2015 (11) TMI 1253 - AT - Service Tax

Refund claim - Unutilized CENVAT Credit - Export of service - Rule 5 of the Cenvat Credit Rules, 2004 read with Notification Nos. 4/2006-CE (NT) and 5/2006-CE(NT) dated 14.03.2006 - primary Authority rejected the refund claim partly on the ground that support services of business or commerce which the assessee had provided to its overseas associated enterprises and for which it had received remuneration in foreign exchange, was not used outside India but within the Indian territory - Held that - Admittedly, remuneration for services rendered by the assessee to overseas entities was received in convertible foreign exchange. The recipient of the service is located outside India, undisputedly - since the benefit of services provided to the foreign recipient accrue economic benefit to the overseas entity, the transactions fall within the ambit of export of services, used outside India. Applying the ratio to the present case, the interface provided by the assessee to synergize activities of the overseas entities and Indian call centres would be export of services. Since this service accrues to the benefit of the overseas entity and is therefore to be considered as having been used outside India and for the benefit of the overseas entity. - Decided in favour of assessee.

Summary

Issues:
Refund claim under Rule 5 of Cenvat Credit Rules, 2004 for input services used for providing output business support service exported overseas.

Analysis:
The appellant, an Indian corporate entity, applied for a refund of Rs. 23,74,027/- for the quarter January 2010 to March 2010, stating it utilized various input services for providing an output business support service exported to an overseas entity. The primary adjudication Authority sanctioned a refund of Rs. 9,35,388/- but rejected the claim for Rs. 13,92,112/-, stating that the services provided were not used outside India. The appellant appealed against this decision.

The appellant had service agreements with its overseas associated enterprise to manage partnerships with suppliers in India, facilitate efficient interfaces, share best practices, and advise on potential services. The services were provided to overseas entities like British Gas Trading Limited and Direct Energy Marketing Limited through Indian call centers. The remuneration for these services was received in convertible foreign exchange.

The appellate Commissioner rejected the refund claim based on the conclusion that the services were not used outside India, citing a Board Circular. However, the Tribunal referred to previous decisions like Paul Merchants vs. CCE, Chandigarh and Microsoft Corporation (India) Pvt. Limited vs. CST, New Delhi, which clarified that services providing economic benefit to overseas entities are considered export of services used outside India.

Applying the ratio from previous decisions, the Tribunal allowed the appeal, setting aside the lower appellate Authority's order and declaring the appellant entitled to a refund of unutilized cenvat credit amounting to Rs. 13,88,262/-.