2018 (12) TMI 1481 - AT - Service Tax

Refund of accumulated CENVAT Credit - export of service - refund rejected on the ground that the input services are neither confirming to the definition of input service or have any nexus with the output service exported by the appellant and in some cases refund benefit was also denied on the ground that the services provided by the appellant cannot be considered as export of service. Held that - In the present cases, the department has taken a stand that the services provided by the appellant are not conforming to export of service for the purpose of claiming of refund. It is difficult to accept such findings of the department inasmuch as the services all along were provided by the appellant pursuant to the contract to its parent company located in Japan. The situation being same for entire period, denial of refund for a part period is not legally sustainable, without substantiating the fact that the appellant also provided services to the parties within the country. In view of the fact that input services were used for providing the output service, which was exported, the appellant should statutorily be entitled for refund of service tax paid on input services, which were lying unutilised in the Cenvat account for a considerable period of time. It is a settled position of law that the authorities while adjudicating the refund application under Rule 5 of the rules, should not look into the aspect of consideration of the requirement of Rule 2 (l) of the rules inasmuch as other provisions exist in the statute for consideration of such dispute. There are no merits in the impugned order, so far as it denied refund benefits to the appellant, other than the service tax paid on immovable property service - appeal allowed in part.

Summary

Issues:
- Denial of refund benefit on the ground of services not conforming to export of service
- Disputed input services not consumed for provision of output service
- Clarification on the requirement of Rule 5 of the Cenvat Credit Rules, 2004

Analysis:
1. The appellant, engaged in ship management services, exported services to a Japanese company, leading to refund applications for service tax paid on input services. The department denied refund citing lack of nexus between management services and output service, and non-consumption of input services for output provision.

2. The appellant argued that all services were used for the exported output service, emphasizing the 100% subsidiary relationship with the Japanese parent company. The learned Advocate contended that service tax on renting immovable property was not contested for refund denial.

3. The Revenue reiterated that the disputed services did not meet the input service definition, justifying the denial of refund. However, the Tribunal found the denial unsustainable as services were provided to the foreign parent company entirely, with no provision within the country, citing a precedent where refund claims were accepted for similar circumstances.

4. The Tribunal highlighted that the appellant, being a subsidiary, exported services entirely to the parent company, warranting refund for service tax on unutilized input services. It referenced a CBEC clarification that Rule 5 does not mandate a nexus between exports and input services, supporting the appellant's claim for refund.

5. Relying on a previous case, the Tribunal held that denial of refund solely based on the lack of nexus between input and output services was unjustified. It allowed the appeals, except for immovable property service, emphasizing the statutory entitlement for refund of service tax paid on input services used for exported output service.

This comprehensive analysis addresses the issues raised in the judgment, highlighting the arguments presented by both parties and the Tribunal's reasoning for allowing the appeals for refund benefits.