2015 (11) TMI 218 - AT - Service Tax

Tribunal Upholds Commissioner's Decision, Dismisses Revenue's Appeals

The Tribunal upheld the Commissioner's decision, dismissing Revenue's appeals and granting all consequential reliefs to the appellants. The impugned order ... Export of services treated as export when provided from India and used outside India and payment received in convertible foreign exchange - Location of service recipient as determinative test for Category-III (knowledge/technique based) services - Refund of accumulated Cenvat credit under Rule 5 of Cenvat Credit Rules, 2004 read with Notification No. 5/2006-CE(N.T.) - CBEC circular clarification on export of services and admissibility of Cenvat creditExport of services treated as export when provided from India and used outside India and payment received in convertible foreign exchange - Location of service recipient as determinative test for Category-III (knowledge/technique based) services - Output services rendered by the assessee qualify as exports of service under the Export of Service Rules, 2005. - HELD THAT: - The Tribunal accepted that although the advisory and related services were performed in India, they were supplied to a recipient located in the USA and the consideration was received in convertible foreign exchange. The Export of Service Rules, 2005 treat a taxable service as export when it is provided from India and used outside India and payment is received in convertible foreign exchange. For Category-III services (knowledge/technique based services such as Banking & Financial Services), the relevant test is the location of the service receiver and whether the benefit accrues outside India; the place of performance is not decisive. Applying these principles and the CBEC Circular No. 111/05/2009, the Tribunal found the conditions for export were satisfied and the services constituted export of services. [Paras 6, 7, 8]The output services were exported in accordance with the Export of Service Rules, 2005.Refund of accumulated Cenvat credit under Rule 5 of Cenvat Credit Rules, 2004 read with Notification No. 5/2006-CE(N.T.) - CBEC circular clarification on export of services and admissibility of Cenvat credit - The appellants are entitled to refund of accumulated Cenvat credit in respect of input services used to provide the exported output services. - HELD THAT: - Rule 5 of the Cenvat Credit Rules, 2004 permits refund of accumulated credit where inputs or input services are used in providing output services which are exported; Notification No. 5/2006-CE(N.T.) prescribes conditions and safeguards for such refunds. The adjudicating authority had not examined admissibility of the input services, but the Commissioner (Appeals) found that the input services claimed (various support and business services) were used in relation to the exported output services. Reliance was placed on CBEC Circulars (including No. 111/05/2009 and No. 120/01/10-ST) which affirm that for Category-III services the benefit accruing outside India and the use by a foreign recipient suffice for export treatment, and that Cenvat credit may be refunded subject to conditions. Given the Commissioner's categorical findings that the input services were used for exported services, the Tribunal found no reason to interfere and held the refund claims allowable. [Paras 7, 8, 9]The refund claims of accumulated Cenvat credit are allowable and the impugned orders rejecting them are set aside.Final Conclusion: Revenue appeals dismissed; impugned orders of the Commissioner (Appeals) upholding export status of the services and allowance of refund of accumulated Cenvat credit are maintained, and the appellants are entitled to consequential reliefs. Issues:Refund claims under Cenvat Credit Rules for unutilized accumulated credit on services exported, rejection of refund claims by adjudicating authority, appeal allowed by Commissioner, Revenue's appeal against Commissioner's order.Analysis:The case involved refund claims totaling Rs. 28,04,138 filed by respondents for unutilized Cenvat credit earned on services used for output services exported from October 2007 to December 2008. The adjudicating authority rejected the claims, stating services provided were not covered under export of services. However, the Commissioner allowed the appeals, setting aside the original order. Revenue filed appeals against this decision.During the hearing, the Revenue argued that services were provided in India to a US company, hence not exported. They claimed the output services were not exported, so the appeal should be dismissed. The respondent did not appear, leading to the case being decided on merits.The Tribunal found that although services were provided in India, they were received by a foreign company in the USA and paid for in convertible foreign exchange. This met the conditions for services to be treated as exported. The Commissioner's findings supported the refund claims, stating that the services provided were in relation to business or commerce to a recipient outside India, fulfilling the conditions for export of services.The Tribunal referred to CBEC Circulars clarifying that services provided in relation to business or commerce to a recipient outside India qualify as exports, regardless of the place of performance. The benefit of the services accruing outside India is essential for such exports. The Tribunal held that the adjudicating authority's rejection of the refund claims was incorrect and not sustainable. The appeals were allowed, and the refund claims were deemed allowable under the relevant Notifications and Rules.The Tribunal upheld the Commissioner's decision, dismissing the Revenue's appeals and granting all consequential reliefs to the appellants. The impugned order was deemed just and proper, leading to the dismissal of Revenue's appeals and the disposal of stay applications accordingly.