2014 (5) TMI 216 - AT - Service Tax

Denial of refund claim - CENVAT Credit - Held that - Primafacie, this is a case where Revenue wants to deny refund of input taxes for services exported relying for non compliance with procedural provisions, the requirement of which is doubtful for exporters. No case of substantial risk to Revenue is brought out. On this matter already there is a decision of the Karnataka High Court in favour of the respondent. In such situation, I am of the view that prayer for staying the order cannot be granted - Stay denied.

Summary

Issues:
1. Claim of refund of Cenvat credit for service tax paid on input services.
2. Interpretation of registration requirements under Rule 4 of Service Tax Rules, 1994.
3. Delay in obtaining registration and its impact on refund claim.
4. Stay petition filed by Revenue against the order of Commissioner (Appeals).

Analysis:
1. The respondent, a provider of information technology services, claimed a refund of Cenvat credit for service tax paid on input services used for providing such services during April 09 to March 10. The adjudicating authority rejected the claim citing that the respondent had obtained registration only in April 10, hence ineligible for refund for the previous period. However, the Commissioner (Appeals) allowed the appeal based on a Karnataka High Court decision stating no restriction on taking credit on services received before registration. The Revenue appealed against this decision.

2. The Revenue argued that the Karnataka High Court decision did not consider the specific registration requirement under Rule 4 of Service Tax Rules, 1994, which mandates registration for persons liable to pay service tax. They emphasized that exporters are not exempt from this rule, citing Rule 4(7) of Service Tax Rules, 1994 and Rule 9(5) of Cenvat Credit Rules, 2004. The Revenue sought a stay on the Commissioner (Appeals) order based on these provisions.

3. In response, the respondent's consultant explained that the delay in obtaining registration was due to following the Department's advice to register under Rule 4 of Service Tax Rules, 1994 instead of Notification No.41/07. They clarified that there was no intentional delay on their part in complying with the registration procedure as advised by the Department.

4. The Tribunal considered both arguments and noted that the Revenue's stance aimed to deny refund based on procedural non-compliance, which may not be applicable to exporters. With no substantial risk to Revenue evident, the Tribunal referred to the Karnataka High Court decision favoring the respondent. Consequently, the Tribunal rejected the Revenue's stay petition against the Commissioner (Appeals) order, allowing the refund claim to stand.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, and the Tribunal's decision based on legal interpretations and precedents.