2014 (5) TMI 840 - AT - Service Tax

Denial of refund claim - Service received prior to date of registration - export of services - Held that - Rule 4 of Service tax Rules prescribing registration does not apply to person subject to service tax levy but applies to person liable for paying the service tax . Appellant was not liable to pay tax and did not take registration. The Department has not been insisting on taking of registration by units, like the appellant, exporting their services fully. So prima facie it appears that units fully exporting their services do not have to take service tax registration. In the case of the appellant a need to take registration arose only when the appellant decided to claim refund. The Hon. Karnataka High Court and the Tribunal has already given two final orders, to the effect that refund under Rule 5 of CENVAT Credit Rules cannot be denied for input services received prior to the date of registration. We note that the department has not raised any matter challenging the receipt of the service, tax payment on such service and export of output services rendered using such input service. So at this stay stage, we do not find any reason to depart from these decisions and deny the benefit of refund of incidence of tax on export activity - Stay denied.

Summary

Issues:
1. Refund claim on input services received before registration.
2. Legal provisions on registration for exported services.
3. Applicability of CENVAT Credit Rules on registration for claiming refund.

Analysis:
Issue 1: The respondent, a Business Processing Outsourcing Service provider, claimed a refund under Rule 5 of CENVAT Credit Rules for input services received before their registration in December 2008. The Revenue rejected the claim, arguing that services received before registration were not eligible for refund. However, the Commissioner (Appeals) allowed the refund, citing a Karnataka High Court decision. The Revenue challenged this decision.

Issue 2: The Revenue contended that registration was required for claiming a refund, citing legal provisions. They argued that even though exported services were exempt, there was still a tax liability, necessitating registration. The appellant, opposing this, highlighted that the Karnataka High Court found no rule mandating registration for claiming refunds under CENVAT Credit Rules.

Issue 3: The Tribunal analyzed the requirement of registration under Rule 4 of Service Tax Rules, noting that it applies to persons liable for paying service tax, not those solely subject to the tax levy. The appellant, fully exporting services, was not liable to pay tax and had not taken registration. The Tribunal observed that the department did not insist on registration for units fully exporting services. It was noted that registration became necessary only when claiming a refund. Relying on previous decisions, the Tribunal rejected the Revenue's stay application, affirming that refund under Rule 5 cannot be denied for services received before registration, especially when the department did not challenge the service receipt, tax payment, or export of services.

In conclusion, the Tribunal upheld the Commissioner (Appeals) decision, emphasizing that registration for claiming a refund under CENVAT Credit Rules was not mandatory for units exporting services, especially when tax liabilities were exempted.