2016 (2) TMI 580 - AT - Service Tax

Tribunal grants refunds on unutilized CENVAT credit and upholds eligibility for appellants

M/s. Cognizant Technology Solutions Versus CCE & ST (LTU), Chennai

The Tribunal allowed the appeals, granting refunds of unutilized CENVAT credit on export of services and correcting the computation method for turnover. ... Refund of unutilized CENVAT credit on export of services under Rule 5 of Cenvat Credit Rules, 2004 (CCR) - Eligible input services - method of calculation of credit to be refunded - prescribed formula - adjudicating authority while computing the value has deducted the value of SEZ exports from the export turn over (numerator) but retained the SEZ export turn over in the total turnover (Denominator). - Held that:- the appellants are eligible for refund under Rule 5 of CCR on the input services used in the export of service. The order of the LA rejecting the refund claim by adopting the wrong method of computation is not justified and liable to be set aside to that extent of restriction of the refund claim. We hold that the value of export turnover should be equal to the total turnover and the value of SEZ exports should be included in the export turnover (numerator). Accordingly, the appellants are eligible for the full refund claim. Decided against the revenue and in favor of assesseee. Issues Involved:1. Refund of unutilized CENVAT credit on export of services.2. Taxability of software maintenance services under Management, Maintenance, and Repair Service (MMRS) before 16.05.2008.3. Computation of export turnover and total turnover for determining refund under Rule 5 of CENVAT Credit Rules, 2004.Detailed Analysis:1. Refund of unutilized CENVAT credit on export of services:The appellants, engaged in software services, claimed refunds of unutilized CENVAT credit under Rule 5 of CENVAT Credit Rules, 2004, read with Notification No. 05/2006. The adjudicating authorities rejected or restricted these claims on the grounds that software maintenance services were not taxable before 16.05.2008 and that the computation of turnover for refund purposes was incorrect. The Tribunal found that the appellants had paid service tax on MMRS and were entitled to refunds. The Tribunal relied on the High Court and Tribunal decisions, including the case of mPortal India Wireless Solutions Pvt. Ltd. vs. CST Bangalore, which established that refunds should not be denied on the ground of non-taxability if the services were exported. The Tribunal allowed the appeals, setting aside the orders that rejected or restricted the refunds.2. Taxability of software maintenance services under MMRS before 16.05.2008:The adjudicating authorities and the Commissioner (Appeals) held that software maintenance services were not taxable under MMRS before 16.05.2008 and thus rejected the refund claims. The Tribunal, however, found that the appellants had paid service tax on MMRS and were eligible for refunds. The Tribunal referenced the case of KPIT Cummins Infosystems Ltd. vs. CCE, Pune-I, which supported the taxability of software maintenance services under MMRS during the relevant period. The Tribunal concluded that the appellants were entitled to refunds of input services used in the export of services.3. Computation of export turnover and total turnover for determining refund:The dispute involved the method of computing export turnover and total turnover for determining the refund amount under Rule 5 of CENVAT Credit Rules. The adjudicating authority excluded the SEZ exports from the export turnover (numerator) but included them in the total turnover (denominator), reducing the refund claims. The Tribunal held that this method was incorrect and that the SEZ exports should be included in both the export turnover and total turnover. The Tribunal relied on the High Court decision in CIT vs. Tata Elxsi Ltd., which emphasized uniformity in the components of the numerator and denominator to avoid anomalies. The Tribunal set aside the orders that restricted refunds based on the incorrect computation method and allowed the appeals for full refunds.Separate Judgments:- Appeals No. ST/278/10 and ST/295/11: The Tribunal set aside the orders rejecting refund claims and allowed the appeals with consequential relief.- Appeals No. ST/40422-40425/2014 and ST/41019-41023/2015: The Tribunal set aside the orders restricting refunds and allowed the appeals with consequential relief.- Revenue Appeals No. ST/551-554/2011: The Tribunal upheld the orders of the Commissioner (Appeals) and rejected the revenue appeals.- Appeals No. ST/41015-41018/2015: The Tribunal set aside the orders of the Commissioner (Appeals) and allowed the appeals.Conclusion:The Tribunal allowed the appeals of the appellants, granting refunds of unutilized CENVAT credit on export of services and correcting the computation method for turnover. The Tribunal rejected the revenue appeals, upholding the eligibility of refunds for the appellants.