2018 (10) TMI 1254 - AT - Service Tax

Cash Refund of accumulated CENVAT Credit - inputs used in providing exported services - Performance based service - export of services or not? - rejection on the ground that the services provided by the appellant to their overseas service recipient was in the nature performance based service in India, hence not an export service - Held that - In their own case, this Tribunal has already taken a view that the aforesaid services rendered by the appellant are in the nature of export of service and hence eligible to cash refund of accumulated CENVAT Credit. In the case of Advinus Therapeutics Ltd. 2016 (12) TMI 34 - CESTAT MUMBAI , this Tribunal more or less in similar circumstances, considering all aspects of the issue, interpreting Rule 3, 4 of Place of Provision of Services Rules, 2012, and Rule 6A of Service Tax rules, 1994, applying the principles of law laid down in this regard and the Board s clarification held that scientific or technical consultancy service provided in the development of drugs, to the overseas recipient of such service, is an export service . The appellants are eligible to cash refund of the accumulated CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004, except in relation to input service denied by the learned Commissioner (Appeals) observing that there is no nexus between the input and output service, as the necessary evidences in relation to Building maintenance charges were not produced and the rent-a-cab service has been mentioned in the exclusion clause of input service after amendment to Rule to 2(l) of the Cenvat Credit Rules, 2004 with effect from 01.4.2011. Matters are remanded to the adjudicating authority to calculate the admissibility refund amount except the credit availed on Building maintenance charges and rent-a-cab service - appeal allowed by way of remand.

Issues Involved:
1. Eligibility of cash refund of accumulated CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004 for services provided.
2. Classification of services as export services under Rule 6A of Service Tax Rules, 1994.
3. Applicability of Rule 4(a) of the Place of Provisions of Service Rules, 2012.
4. Denial of credit on input services such as maintenance of Air Conditioners and Rent-a-Cab services.

Issue-wise Detailed Analysis:

1. Eligibility of Cash Refund of Accumulated CENVAT Credit:
The appellants provided Scientific & Technical Consultancy Services to an overseas client and claimed a refund of accumulated CENVAT Credit on inputs used in providing these services under Rule 5 of the CENVAT Credit Rules, 2004. The department rejected the refund claims, arguing that the services were performance-based and executed in India, thus not qualifying as export services. The Tribunal found that the appellants had independently procured the goods necessary for testing and analysis, paid appropriate customs duty, and provided the service to the overseas client, thus qualifying for a cash refund of accumulated CENVAT Credit.

2. Classification of Services as Export Services:
The Tribunal held that the services provided by the appellant are in the nature of export services. The Tribunal referenced its own previous decisions and other judgments, such as in the case of Advinus Therapeutics Ltd., where it was established that scientific or technical consultancy services provided for drug development to an overseas recipient constitute export services. The Tribunal emphasized that the receipt of convertible foreign exchange and the location of the service recipient outside India are key factors in classifying the services as export services.

3. Applicability of Rule 4(a) of the Place of Provisions of Service Rules, 2012:
The Tribunal examined whether Rule 4(a) of the Place of Provisions of Service Rules, 2012 applied, which pertains to services provided on goods supplied by the service recipient. The Tribunal concluded that Rule 4(a) was not applicable since the goods used for testing were procured independently by the appellants and not supplied by the overseas client. The Tribunal cited the CBE&C Education Guide and other legal precedents to support this interpretation, emphasizing that the services were performed on goods procured by the appellants themselves.

4. Denial of Credit on Input Services:
The appellants argued that input services such as maintenance of Air Conditioners and Rent-a-Cab services were necessary for their operations. However, the Tribunal upheld the denial of credit on these input services, agreeing with the Commissioner (Appeals) that there was no nexus between these input services and the output service provided. Additionally, Rent-a-Cab services were specifically excluded from the definition of input services after an amendment to Rule 2(l) of the CENVAT Credit Rules, 2004, effective from April 1, 2011.

Conclusion:
The Tribunal concluded that the services provided by the appellants qualify as export services and thus, they are eligible for a cash refund of accumulated CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004. However, the Tribunal remanded the matter to the adjudicating authority to calculate the admissible refund amount, excluding the credit availed on Building maintenance charges and Rent-a-Cab services. The appeals were disposed of accordingly.

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