2009 (5) TMI 50 - AT - Service Tax

Rebate for Cenvat credit on input services allowed despite late declaration under Notification 12/2005-ST, delay treated as procedural lapse

CESTAT, NEW DELHI held that the appellant's rebate claim for Cenvat credit on input services must be allowed despite late filing of the declaration under ... Rebate of service tax on input services used in export of services - procedural requirement of filing declaration prior to export - input services as per Cenvat Credit Rules - verification of declaration by Assistant Commissioner - liberal construction for export benefitsProcedural requirement of filing declaration prior to export - verification of declaration by Assistant Commissioner - liberal construction for export benefits - Late filing of the declaration under Notification No.12/2005-ST does not automatically disentitle the exporter to rebate. - HELD THAT: - The Notification prescribes filing of a declaration prior to export under the heading 'Procedure', and verification by the Assistant Commissioner is envisaged. The Tribunal treated the requirement to file the declaration as procedural in nature and held that non-observance of that procedural condition is a technical lapse which cannot be used to deny the substantive concession of rebate, particularly in the context of export where a liberal view is warranted. Documentary verification of input services can be undertaken subsequently; consequently late filing did not justify denial of rebate in this case. [Paras 8, 9]Late filing of the declaration was a procedural lapse only and did not preclude grant of the rebate; the appeals are rejected on this ground.Input services as per Cenvat Credit Rules - rebate of service tax on input services used in export of services - Services used by the respondent (including those challenged by the Department) qualify as input services for the output service rendered and therefore are eligible for rebate where Cenvat credit has not been disputed. - HELD THAT: - The Export of Services Rules adopt the meanings of 'inputs' and 'input services' from the Cenvat Credit Rules. The Tribunal observed that the eligibility for rebate cannot be approached with a different yardstick from the entitlement to Cenvat credit; since the Department did not challenge the taking of credit, there was no basis to deny rebate. The definition of 'input services' is inclusive; services connected with setting up, maintenance and day-to-day operation (including recruitment, security, catering, transport, advertising and similar services) form part of input services in relation to business auxiliary services. Prior Tribunal precedents treating such services as input services were noted and applied. [Paras 6, 7]The contested services are input services within the meaning of the Rules and, absent challenge to the Cenvat credit, rebate cannot be denied on that basis.Final Conclusion: The Department's appeals were rejected: late filing of the declaration under Notification No.12/2005-ST was held to be a procedural/technical lapse not warranting denial of rebate, and the services claimed by the respondent were held to qualify as input services for purposes of rebate where the Cenvat credit taken was not disputed. Issues Involved:1. Filing of declaration prior to export of services.2. Eligibility of certain services as input services for rebate.3. Procedural lapses and their impact on rebate claims.Issue-wise Detailed Analysis:1. Filing of Declaration Prior to Export of Services:The Department argued that the filing of a declaration prior to the export of services, as mandated by Notification No. 12/2005-ST dated 19.4.2005, is a mandatory requirement. The respondent filed the declaration on 9.5.2005, which was after the export of services for the period in question. The Department contended that no rebate of service tax should be admissible for the period prior to 9.5.2005 due to this delay.The respondent countered that the late filing of the declaration is a procedural lapse and should not be used to deny substantive concessions. They argued that such procedural lapses should be viewed liberally, especially in the context of export benefits. The Tribunal agreed with the respondent, citing that the non-observance of a procedural condition of a technical nature cannot be used to deny substantive concessions. The Tribunal emphasized that a liberal view is required in respect of export benefits and procedural lapses should not lead to denial of the benefit under beneficial legislation.2. Eligibility of Certain Services as Input Services for Rebate:The Department challenged the eligibility of certain services such as Mandap Keeper, Outdoor Catering, Real Estate Agent Services, and others, arguing that these services are not directly used in providing the output services and are related to the maintenance of capital assets or other peripheral activities. The Department also contended that the respondent did not declare which services were input services for the output services provided.The respondent maintained that all input services for which rebate is claimed have been used for rendering export services. They cited various decisions, including CST, Delhi Vs. Keane Worldzen India Pvt. Ltd. and C.C.E., Hyderabad IV vs. Deloitte Tax Services India Pvt. Ltd., to support their claim that services such as Equipment hiring, professional consultation, recruitment, security, telephone, transport, training, facility operation, courier, cafeteria, and advertisement services should be considered as input services in relation to the output services.The Tribunal agreed with the respondent, noting that the terms 'inputs' and 'input services' used in the Export Services Rules have the same meaning as in the Cenvat Credit Rules. The Tribunal observed that the eligibility to credit of duty paid on inputs and credit of tax paid on input services is not contingent on whether the services are exported or not. They emphasized that if the respondent were providing the same services to domestic customers, they would be entitled to use the credit to pay the service tax. Therefore, the eligibility for rebate should not be questioned without questioning the credit taken.3. Procedural Lapses and Their Impact on Rebate Claims:The Department argued that the procedural requirement of filing a declaration before the export of services was not met and thus rebate claims should be denied. The respondent argued that the late filing of the declaration is a procedural lapse and should not impact the substantive right to rebate.The Tribunal held that the late filing of the declaration is a procedural lapse and should not be used to deny substantive concessions. They emphasized that the non-observance of a procedural condition of a technical nature cannot be used to deny the substantive concession. The Tribunal also noted that in respect of export benefits, a liberal view should be taken, and procedural lapses should not lead to the denial of benefits under beneficial legislation.Conclusion:The Tribunal rejected the Department's appeals, holding that the late filing of the declaration is a procedural lapse and should not be used to deny substantive concessions. They affirmed that all input services claimed by the respondent were used for rendering export services and thus eligible for rebate. The appeals by the Department were dismissed, and the respondent was entitled to the rebate claims.