2015 (2) TMI 312 - AT - Service Tax

Denial of refund claim - export of software service and software consultancy service - the activity were not taxable during the relevant period - Unutilized CENVAT Credit - discrepancies were noticed - invocation of Rule 6(3)(c) of the Cenvat Credit Rules, 2004 - Held that - Notification No. 5/2006-C.E. (N.T.), dated 14-3-2006 has been issued. Rule 6 of Cenvat Credit Rules, 2004 deals with obligation of the manufacturer of dutiable and exempted goods and provider of taxable and exempted services. Under Rule 6(3)(c), the provider of output service shall utilise credit only to the extent of an amount not exceeding 20% of the amount of service tax payable on taxable output service. In the present case, the services provided by the appellant and exported is not a taxable output service inasmuch as software development software service and software consultancy service become taxable only in the Budget 2008. Therefore, the cap of 20% prescribed under Rule 6(3)(c) have no application whatsoever. Therefore, there was no bar on the appellant in availing full credit in respect of IT software services during the material period. Object of EXIM Policy of the Government of India is to promote exports of goods and services and not export of taxes. Service Tax being a destination based consumption tax, in the case of exports there should not be any tax burden and the tax burden, if any, is to be imposed by the Government of the country where the services are consumed. Otherwise, it would render the exports of software uncompetitive. Keeping in view of above policy objective of the government, it is appropriate to hold that the appellants are eligible for the refund of the amount claimed by them of ₹ 2,14,45,060/- during the impugned period on account of export of exempted services subject to the satisfaction of other conditions prescribed in Notification No. 5/2006-C.E. (N.T.), dated 14-3-2006 and the Revenue shall verify the same. - Following decision of mPortal India Wireless Solutions (P.) Ltd. Versus Commissioner of Service Tax 2011 (9) TMI 450 - KARNATAKA HIGH COURT and assessee's own previous case 2013 (7) TMI 124 - CESTAT MUMBAI - Impugned order is set aside - Decided in favour of assessee.

Summary

Issues involved:
1. Rejection of refund claims for unutilized CENVAT Credit under Rule 5 of the Cenvat Credit Rules, 2004.
2. Discrepancies in refund claims leading to show-cause notices and rejection by adjudicating authority.
3. Appellant's contention of services being exported and wrongly rejected refund claims under Rule 6(3)(c) of the Cenvat Credit Rules, 2004.
4. Comparison with a previous judgment in a similar case involving a sister concern.
5. Interpretation of rules regarding utilization of credit for taxable and exempted services under Rule 6(3)(c).
6. Legal requirement of registration for claiming CENVAT credit.
7. Applicability of EXIM Policy in promoting exports and eligibility for refund of the claimed amount.

Detailed Analysis:
1. The appeals were filed against the rejection of refund claims for unutilized CENVAT Credit under Rule 5 of the Cenvat Credit Rules, 2004. Discrepancies in the refund claims led to show-cause notices and subsequent rejection by the adjudicating authority. The appellant contested the rejection on the grounds of services being exported and claimed that the rejection under Rule 6(3)(c) was incorrect.

2. The first appellate authority upheld the rejection of refund claims, stating that non-registration of the appellant cannot be a ground for rejection. However, the appellant cited a previous judgment involving a sister concern where the appeal was allowed, indicating a favorable precedent.

3. The Tribunal analyzed the issue of rejection of refund claims concerning service tax paid on input services that were not utilized by the appellant, a service provider registered under the STPI scheme. Referring to the previous judgment involving the sister concern, the Tribunal found in favor of the appellant based on the interpretation of rules governing the utilization of credit for taxable and exempted services under Rule 6(3)(c).

4. The Tribunal emphasized the legal requirement of registration for claiming CENVAT credit and the applicability of the EXIM Policy in promoting exports. It concluded that the appellant was eligible for the refund of the claimed amount on account of export of exempted services, subject to the conditions prescribed in the relevant notification.

5. Considering the similarity of issues between the present case and the judgment involving the sister concern, the Tribunal set aside the impugned order, allowing the appeal with consequential relief. The judgment highlighted the importance of promoting exports and ensuring competitiveness by refunding the tax burden on exported services.