2014 (6) TMI 765 - AT - Service Tax

Denial of refund claim - Export of services - use of input services - Health Club and Fitness Centre, Management Consultants, Business Auxiliary Services, Transport of goods by road, Advertising Space or Time Legal Consultancy Service - non fulfillment the conditions of Rule 5 of Cenvat Credit Rules, 2004 read with Notification No.5/2006-CE, dated 14.03.2006 - Held that - the objection of the Revenue that the Bank Realisation Certificate has not been produced in respect of individual receipt is not sustainable, particularly, when the appellants have produced the entire Bank Realisation Certificate for the complete financial year. Quantum of refund - refund claim by the appellants amounts to Rs.4,52,840/-, while the value of export services is limited to Rs.1,92,912/- - Held that - the amount of refund is governed by the formula under which unutilised credit is multiplied by ratio of export turnover and total turnover and therefore this contention of the Revenue will not have any force if the amount of refund claim satisfies this formula as provided in the Notification. Co-relation between input services and the services exported - Held that - Refund is liable to be sanctioned after it is verified that input services have gone into the export services and it has to be seen from the concerned invoices also particularly in the present case since the refund pertain to October, 2010 to March, 2011, there may be cases where input services were received in January and February, 2011 in that case it cannot be said that services has been utilised in respect of the services which are exported prior to receipt of particular input services in previous quarter. As per the decision of the Hon ble High Court, the matter is required to be verified. In the light of the observations of the Hon ble High Court of Karnataka, the matter is remanded back to the original authority for re-verification of the claim - Following decision of Shell India Ltd. Vs. CCE, Bangalore reported in 2012 (10) TMI 34 - KARNATAKA HIGH COURT - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
- Refund claim under Rule 5 of Cenvat Credit Rules, 2004 for M/s. Divine Wellness Pvt. Ltd.
- Eligibility criteria for refund based on export services.
- Rejection of refund claim by lower authorities.
- Admissibility of refund under Notification No.5/2006-CE dated 14.03.2006.
- Non-submission of Bank Realisation Certificate for export services.
- Calculation of refund amount based on export turnover and total turnover.
- Interpretation of one-to-one co-relation between input services and exported services.

Analysis:
The appeal filed by M/s. Divine Wellness Pvt. Ltd. pertains to a refund claim of Rs.10,92,185/- under Rule 5 of Cenvat Credit Rules, 2004 for the period 01.10.2010 to 31.03.2011. The claim was initially returned due to some part of it relating to a different division of the Commissionerate. The main contention of the appellant is that they are eligible for the refund as they have unutilised CENVAT credit in their account from providing export services, even though a small part was for domestic consumption. The Revenue rejected the claim citing non-fulfillment of conditions under Rule 5 and Notification No.5/2006-CE, particularly emphasizing the absence of Bank Realisation Certificate for export services.

The advocate for the appellant argued that the Bank Realisation Certificate was not necessary as the total foreign exchange received for the financial year was provided, amounting to Rs.3,12,495/- during the relevant period. Additionally, the Revenue objected to the refund amount exceeding the value of export services. However, the appellant relied on the prescribed formula in the Notification for calculating the refund amount based on export turnover and total turnover, maintaining their eligibility.

The Tribunal noted that under Rule 5, CENVAT credit for input services used in exported output services should be allowed for service tax payment or refund, subject to specified conditions. The Bank Realisation Certificate for the entire financial year was considered sufficient evidence of foreign exchange realization. The Tribunal also referenced previous cases to distinguish the grounds for denial of refund, emphasizing the need for verification that input services were indeed used in providing exported services.

Regarding the one-to-one co-relation between input and exported services, the Tribunal referred to a High Court decision highlighting the necessity to ensure that eligible input services were consumed for the exported output services. As a result, the matter was remanded back to the original authority for re-verification and a decision after providing an opportunity for the appellant to be heard. Ultimately, the appeal was disposed of by way of remand for further examination.