2014 (9) TMI 568 - HC - Service Tax

Refund of cenvat credit - Export of services or not - services provided from India or not - onsite work undertaken at customer s premises - software development service - Rule 5 of the CENVAT Credit Rules, 2004 read with the Notification No. 05/2006-CE(NT) - export of service as provided in Rule 3(2) for the period post 27/02/2010 - Held that - first condition (clause (a)) with regard to provision of service from India and its use outside India has not been satisfied. The services have been performed at overseas' customers' site by the subsidiaries of the Appellants, though they may be to the customers of the Appellants. However, these services have not been provided by the Appellants, but claimed to be provided by their subsidiaries. The agreement has been referred to in great details by the Tribunal and it arrived at a conclusion that there may not be any privity of contract as between the subsidiaries of the Appellants and customers, but the situs of service and its provision is both abroad. With the provision of service and site at which the service is provided the Appellants who are in India cannot be said to be involved. The service has been held to be not provided by the Appellants from India. Tribunal was right in it's conclusion that the services provided do not satisfy the requirement of the Export of Service Rules, 2005 as prevailing prior to their amendment with effect from 27.02.2010. In such circumstances any wider questions or controversy need not be gone into and decided. The Written Submissions of the Appellants referred to the services in relation to immovable property and based on that the arguments are canvassed. We are of the view that there was no Rule 3(1) (ii) of the Export of Service Rules, 2005 as initially introduced. There was Rule 3(1)(i) and (iii). We are not in agreement with Mr.Sridharan that the business establishment of the service provider is in India and final consumption and consumer is outside India. We find that the provider of service is also a subsidiary outside India and recipient is also outside India. Regarding alternative claim of refund under different provision - Held that - Appellants had not invoked any specific provision and made an application under the same to claim refund. They could not have invoked Section 11B of the Central Excise Act, 1944 during the course of the proceedings. In the facts and circumstances of the present case Mr.Kantharia is right in urging that the reasons assigned in paragraph 5.9 of the impugned order by the Tribunal cannot be faulted. There is no application made in a prescribed format and time by the Appellants to claim the refund. The refund claim will have to be decided in accordance with the provisions and after the compliance is made with the procedural formalities set out therein. Today, we cannot entertain the argument alternatively made on the claim of refund without any such compliance leave alone any application. For all these reasons we do not find any basis for the alternate claim as well. In the event the Appellants wish to make any such claim it is open for them to invoke the provisions in that regard and as available in law - Decided against Assessee.

Summary

Issues Involved:
1. Eligibility for refund of service tax for onsite work under Rule 3(2)(a) of the Export of Service Rules, 2005.
2. Interpretation of Section 66A of the Finance Act, 1994 regarding reverse charge mechanism.
3. Claim for refund under Section 11B of the Central Excise Act, 1944.

Detailed Analysis:

1. Eligibility for Refund of Service Tax for Onsite Work under Rule 3(2)(a) of the Export of Service Rules, 2005:
The main issue was whether the onsite work undertaken at the customer's premises by the appellants qualifies as "Service Provided from India" under Rule 3(2)(a) of the Export of Service Rules, 2005. The appellants argued that their services, including onsite work performed by their subsidiaries, should be considered as provided from India. The Tribunal, however, held that the onsite services performed by the subsidiaries outside India do not qualify as services provided from India. Therefore, such services do not meet the criteria for export of services under the Export of Service Rules, 2005, and the appellants are not eligible for a refund for the period before 27.02.2010. The Tribunal's interpretation was based on the fact that the services were performed and used outside India, and thus, did not fulfill the requirement of being provided from India.

2. Interpretation of Section 66A of the Finance Act, 1994 Regarding Reverse Charge Mechanism:
The appellants contended that under Section 66A of the Finance Act, 1994, services received from their overseas subsidiaries should be deemed as services provided by the appellants in India. They argued that this legal fiction should extend to all provisions of Chapter V of the Finance Act, 1994, including the Export of Service Rules, 2005. The Tribunal, however, rejected this argument, stating that Section 66A is specifically for the charge of service tax on services received from outside India and does not alter the fact that the services in question were performed and used outside India. Therefore, the services provided by the subsidiaries cannot be considered as export of services from India.

3. Claim for Refund under Section 11B of the Central Excise Act, 1944:
The appellants alternatively argued that if the onsite services are not considered as provided from India, they should not be liable to pay service tax under Section 66A on the amounts charged by subsidiaries, and hence, the amount paid should be refunded under Section 11B of the Central Excise Act, 1944. The Tribunal noted that the appellants did not make a proper application for refund in the prescribed format within the stipulated time. The Tribunal emphasized that every refund claim must be adjudicated by the appropriate authority following due process and principles of natural justice. Therefore, the Tribunal rejected the appellants' alternative plea for a refund, as no specific application was made in accordance with Section 11B.

Conclusion:
The High Court upheld the Tribunal's decision, stating that the services provided by the appellants' subsidiaries outside India do not qualify as services provided from India under the Export of Service Rules, 2005. Consequently, the appellants are not eligible for a refund for the period before 27.02.2010. The Court also agreed with the Tribunal's interpretation of Section 66A, affirming that it does not apply to the Export of Service Rules, 2005. Finally, the Court dismissed the appellants' alternative claim for a refund under Section 11B due to procedural non-compliance. The appeals were dismissed with no order as to costs.