Tribunal grants refund for 100% of credit on exported services under Cenvat Credit Rules

The Tribunal allowed the appeals, ruling in favor of the appellant. It held that 100% of the credit related to Services Exported should be refundable under Rule 5 of the Cenvat Credit Rules, 2004, emphasizing that all exported services, including exempted ones, should be included in turnover calculations for refund purposes. The decision highlighted the concept of 'Zero rated' exports, supporting the refund of all unutilized service tax credit on exported services.

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Issues:
Calculation of refund under Rule 5 of the Cenvat Credit Rules, 2004 for unutilized CENVAT credit on exported services.

Analysis:
The appellant, engaged in providing I.T. enabled services, filed appeals against six Order-in-Appeal Nos. challenging the calculation of refund claim amount by the Revenue. The main argument by the appellant was that the value of Technical Testing and Analysis Services should be added to both 'Export Turnover' and 'Total Turnover' as per the provisions of Notification No. 7/2010-CE (NT). The appellant contended that all services exported, whether dutiable or exempted, should be included in the turnover calculations. Additionally, it was emphasized that no services were provided to the Domestic Tariff Area (DTA), and all services were exported, warranting full refund of unutilized CENVAT credit as per Rule 5 of the Cenvat Credit Rules, 2004.

The Revenue, represented by the AR, argued that exempted services exported should only be included in the total turnover, not the Export Turnover, as no service tax credit is admissible for exempted services. The AR supported the order passed by the first appellate authority.

Upon hearing both sides and examining the case records, the Tribunal focused on the calculation of refund under Rule 5(1) of the Cenvat Credit Rules, 2004. The formula for refund amount was considered, which involves the Export turnover of goods and services divided by the Total turnover, multiplied by the Net CENVAT credit. The definitions of Export turnover of services and Total turnover were crucial in determining the refund calculation.

The Tribunal agreed with the appellant's argument that 100% of the credit related to Services Exported should be refundable under Rule 5 of the Cenvat Credit Rules, 2004. It was noted that there was no evidence of the appellant taking input service tax for exempted services exported. The definition of 'Export Output of Services' did not differentiate based on payments received, supporting the inclusion of all exported services in the turnover calculations. The Tribunal highlighted the concept of 'Zero rated' exports and concluded that even exempted export services should be added to the Export turnover of services, allowing for the refund of all unutilized service tax credit on exported services.

In light of these considerations, the appeals filed by the appellants were allowed, providing them with consequential relief as deemed necessary.

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