2025 (3) TMI 1065 - AT - Service Tax

Refund of accumulated cenvat credit under the provisions of Rule 5 of Cenvat Credit Rules 2004 - Refund of service tax under Section 11B of Central Excise Act 1944 made applicable to service tax matters through Section 83 of Finance Act 1994. Refund of accumulated cenvat credit under the provisions of Rule 5 of Cenvat Credit Rules 2004 - HELD THAT - As a transaction between the appellant company and subsidiary company or the appellant who is a holding company invoices are raised between the two and money is transferred to the holding company irrespective of the value of service provided by subsidiary outside the territorial jurisdiction of India to overseas clients. The services provided by overseas subsidiary to their overseas clients are treated by the appellant as having provided by them on the strength of invoices which are for financial transactions between the holding company and subsidiary company where the appellant has no role in providing services by their subsidiary to their clients. Appellant has paid service tax on these transactions on reverse charge basis and availed cenvat credit of the same. Contention of Revenue is that those services are provided by subsidiaries and the appellant has nothing to do with them and therefore they are not input services for the appellant and therefore cenvat credit of service tax paid on the transactions that took place between overseas subsidiaries and their overseas clients does not satisfy the definition of input service under Rule 2(l) of Cenvat Credit Rules 2004 thereby holding that the authorities below have denied refund of accumulated cenvat credit of such cenvat credit under Rule 5 of Cenvat Credit Rules 2004 - The said cenvat credit is cenvat credit of service tax paid on transactions that completely took place beyond the territorial jurisdiction of India and under the provisions of Section 64 of Finance Act 1994 service tax was not leviable on the same. Therefore there are no infirmity in denial of refund of the said cenvat credit through the above stated orders-in-appeal. Refund of service tax under Section 11B of Central Excise Act 1944 made applicable to service tax matters through Section 83 of Finance Act 1994 - HELD THAT - The said claim for refund is in respect of service tax paid by the appellant in respect of transactions that took place beyond the territorial jurisdiction of India and therefore that service tax was not payable - The affidavit has not given bifurcation in respect of refund claim dealt with in each appeal. Therefore even if the appeals in Batch-II appeals are allowed the refund sanctioning authorities will not be in a position to decide the quantum of refund to be allowed to the appellant in each individual refund claim dealt with in each appeal of Batch-II appeals. Therefore such an order will be unimplementable order and an unimplementable order is not sustainable in law and therefore for want of sufficient information we are not able to pass orders for allowing refund in case of Batch-II appeals. Thus in the absence of complete information required to pass orders we are not able to allow appeals in Batch-II appeals. Conclusion - The services provided by subsidiaries directly to overseas clients do not qualify as input services for the appellant thus not eligible for Cenvat credit refund under Rule 5 of the Cenvat Credit Rules 2004. ii)The denial of the refund of Cenvat credit affirmed. ii) In case of refund of service tax appeals rejected due to insufficient information to substantiate the refund claims despite acknowledging the appellant s partial withdrawal of claims. Appeals dismissed.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment deals with two primary issues:

Batch-I Appeals: The issue is related to the refund of accumulated Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004, concerning services provided under Model-II transactions.

Batch-II Appeals: The issue pertains to the refund of service tax under Section 11B of the Central Excise Act, 1944, as applicable to service tax matters through Section 83 of the Finance Act, 1994, also concerning Model-II transactions.

2. ISSUE-WISE DETAILED ANALYSIS

Batch-I Appeals:

Relevant Legal Framework and Precedents: The appeals focus on the interpretation of Rule 5 of the Cenvat Credit Rules, 2004, which allows for the refund of accumulated Cenvat credit in the context of exported services. The relevant legal question is whether the services provided under Model-II transactions qualify as export services, allowing for such a refund.

Court's Interpretation and Reasoning: The Tribunal found that the services provided by the overseas subsidiaries to their clients outside India do not qualify as input services for the appellant, as the appellant did not directly provide these services. The Tribunal relied on previous decisions, including a final order from March 2022, which held that such onsite services do not constitute export services.

Key Evidence and Findings: The Tribunal noted that the appellant's subsidiaries entered into direct contracts with overseas clients and provided services outside India's jurisdiction. The appellant's role was limited to financial transactions between itself and its subsidiaries.

Application of Law to Facts: The Tribunal applied the definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004, and concluded that the services in question do not meet the criteria for input services, thus denying the refund of Cenvat credit.

Treatment of Competing Arguments: The appellant argued that the services should be considered part of a composite contract and qualify as export services. However, the Tribunal rejected this argument, emphasizing the direct contractual relationship between the subsidiaries and the overseas clients.

Conclusions: The Tribunal affirmed the denial of the refund of Cenvat credit, dismissing the Batch-I appeals.

Batch-II Appeals:

Relevant Legal Framework and Precedents: The appeals involve the application of Section 11B of the Central Excise Act, 1944, concerning the refund of service tax paid on transactions deemed not subject to service tax.

Court's Interpretation and Reasoning: The Tribunal noted the appellant's partial withdrawal of claims, leaving a specific amount for consideration. However, the Tribunal found insufficient information to determine the exact refund amounts for each appeal.

Key Evidence and Findings: The appellant had withdrawn claims amounting to approximately Rs.1992.79 crores, leaving Rs.75.26 crores for consideration. The Tribunal noted the lack of detailed bifurcation of refund claims across individual appeals.

Application of Law to Facts: The Tribunal acknowledged the appellant's receipt of substantial refunds under Rule 5 of the Cenvat Credit Rules, 2004, but found the remaining claims unsubstantiated due to inadequate documentation.

Treatment of Competing Arguments: The appellant argued for the refund based on the non-applicability of service tax to the transactions. However, the Tribunal emphasized the need for precise information to determine refund eligibility.

Conclusions: The Tribunal rejected the Batch-II appeals due to the absence of sufficient information to substantiate the refund claims.

3. SIGNIFICANT HOLDINGS

Core Principles Established:

The Tribunal reinforced the principle that services provided by subsidiaries directly to overseas clients do not qualify as input services for the appellant, thus not eligible for Cenvat credit refund under Rule 5 of the Cenvat Credit Rules, 2004.

Final Determinations on Each Issue:

For Batch-I appeals, the Tribunal dismissed the appeals, affirming the denial of the refund of Cenvat credit.

For Batch-II appeals, the Tribunal rejected the appeals due to insufficient information to substantiate the refund claims, despite acknowledging the appellant's partial withdrawal of claims.

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