2022 (2) TMI 559 - AT - Service Tax

Seeking refund of unutilized credit - Development of Computer Software - rejection of refund on the ground that it was export of non-taxable services - services not qualifying as exports under Export of Services Rules, 2005 or otherwise? - HELD THAT - Tribunal has taken a similar view in AXA BUSINESS SERVICES PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX 2016 (12) TMI 1524 - CESTAT BANGALORE and REPRO INDIA LTD. VERSUS UNION OF INDIA 2007 (12) TMI 209 - BOMBAY HIGH COURT where it was held that Once credit was admissible and unless there was no nexus between the output service exported and input services were used when credit was taken, the refund of the same also could not have been denied since the substantive ground of taking CENVAT credit in the first place being correct would lead to the obvious conclusion that ultimately if it gets accumulated the refund has to be sanctioned. In the present case, the availment of credit is not contested by the Revenue and the appellants having exported the services cannot be disentitled to refund under Rule 5 on the ground that the exported services are exempt - there is no substance in the submissions of the learned authorized representative as far as interest on delayed payment is concerned - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim rejection based on export of non-taxable services; entitlement to cenvat credit under STPI Scheme; rejection of refund on ground of Development of Computer Software not qualifying as exports; dispute over utilization of input services; limitation period for refund claim; interest on delayed payment.

Analysis:
1. The appellants, engaged in export of services as a 100% Export Oriented Unit, filed a refund claim for unutilized credit under Cenvat Credit Rules. Revenue rejected the claim citing export of non-taxable services like Development of Computer Software, not qualifying as exports under Export of Services Rules, 2005. Orders-in-Original and Appeal upheld rejection.

2. Appellants argued for cenvat credit entitlement under STPI Scheme, citing CBEC Circular and various judgments supporting unchallenged credit availed. They also contended that utilization of input services in export services was not disputed, referring to relevant case laws.

3. Appellants disputed Revenue's limitation argument, citing Karnataka High Court judgment for timely refund filing. They sought interest on refund based on Board's Circulars and judgments like Garden Silk Mills Ltd. v. Union of India.

4. Revenue reiterated rejection grounds, disputing appellants' additional relief claim under Rule 10 of CESTAT Procedure Rules. Both sides were heard, and records were examined.

5. Tribunal found appellants' services eligible for refund, as observed in similar cases like Kpit Cummins Infosystems Ltd. and AXA Business Services Pvt. Ltd. Tribunal emphasized the policy objective to promote exports without tax burden, supporting refund eligibility despite exported services being exempt.

6. Appellants filed for interest on delayed payment, referencing Karnataka High Court's stance on interest computation under Section 11BB of Central Excise Act. Tribunal concurred with the obligation to pay interest for delayed refund, citing decisions from High Courts of Gujarat and Madras.

7. Tribunal dismissed Revenue's arguments against interest payment, emphasizing the obligation to pay interest under Section 11BB for delayed refund of unutilized Cenvat credit. The appeal was allowed, and the miscellaneous application for interest was disposed of accordingly.