rendered by the appellant cannot be considered as export of services, the question of correlation becomes immaterial. The question of denying the benefit does not arise. For the claims July 2009 to December 2009, the Export of Service Rules was amended with effect from 27.2.2010 where clause (a) of Rule 3 (2) of Export of Service Rules, 2005 was omitted, which categorically stated such services provided from India and used outside India. The impugned order is upheld and the appeals are rejected.

Summary

Issues Involved:
1. Whether the appellant satisfied the conditions of Rule 5 of the Cenvat Credit Rules 2004 read with the Export of Service Rules, 2005.
2. Whether the refunds for earlier and later periods being sanctioned can be rejected for the interim period.
3. Whether the Order-in-Original was beyond the scope of the show-cause notice.

Summary:

Issue 1: Conditions of Rule 5 of Cenvat Credit Rules 2004 Read with Export of Service Rules, 2005
The appellant, an IT company, filed refund claims u/s Rule 5 of Cenvat Credit Rules, 2004 for service tax paid on input services used in exported services. The claims were rejected on grounds that the output services were not exported per Export of Services Rules, 2005, and nexus between input and output services was not established. The Commissioner (Appeals) upheld the rejection, noting that services were provided by the appellant's overseas subsidiaries, not from India, thus not qualifying as export of services under Rule 3(2) of Export of Service Rules, 2005. The Tribunal agreed, stating that the services rendered outside India by subsidiaries and payments received by them do not satisfy the conditions for export of services.

Issue 2: Refunds for Earlier and Later Periods
The appellant argued that refunds for the periods before and after the disputed period were sanctioned, hence the interim period should also be eligible. The Tribunal noted that the earlier refunds were sanctioned based on services rendered from India, and the rules were amended post-27.02.2010, omitting the clause requiring services to be provided from India and used outside India. Therefore, the Tribunal found no inconsistency in rejecting the refunds for the interim period.

Issue 3: Scope of the Show-Cause Notice
The appellant claimed the Order-in-Original traversed beyond the show-cause notice. The Tribunal found that the original authority had issued the order based on documents filed by the appellant in response to the notice. The Tribunal held that the order did not traverse beyond the notice as it was based on essential facts required to process the refund claims.

Conclusion:
The Tribunal upheld the impugned order, confirming the rejection of the refund claims for the period from October 2008 to June 2009, and dismissed the appeals.