2018 (4) TMI 26 - AT - Service Tax

Tribunal grants appeal, approves refund claim under CENVAT Credit Rules. Compliance with export service conditions key.

The Tribunal allowed the appeal, overturning the rejection of the refund claim under the CENVAT Credit Rules. It emphasized the appellant's compliance ... Violation of principles of natural justice in adjudication - Refund of accumulated CENVAT credit for exported services - Qualification of service as export under Rule 6A of the Service Tax Rules - Application of Board Circular No.120/01/2010 ST for exporters of 100% services - Interpretation and application of Notification No.5/2006 CE(NT) to refund claimsViolation of principles of natural justice in adjudication - The order rejecting the refund claim was passed without issuing a show cause notice or affording an opportunity of hearing and thereby violated principles of natural justice. - HELD THAT: - The Tribunal found that the Deputy Commissioner rejected the refund claim without issuing a show cause notice and without giving the appellant an opportunity of hearing. Such omission rendered the adjudication contrary to natural justice. In consequence the impugned order was held to be legally unsustainable and was set aside. [Paras 7]Impugned order set aside for violation of principles of natural justice.Refund of accumulated CENVAT credit for exported services - Qualification of service as export under Rule 6A of the Service Tax Rules - Application of Board Circular No.120/01/2010 ST for exporters of 100% services - Interpretation and application of Notification No.5/2006 CE(NT) to refund claims - Whether the appellant's services for the period April 2012 to June 2012 qualified as export of service and the refund claim was admissible on merits. - HELD THAT: - On merits the Tribunal held that the appellant had satisfied the conditions of Rule 6A of the Service Tax Rules for the services to qualify as exported services. The Tribunal further relied on Board Circular No.120/01/2010 ST which provides that service providers exporting 100% of their services should ordinarily be granted refund of CENVAT credit if otherwise in order, subject to a declaration of compliance with Notification No.5/2006. Applying these principles and Notification No.5/2006 as applicable to the relevant quarter, the Tribunal concluded that the refund rejection on the ground that proceeds were received later did not preclude recognition of the export turnover for the quarter and the refund was accordingly allowable. [Paras 7]Appellant's services held to qualify as export for the period; refund claim allowable and appeal allowed on merits.Final Conclusion: The appeal is allowed: the impugned order rejecting the refund is set aside for breach of natural justice and, on merits, the appellant's services for April 2012 to June 2012 are held to qualify as export entitling it to refund of accumulated CENVAT credit in accordance with Rule 6A, Notification No.5/2006 and Board Circular No.120/01/2010 ST. Issues:Appeal against rejection of refund claim under CENVAT Credit Rules based on export of services during a specific period.Analysis:The appeal was directed against the Commissioner of Service Tax (Appeals) order rejecting the refund claim of the appellant related to accumulated cenvat credit for exported output services during April-June 2012. The claim was rejected because the export proceeds were received in July, falling outside the claim period. The appellant argued that the order lacked consideration of statutory provisions and was based on assumptions without proper review of facts. It was highlighted that the original authority did not issue a show-cause notice, violating principles of natural justice. The appellant referred to relevant case laws to support their argument.On the merit of the claim, the appellant contended that services provided to a foreign entity qualified as export of service under relevant rules. The appellant asserted compliance with conditions for filing the refund claim and disputed the authorities' interpretation of the new refund notification issued in June 2012. The appellant emphasized that the services were exported during the relevant period and the notification did not specify a condition regarding the timing of proceeds receipt for export turnover calculation.The Revenue argued against the refund, stating that the appellant did not receive proceeds in the same quarter as the refund claim. However, the Tribunal found that the original order lacked compliance with principles of natural justice and ruled in favor of the appellant. It was noted that the appellant met all conditions for service export as per Rule 6A of the Service Tax Rules. Referring to a Board circular, the Tribunal emphasized that exporters of 100% services should be granted CENVAT credit refund if in order, without restrictions on credit timing. Considering the circular and Notification No.5/2006, the Tribunal set aside the order rejecting the refund, allowing the appeal of the appellant.In conclusion, the Tribunal overturned the decision to reject the refund claim, emphasizing compliance with export service conditions and principles of natural justice. The appellant's argument regarding the timing of proceeds receipt and adherence to relevant notifications played a crucial role in the Tribunal's decision, ultimately leading to the appeal being allowed.