2013 (1) TMI 521 - AT - Service Tax

Tribunal emphasizes nexus between input & output services for refund claims, directs reexamination.

The Commissioner of Service Tax. Bangalore Versus M/s Fiorano Software Technologies Pvt. Ltd.

The Tribunal remanded two appeals concerning refund claims under Rule-5 of the CENVAT Credit Rules 2004 for reexamination of the nexus between input and ... Refund claim u/r 5 of CCR 2004 r.w. Notification No. 5/06 CE(NT) dated 14/3/2006 - unutilized CENVAT credit taken on nine input services claimed to have been used for export of output services - rejection of refund claim recording a finding against nexus between the output services and the input services & in view of Circular No. 120/1/2010 dated 19/1/2010 issued by the Board - period in question April to June 2008 - Held that:- On the question whether a nexus was established by the party between maintenance or repair service (output service exported) and input services, the impugned order has offered no clear and intelligible finding, apart from an observation to the effect that the input services would qualify for availment of credit as per Board's Circular , this part of the appellate Commissioner's order cannot be sustained inasmuch as it is not a speaking order on the issue - the refund ordered by the Commissioner (Appeals) to the extent of the amount of unutilized CENVAT credit on input services claimed to have been used for export of consulting engineer's service requires to be set aside and it is ordered accordingly. The impugned order was passed on 8/3/2010 when the Board's Circular was in force. This circular was not available to the original authority and hence that authority did not have occasion to follow the Board s guidelines. In the fitness of things, that authority should reexamine the question whether the refund claimant has been able to establish a nexus between consulting engineer s service (exported) and each of the input services. Needless to say that, in this regard, the Board s guidelines shall be followed. Period July to September 2008 - Held that:- It is incumbent on the authority to meticulously consider the party's declaration and decide whether the facts declared by them are correct and whether these facts would go to establish a nexus between the output service and each of the input services which the appellate Commissioner has not done here. Mere observation to the effect that the findings of the original authority relating to input services for output services are not convincing is itself unconvincing. The impugned order does not disclose proper application of mind to the nexus issue. The appellate authority appears to have proceeded on the premise that the Board's Circular is the panacea for everything - set aside the aforesaid findings of the Commissioner (Appeals) & remand it to the original authority (which did not have occasion to consider the Board's circular) to reexamine the nexus issue. Issues:1. Refund claim under Rule-5 of the CENVAT Credit Rules 2004.2. Nexus between input services and output services for refund.3. Interpretation of Board's Circular No. 120/1/2010.4. Validity of refund orders by the Commissioner (Appeals).5. Requirement of Chartered Accountant's certificate for refund claim.6. Review of appellate Commissioner's decision on nexus issue.Analysis:1. The case involved a refund claim of Rs. 83,423/- under Rule-5 of the CENVAT Credit Rules 2004 for unutilized CENVAT credit on input services used for exporting output services. The original authority rejected the claim due to lack of nexus between input and output services.2. The Commissioner (Appeals) sanctioned the refund citing a nexus based on Board's Circular No. 120/1/2010. However, the appellate Tribunal found the order lacking clarity on the nexus between maintenance or repair services and input services, leading to setting aside of the refund order.3. The Tribunal emphasized that the Board's Circular is not a conclusive answer to establishing nexus and that the authority must follow the Circular's guidelines to determine the connection between input and output services for refund eligibility.4. In another appeal, involving a refund claim of Rs. 1,80,763/- for CENVAT credit on input services used for exporting output services, the Commissioner (Appeals) directed the party to provide a declaration to establish nexus as per the Circular. The Tribunal found the appellate authority's decision lacking proper consideration of the nexus issue and set aside the findings.5. The Tribunal clarified that while a Chartered Accountant's certificate was not required for the refund claim, the authority must thoroughly evaluate the party's declaration to verify the factual correctness and nexus between input and output services.6. The Tribunal remanded both appeals to the original authority for reexamination of the nexus issue following the guidelines in the Board's Circular. The parties were granted a reasonable opportunity to present declarations, and the authority was directed to decide on the nexus between each output service and input service after due consideration.In conclusion, the Tribunal emphasized the importance of establishing a clear nexus between input and output services as per the Board's Circular guidelines for refund eligibility, ensuring a thorough evaluation by the authorities to determine the factual correctness of the claims.