2009 (6) TMI 447 - AT - Service Tax

Rebate of Service tax-Export of services-Notification No. 12/2005 dated 19.04.2005- The appellant is a wholly owned subsidiary of M/s. Dell International Inc.-USA. They are a 100 per cent EOU with Software Technology Parks of India (STPI). They provide business process outsourcing services like call centre, IT support and back office data processing. These services are provided exclusively to Dell Group Companies and their customers outside India and all the services are exported out of India. The service fee for providing the services is the entire cost of the appellants with a marking of 10 per cent. The appellant exports 100 per cent of his services and the payment for these services exported is received in convertible foreign exchange. The input services were used for providing output services. In this case the appellant filed two rebate claims under Notification No. 12/2005-ST issued under Export of Service Rules, 2005 for the refund of the service tax paid on the input services for the period from 3/2005 to 9/2005 and 10/2005 to 2/2006, but this rebate claim was rejected on the following three grounds-(1) non-filing of necessary declaration, (2) to be filed before Jurisdictional Central Excise Authorities (3) appellant had not paid any service tax on the services exported by them. Held that- once the taxable services is exported and various input services have been utilized for providing the output service the appellant could be entitled for the rebate which is equal to the service tax paid on the input services. Also held that the appellant fulfill the five condition of the said notification no. 12/2005, thus the appellants are entitled for the rebate in respect of all the rebate claims. The appeal is allowed.

Issues Involved:
1. Eligibility of rebate claims for exported services.
2. Taxability of services under "Business Auxiliary Service."
3. Compliance with procedural requirements for rebate claims.
4. Definition and scope of "input service" under Cenvat Credit Rules, 2004.

Detailed Analysis:

1. Eligibility of Rebate Claims for Exported Services:
The appellant, a 100% EOU, filed rebate claims for services exported under the Export of Service Rules, 2005. The lower authority rejected these claims, stating the services exported were mainly Software Development Services, which are not taxable, and the shared services also did not qualify as taxable under Business Auxiliary Service. The Commissioner (Appeals) upheld this decision, confirming that the services exported were not taxable and hence, not eligible for rebate.

2. Taxability of Services under "Business Auxiliary Service":
The appellant provides various services including call centre operations, IT support, and back-office processing to Dell Group Companies and their customers outside India. The Commissioner (Appeals) in Orders-in-Appeal Nos. 83 & 83A/2008 ST, dated 31-1-2008, held that the appellant is providing taxable services and using input services for exporting its services. The Board's Circular No. 62/11/2003-ST, dated 21-8-2003, clarified that services like payroll processing and accounts management, even when using computer programs, are taxable as Business Auxiliary Services and not excluded as Information Technology Services.

3. Compliance with Procedural Requirements for Rebate Claims:
The Original Authority rejected the rebate claims on grounds of non-filing the necessary declaration before export of services, improper jurisdiction for filing claims, and non-payment of service tax on exported services. The CESTAT remanded the case to the Commissioner (Appeals) for a decision on merits, who then directed the Original Authority to work out the rebate for eligible input services/inputs. The appellant argued that they had filed the necessary declarations and fulfilled all conditions stipulated under Notification No. 12/2005-ST, including the receipt of payment in convertible foreign exchange and non-availment of Cenvat credit on inputs and input services for which rebate was claimed.

4. Definition and Scope of "Input Service" under Cenvat Credit Rules, 2004:
The appellant utilized various input services such as General Insurance, Maintenance or Repair, Telecom, Manpower Recruitment, Advertising, and others for providing the output service of "Business Auxiliary Service." The definition of "input service" under rule 2(l) of the Cenvat Credit Rules, 2004, is broad and includes any service used directly or indirectly in relation to providing output service. The Tribunal noted that the interpretation of "input service" should be liberal, and the services used by the appellant qualify as input services since they are integrally connected to the provision of the output service. The Tribunal also referenced several judicial decisions supporting a broad interpretation of "input service."

Conclusion:
The Tribunal concluded that the services exported by the appellant are taxable under "Business Auxiliary Service," and the input services used qualify for rebate under the Export of Service Rules, 2005. The appellant had complied with the procedural requirements of Notification No. 12/2005-ST. Consequently, the appeals were allowed, and the appellant was entitled to the rebate claims with consequential relief.

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