2022 (9) TMI 522 - AT - Service Tax

Refund of CENVAT Credit - export of services - denial of credit on the ground that the service provider is not registered with the department - Rule 4 of Service Tax Rules, 1994 - HELD THAT - Mere perusal of Rule 5 of the 2004 Rules, would, inter alia, show that where a service provider, provides an output service, which is exported, without payment of service tax under a bond, he would be entitled to refund of Cenvat credit, as determined by the formula provided in the Rule. What is relevant to note is that Rule 5 of the 2004 Rules does not stipulate registration of premises as a necessary prerequisite for claiming a refund - if Notification No. 27/2012 dated 18.06.2012 is perused it shows that insofar as the provider of output service is concerned, for seeking refund of Cenvat credit, is required to file an application in prescribed form i.e. Form A (annexed to notification) before Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise as the case may be. Insofar as the jurisdiction of competent officer is concerned, the same is fixed, in consonance with the location of the registered premises of the service provider from which the output services are exported, clearly the notification does not prohibit the grant of Cenvat credit even if the premises are not registered. The fixation of jurisdiction of the competent officer, cannot be read in a manner that it obliterates the rights of the exporter of output services to claim refund of Cenvat credit. Whether the supply of service by a subsidiary/sister concern of a foreign company in India which is incorporated under the laws in India to a foreign company incorporated under laws of a country outside India will hit by condition (v) of sub- section 6A of Service Tax Rules, 1994? - HELD THAT - The services rendered would be treated as Export of services when clause (a) to clause (d) refers to provider of service is located in the taxable territory and recipient of service is located outside India and the service is not a service specified in Section 66D of the Act and the place of the provision of the service is outside India and as per clause (e) the payment for such service has been received by the provider of service in convertible Foreign Exchange - Item (b) of the explanation 3 stipulates that an establishment of a person in taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of distinct persons. Hence, by no stress of imagination, it can be said that the rendering of services by the petitioner No.1 to its parent Company located outside India was service rendered to its other establishment so as to deem it as a distinct person as per Item (b), explanation 3 of clause (44) of Section 65B of the Act, 1994 the petitioner No.1 which is an establishment in India, which is a taxable territory and its holding Company, which is the other company in non taxable territory cannot be considered as establishments so as to treat as distinct persons for the purpose of rendering service. In the present case there is no denial that services have been provided from India and have been used outside India and that the payment has been received in convertible foreign exchange. It stands clear that the services in the present case amounts to export of service - Regarding the allegation of absence of nexus between the export and service, in some of the input services he submits that Tribunal in the case of Apotex Research Pvt. Ltd. v. CC, Bangalore 2015 (3) TMI 346 - CESTAT BANGALORE , held that there is no need to establish nexus between input services and output services at the time of filing of refund claim. Since the issue of jurisdiction was not specifically taken in the show cause notice the adjudication on this point against the assessee is not sustainable. The appellant since admittedly has centralized registration in terms of sub clause (2) and (3) of Rule 4 is Noida unit was not required to be registered. Refund claim should not have been rejected on this ground. The services provided by the appellant amounts to export of service as were received by the company located outside the taxable territory irrespective those were the group companies of the appellant. The order under challenge is held to be the result of wrong interpretation of the relevant provisions and notifications - Appeal allowed.

Summary

Issues Involved:
1. Whether the authorities were justified in refusing to grant Cenvat credit on the ground that the service provider is not registered with the department.
2. Whether the supply of service by a subsidiary/sister concern of a foreign company in India to a foreign company will hit by condition (v) of sub-section 6A of Service Tax Rules, 1994.

Issue-Wise Detailed Analysis:

1. Refusal to Grant Cenvat Credit Due to Lack of Registration:

The appellant's refund claim was rejected on the grounds that the export invoices were issued from an unregistered address in Noida, which was not part of their centralized registration. The adjudicating authority cited Rule 4 of the Service Tax Rules, 1994, emphasizing that the service provider must be registered to claim Cenvat credit. However, the appellant argued that neither Rule 5 of the CCR, 2004 nor Notification No. 27/2012 mandates that export invoices must be issued from a registered office. The Tribunal agreed with the appellant, noting that Rule 4 allows for centralized billing and accounting, and does not require each office to be registered if centralized registration is in place. The Tribunal referenced several precedents, including the Karnataka High Court's decision in mPortal India Wireless Solutions P. Ltd. v. CST, Bangalore, which held that registration of each premise is not a prerequisite for claiming Cenvat credit. The Tribunal concluded that the rejection of the refund claim on the basis of the unregistered Noida premises was not justified and amounted to a procedural irregularity that should not deny substantive benefits.

2. Supply of Service to a Foreign Company and Condition (v) of Sub-section 6A of Service Tax Rules, 1994:

The second ground for rejection was that the appellant and the group companies were merely establishments of a distinct person, as per Rule 6A of the Service Tax Rules, 1994. The appellant contended that the services provided to their group companies outside India should be considered as export of services. The Tribunal examined Rule 6A, which stipulates conditions for services to qualify as exports, including that the provider and recipient of the service should not be merely establishments of a distinct person. The Tribunal referred to various judgments, including the Gujarat High Court's decision in M/s. Linde Engineering India Pvt Ltd. v. Union of India, which clarified that a subsidiary in India providing services to its parent company abroad does not constitute services between distinct persons. The Tribunal concluded that the services provided by the appellant to its group companies outside India qualify as export of services, as they met all the conditions of Rule 6A, including receipt of payment in convertible foreign exchange.

Conclusion:

The Tribunal held that the adjudicating authority's rejection of the refund claim on the grounds of jurisdiction and registration was beyond the scope of the show cause notice. The show cause notice did not specifically address the issue of jurisdiction, and the appellant's centralized registration was sufficient under Rule 4 of the Service Tax Rules, 1994. Additionally, the services provided by the appellant were deemed to be exports, as they were delivered to companies outside India and met all the necessary conditions. Therefore, the Tribunal set aside the order under challenge and allowed the appeal, emphasizing that procedural irregularities should not deny substantive benefits like refunds.

Order:

The order under challenge was set aside, and the appeal was allowed. The Tribunal pronounced this decision in the open court on 09.09.2022.