2019 (1) TMI 1110 - AT - Service Tax

Appellant entitled to service tax refund for exported services, Cenvat credit on credit notes denied

The Tribunal held that the appellant was entitled to a refund of service tax paid on disputed services as a clear nexus was established between input ... Refund of unutilized CENVAT Credit - refund rejected on the ground that the input services have not gone for consumption and have no nexus with the output service; that invoices are greater than one year old; that address was not matching as per ST 2 returns; that invoices were not submitted and Cenvat credit availed on the basis of credit notes - Rule 5 of the Cenvat Credit Rules, 2004 - Held that:- In order to ascertain, whether a particular service has nexus with the output service, the test to be applied is that in absence of use/utilization of such service, what will be the effect on ultimate exportation of service. In absence of use of such input service, if it adversely impacts the quality and efficiency of the exported output service, then such input service should qualify for the benefit of refund envisaged under Rule 5 of the rules - In this case, the nature of use of the disputed services for the purpose of exportation of output service, as explained by the appellant, clearly shows that those services have nexus with the output service and that such services were in fact, required for smooth business transactions of exportation of service. Further, it has also been clarified that since those offices run on 24x7 basis, it is the necessary pre-requisite that the employer should provide certain facilitates in the form of services to its employees to ensure that the output service is provided efficiently; and accordingly, it was clarified that the services like outdoor catering or rent-a-cab to pick-up and dropping of the employees, would be eligible for credit - refund cannot be denied holding that there is no nexus between those services and the output service exported by the appellant. Time limitation - rejection on the ground that issuance of let export order/date of shipment should be considered as the relevant date for the purpose of computation of limitation period under Section 11B of the Central Excise Act, 1994 and not date of receipt of FIRC, as claimed by the appellant - Held that:- The issue arising out of the present dispute is no more res integra, in view of the decision of this Tribunal in the case of Bechtel India Pvt. Ltd. vs. Commissioner of Central Excise, Delhi, [2013 (7) TMI 490 - CESTAT NEW DELHI], wherein it has been held that in case of export of services, export is complete only when foreign exchange is received in India; and such date should be considered as relevant date for the purpose of computation of limitation period - In this case, though the export invoices were issued by the appellant on 30.06.2007, but the hard copy of FIRC was received on 18.07.2007 and thereafter, the refund claims were lodged on 30.06.2008. Since the refund applications were filed with one year from the date of receipt of FIRC, the same is within time and cannot be rejected on the ground of barred by limitation of time - the impugned order rejecting the refund applications on time bar aspect is not sustainable. Refund claim - availment of Cenvat credit on the basis of credit notes - Held that:- The he appellant has agreed that such credit is not permissible and the credit amount has already been reversed by the appellant from the Cenvat account - Since the appellant concedes that it is not entitled for such credit, no opinion is expressed on entitlement for such credit - refund rightly denied. Rejection of refund benefit on the ground of non-submission of relevant invoices - Held that:- The appellant stated that the relevant documents/invoices are available with it and can be produced before the original authority for necessary verification. Since the appellant concedes that the invoices are available with it, the matter can be remanded to the original authority for verification of the disputed invoices. Appeal allowed in part and part matter on remand. Issues Involved:1. Nexus between input services and output services.2. Limitation period for filing refund claims.3. Availment of Cenvat credit on the basis of credit notes.4. Non-submission of relevant invoices.Issue-wise Detailed Analysis:1. Nexus between Input Services and Output Services:The appellant, engaged in providing 'Business Support Service' and 'Information & Technology Service,' exports the entire output service and avails Cenvat credit on input services. The refund applications were partly rejected, with some services deemed to lack a nexus with the output services. The appellant substantiated the nexus between the disputed input services and the output services exported, arguing that the input services were essential for smooth business operations. The Tribunal held that even indirect use of input services qualifies for refund under Rule 5 of the Cenvat Credit Rules, 2004. The test applied was whether the absence of such input services would adversely impact the quality and efficiency of the exported output service. The Tribunal found that the disputed services had a clear nexus with the output services and were necessary for business operations, thus qualifying for the refund benefit.2. Limitation Period for Filing Refund Claims:The refund applications for the period June 2007 to September 2010 were rejected based on the issuance of let export order/date of shipment as the relevant date for the limitation period. The Tribunal referred to the decision in Bechtel India Pvt. Ltd. Vs Commissioner of Central Excise, Delhi, which held that in the case of export of services, the relevant date is the date of receipt of foreign exchange in India. Since the refund applications were filed within one year from the date of receipt of FIRC, they were deemed within the stipulated time and not barred by limitation.3. Availment of Cenvat Credit on the Basis of Credit Notes:The appellant conceded that availing Cenvat credit on the basis of credit notes was not permissible and had already reversed the credit. The Tribunal upheld the denial of refund benefit on this ground, as the appellant agreed that such credit was not entitled.4. Non-submission of Relevant Invoices:The appellant stated that the relevant invoices were available and could be produced before the adjudicating authority. The Tribunal remanded the matter to the original authority for verification of the disputed invoices, allowing for the submission and verification of the necessary documents.Conclusion:The appeals were disposed of with the following terms:- The nexus between input services and output services was established, entitling the appellant to a refund of service tax paid on the disputed services.- The refund claim was not barred by limitation of time.- Refund benefit was not available for Cenvat credit availed on the basis of credit notes.- The matter was remanded to the original authority for verification of invoices not submitted during the adjudication proceedings.(Order pronounced in Court on 14/01/2019)