2018 (6) TMI 1011 - AT - Service Tax

Refund claim - Rule 5 of Cenvat Credit Rules, 2004 - various input services - denial on the ground of nexus - Held that - The lower authority mainly contended that the above services are not admissible input service for the reason that in the definition the service related to business activities was excluded. Merely due to this reason it cannot be said that all the above services are not input service. To qualify service as input service irrespective whether activities related to business was excluded but as per the main clause of the definition of the service is that any service used for providing out put service is admissible input service. The appellant are exclusively output service provider, to run the entire business for providing output service, all the above services are invariably required therefore all the said services were used for providing output service, accordingly, services are covered under the ambit of input service as defined under 2(l) of Cenvat Credit Rule, 2004 - As regard the works contract service though the works contract service was excluded in relation to construction of building of the output service provider, however in the present case works contract service were not used for construction or execution of works contract of building or civil structure or for laying foundation or making structure for support of capital goods but it is used in maintenance related work which is clear from the invoice therefore works contract service is also not excluded in the present case - refund allowed. Refund for the period April to September, 2012 filed for six months - contravention of condition of N/N. 27/12-CE(N.T.) dated 18- 6-2012 - Held that - The restriction under notification provided to avoid multiple claims in particular quarters therefore the claim should be filed quarterly basis but if the claim is filed after six months for two quarters there is no violation of any condition. Only condition which bar the refund is refund should be filed within the overall period of one year from the relevant date. If that be so refund is well within the time limit and same should be allowed - refund allowed. Refund claim - denial on the ground that appellant had not shown debit of refund amount in Cenvat account at the time of filing refund claim - non-compliance of of N/N. 27/12-CE(N.T.) dated 18-6-2012 - Held that - Appellant have subsequently, debited the said amount in their Cenvat account and debit entry also shown in ST-3 returns. In this circumstances it cannot be said that the appellant have not debited the amount. The purpose of debiting amount is that the said amount is being refunded therefore it is not mandatory that amount should be debited immediately at the time of filing refund. The only obligation on the claimant is that that before sanction of refund if the refund amount is debited in the Cenvat account refund should be granted. In the present case even if the reversal is not made the adjudicating authority could have very well directed to the appellant to first reverse the credit and then refund could have been processed. However, in the present case appellant have admittedly debited the amount in their Cenvat account, refund on this count cannot with withheld, the same should be granted - refund allowed. Refund claim - denial on the ground that Cenvat Credit availed against invoices pertains to out of pocket expenses - Held that - There is no dispute that service provider in relation to service provided, out of pocket expenses which was taken as reimbursement from the appellant. Out of pocket expenses is nothing but part of the gross value of the service provided by service provider therefore there is no difference between the service tax paid on the service bills and out of pocket expenses claimed in separate bill, both are in the nature of service charges and liable to service tax therefore merely because term out of pocket expenses, cenvat credit and consequently refund cannot be denied - refund allowed. Refund claim - denial on the ground that Invoice bearing different address which is not registered with Service Tax department - Held that - So long invoices are in respect of service which was received and used by the appellant, even though the invoices are addressed to their other premises which is not registered, Cenvat credit cannot be denied - refund allowed. Refund claim - denial on the ground that there is error in OIA whereby refund of an amount of ₹ 2,98,987/- was erroneously rejected twice in the OIO - Held that - In some of the invoices in the order-in-original, in the list of rejection of refund claim, some invoices were repeated therefore rejection in respect of these invoices was made twice which is an arithmetical error, same needs to be corrected after verifying records - Similar type of error occurred in respect of rejection of refund of ₹ 2,98,987/- for the period April to June, 2013. As per the claim of the appellant this amount was rejected twice in order-in-original this also being matter of fact needs to be verified by the adjudicating authority - matter on remand. Refund claim - denial on the ground that Incorrect formula was applied for computation of an amount - Held that - As per the definition of net cenvat credit availed is total cenvat credit availed during the period and if there is any utilisation of credit for domestic clearances, the same need not to be deducted, total cenvat credit for the purpose of formula to be taken. Therefore lower authority is absolutely wrong as they have mis-interpreted the term net Cenvat credit availed , therefore on this count refund could not have been rejected - refund allowed. Refund claim - denial on the ground that Supporting documents not submitted - Held that - The appellant have submitted documents which the adjudicating authority may verify and decide - matter on remand. Refund claim - In respect of an amount of ₹ 2,27,436/- for the period Oct to Dec, 2012 no reason was given for the difference in between amount of refund in appeal before the Commissioner (Appeals) and amount sanctioned but rejected in OIA - Held that - This portion of the refund needs relook and to be decided a fresh - matter on remand. Appeals are allowed by way of remand.

Summary

Issues Involved:

1. Nexus of input service with output service.
2. Filing refund claims on a six-monthly basis instead of quarterly.
3. Non-debit of refund amount in Cenvat account at the time of filing.
4. Refund claims related to out-of-pocket expenses.
5. Invoices bearing different addresses not registered with Service Tax department.
6. Rejection of refund claims twice for some invoices.
7. Arithmetic errors in the Order-in-Original (OIO).
8. Incorrect formula applied for computation.
9. Non-submission of supporting documents.
10. Lack of reasoning for rejection of refund claim amounting to ?2,27,436/-.

Issue-wise Detailed Analysis:

1. Nexus of Input Service with Output Service:
The appellant argued that various input services, such as event management, convention services, sponsorship, works contract, business auxiliary services, training services, manpower supply, repair services, and management consultancy, were used for providing output services and thus should qualify as input services under Rule 2(l) of the Cenvat Credit Rules, 2004. The Tribunal agreed, stating that despite the exclusion of "activities related to business" post-April 2011, the main clause still allowed any service used for providing output service to qualify as input service. The lower authorities erred in their narrow interpretation.

2. Filing Refund Claims on a Six-Monthly Basis:
The Tribunal noted that while Notification No. 27/12-CE(N.T.) dated 18-06-2012 specifies quarterly filing, it does not bar claims filed for two quarters together, provided they are within the one-year time limit from the relevant date. The appellant’s claims for April to June 2012 and July to September 2012 were thus deemed valid.

3. Non-Debit of Refund Amount in Cenvat Account:
The Tribunal found that the appellant had subsequently debited the refund amount in their Cenvat account and reflected it in their ST-3 returns. The purpose of debit is to indicate that the amount is being refunded, and as long as the debit is made before the sanction of the refund, it should be acceptable.

4. Refund Claims Related to Out-of-Pocket Expenses:
The Tribunal held that out-of-pocket expenses are part of the gross value of the service provided and are liable to service tax. Therefore, the denial of Cenvat credit and refund on these grounds was incorrect.

5. Invoices Bearing Different Addresses:
The Tribunal ruled that Cenvat credit cannot be denied merely because the invoices bear an address not registered with the Service Tax department, as long as the services were received and used by the appellant. This position is supported by precedents such as GE India Exports Private Limited and M Portal India Wireless Solutions P. Ltd.

6. Rejection of Refund Claims Twice for Some Invoices:
The Tribunal observed that some invoices were mistakenly rejected twice, leading to excess rejection amounts. This arithmetic error needs correction after verifying the records.

7. Arithmetic Errors in the OIO:
Similar to the previous issue, the Tribunal noted arithmetic errors in the rejection amounts, which need verification and correction by the adjudicating authority.

8. Incorrect Formula Applied for Computation:
The Tribunal found that the department incorrectly applied the formula for computing the refund by considering net Cenvat credit instead of total Cenvat credit. The correct approach is to apply the export turnover percentage to the total Cenvat credit availed during the period.

9. Non-Submission of Supporting Documents:
The Tribunal directed the adjudicating authority to verify the submitted documents and decide accordingly, as the appellant claimed to have provided the necessary documents.

10. Lack of Reasoning for Rejection of Refund Claim Amounting to ?2,27,436/-:
The Tribunal noted that the OIO and OIA did not provide any reasoning for rejecting the refund claim of ?2,27,436/- for the period October to December 2012. This portion of the refund needs to be reconsidered and decided afresh.

Conclusion:
The Tribunal allowed the appeals by way of remand to the adjudicating authority for a fresh order, considering the observations and directions provided. The appeals were thus allowed for re-evaluation and correction of errors.