2013 (7) TMI 237 - AT - Service Tax

Refund unutilized CENVAT credit business auxiliary services - the substantive issue arose as to whether the company was entitled to claim refund of unutilized CENVAT credit taken on input services which were claimed to have been used for providing their output services exported Held that - no attempt was made to determine the exact nature of the output services exported by the assessee, nor to determine the nexus between the input services and the output services. - The nature of activities should be correctly deciphered from the terms of the relevant agreements and the same should be classified under the appropriate head under Section 65(105) of the Act. It is not open to the taxman to approbate and reprobate in this exercise. A correct decision on the subject refund claims should depend on the correct classification of the output services provided by the assessee to the foreign entities. Hence a remand of the case is warranted. Reverse charge mechanism another issue was whether the assessee was liable to pay service tax under reverse charge mechanism - the service classified as manpower recruitment or supply agency service from abroad - the classification of the output services exported by the assessee has got to be done with reference to the entry (under Section 65(105) of the Act) claimed by the assessee and any particular rival entry invoked by the Revenue. - the dispute involved in the Department s appeal also has to be remanded for de novo adjudication.

Summary

Issues Involved:
1. Entitlement to refund of unutilized CENVAT credit on input services used for exported output services.
2. Admissibility of CENVAT credit on input services.
3. Liability to pay service tax under reverse charge mechanism for "manpower recruitment or supply agency service" received from abroad.

Issue-wise Detailed Analysis:

1. Entitlement to Refund of Unutilized CENVAT Credit:
The primary issue in six appeals was whether the company was entitled to claim a refund of unutilized CENVAT credit taken on input services used for providing output services claimed to be exported. The original authorities rejected the refund claims on the grounds that the output services were not taxable under the categories of BAS, ITSS, OIDARS, or BSS. The Commissioner(Appeals) remanded the cases to the lower authorities for re-examination, citing a violation of natural justice and lack of proper examination of documents by the lower authority. However, it was noted that the Commissioner(Appeals) did not have the power to remand the cases and should have decided the cases on merits himself. The appellate authority's orders were set aside, and the cases were remanded to the original authorities for de novo adjudication to determine the correct nature of the output services, their classification, the nexus between input and output services, and the quantification of the refund.

2. Admissibility of CENVAT Credit on Input Services:
In appeal No. ST/2390/2012, the issue was whether the assessee was entitled to take CENVAT credit on input services. The denial of CENVAT credit was linked to the rejection of the refund claim for the same period. Therefore, any decision on the refund claim would impact the admissibility of CENVAT credit. This appeal was also remanded to the adjudicating authority for a fresh decision, contingent upon the outcome of the refund claim adjudication.

3. Liability to Pay Service Tax Under Reverse Charge Mechanism:
In appeal No. ST/1172/2012, the issue was whether the assessee was liable to pay service tax under the reverse charge mechanism for "manpower recruitment or supply agency service" received from abroad. The Commissioner confirmed the demand for service tax for the period from 18/04/2006, the date on which Section 66A of the Finance Act came into force, based on the finding that the assessee received such services from overseas HSBC entities. The assessee contended that the adjudicating authority misinterpreted the relationship between the overseas entities and the employees assigned to them, and that no such services were received. The case was remanded for re-examination of the liability under Section 66A, the applicability of the extended period of limitation, and other relevant issues.

Conclusion:
The Tribunal set aside the impugned orders and remanded all appeals to the respective adjudicating authorities for de novo adjudication. The authorities were directed to pass final orders within three months, ensuring a reasonable opportunity for the assessee to present evidence and be heard. The stay applications were also disposed of.