2013 (7) TMI 124 - AT - Service Tax

Refund of CENVAT credit - export of services - The department was of the view that the services exported by the appellant were software development and software consultancy services falling under the taxable service category of Consulting Engineer the services exported consideration was received in convertible foreign exchange - Held that - The assessee is a 100% export oriented unit - The export of software at earlier date was not a taxable service the assessee had paid input tax on various services the assessee had accumulated CENVAT credit - The assessee is entitled to the refund of the CENVAT credit under Rule 5of the CENVAT Credit Rules, 2004 - As decided in Repro India Ltd. vs. Union of India(2007 (12) TMI 209 - BOMBAY HIGH COURT) that CENVAT credit would be available on input or input services used in the manufacture and export of exempted goods. Bar on Limitation Held that - Bar of limitation cannot be a ground to refuse CENVAT credit to the assessee - limitation under Section 11B not to be applied for refund of accumulated CENVAT credit. - Decision in the case of mPortal India Wireless Solutions P. Ltd. (2011 (9) TMI 450 - KARNATAKA HIGH COURT) followed. Exempted services Rule 2(e) of the CENVAT Credit Rules, 2004 - Held that - Information Technology Software Service brought under the tax net for the first time in the year 2008 - not a taxable service during the period - appeal allowed in the favour of assessee.

Summary

Issues:
Refund claim eligibility under Rule 5 of CENVAT Credit Rules, 2004 for accumulated CENVAT credit due to export of services.

Detailed Analysis:

Issue 1: Eligibility of Refund Claim
The appellant, a registered entity providing various services, filed refund claims totaling Rs. 2,14,45,060 under Rule 5 CENVAT Credit Rules, 2004 due to the inability to utilize accumulated CENVAT credit from exporting services. The department contended that the exported services were taxable and that the appellant had not maintained separate accounts for input services. The adjudicating authority held that the accumulation was due to a cap on credit utilization, not export, but did not order recovery of the credit. The lower appellate authority rejected the refund claims based on the cap under Rule 6(3)(c) of the CENVAT Credit Rules.

Issue 2: Appellant's Submissions
The appellant argued that as a 100% Export-Oriented Unit (EOU), they exported software services and had accumulated CENVAT credit attributable to these exports, making them eligible for refunds under Rule 5. They contended that the exported services were taxable and not exempted, citing relevant case law and circulars. They emphasized that even if services were exempted, exporters were entitled to CENVAT credit benefits.

Issue 3: Judicial Analysis
The Tribunal noted that the exported services were not taxable during the relevant period but were considered exempted services under Rule 2(e) of the CENVAT Credit Rules. The Tribunal clarified the definition of "exempted services" and "output service" under the rules. It highlighted the provisions of Rule 5 allowing credit utilization for exported services and the cap under Rule 6(3)(c), which did not apply to non-taxable output services like those provided by the appellant.

Issue 4: Tribunal's Decision
Relying on a High Court judgment and the objective of promoting exports, the Tribunal allowed the appeal, granting the refund of Rs. 2,14,45,060 to the appellant. It emphasized that in the case of exports, the tax burden should not fall on the exporter, aligning with the government's export promotion policies. The Tribunal directed the Revenue to verify compliance with conditions specified in Notification No. 5/2006-CE(NT) dated 14/03/2006.

In conclusion, the Tribunal allowed the appeal, granting the refund to the appellant for the accumulated CENVAT credit due to the export of exempted services, emphasizing the promotion of exports and the non-tax burden on exporters in destination-based consumption tax systems.