2019 (12) TMI 1066 - AT - Service Tax

Appellants qualify for cash refund under CENVAT Credit Rules

The Tribunal determined that the appellants' services qualified as export services, making them eligible for cash refund of accumulated credit under Rule ... Intermediary - Export of service - Place of Provision of Services Rules, 2012 - Rule 9 (deeming of provider's location) - Place of Provision of Services Rules, 2012 - definition of intermediary (Rule 2(f)) - Cash refund of accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - Input service nexusIntermediary - Place of Provision of Services Rules, 2012 - definition of intermediary (Rule 2(f)) - Place of Provision of Services Rules, 2012 - Rule 9 (deeming of provider's location) - Cash refund of accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - Whether the appellant is an intermediary and therefore the services fall outside the scope of export of service (with the provider deemed located in India under Rule 9), disqualifying claim for cash refund of accumulated CENVAT credit. - HELD THAT: - For the period prior to 01.10.2014 the definition of 'intermediary' did not include services in relation to 'goods'; therefore the amended scope could not be applied retrospectively and the Commissioner's confirmation of demand for the period before 01.10.2014 was unsustainable (following Croda India). For the period after 01.10.2014, on the facts of the agreement the Tribunal found that the appellant acted on a principal-to-principal basis, had no role in fixation or negotiation of price on behalf of the principal, and the service consideration was not directly linked to the main supply of goods; accordingly the appellant did not arrange or facilitate the main supply as an intermediary. Reliance on precedents where similar agency/contractual arrangements were held not to attract Rule 9 was applied. Since the appellant's services are not intermediary services within Rule 2(f), Rule 9 does not render the provider located in India and the services qualify as export of service for purposes of refund under Rule 5 CCR, 2004. [Paras 16, 17]Pre 1.10.2014: amended definition of 'intermediary' could not be applied and demand quashed; Post 1.10.2014: on merits the appellant is not an 'intermediary' and therefore the services qualify as export, entitling the appellant to refund consideration under Rule 5 as applicable.Input service nexus - Cash refund of accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - Whether the services availed by the appellant (Management and Business Consultant services, Business Auxiliary Service, Business Support Service, Membership of Club or Association, Convention Services, Renting of Immovable Property & Telecommunication services) were not input services for lack of nexus and hence not eligible for cash refund. - HELD THAT: - The Commissioner (Appeals) had held that these services lacked nexus with the appellant's exported output services and therefore were not 'input services' eligible for refund. The Tribunal examined earlier decisions and found the Commissioner's conclusion contrary to established precedents recognizing such categories (management/consultancy, business support, membership, convention, rent, telecommunication) as input services where they are used in relation to the business and in providing the exported services. No contrary binding decision was placed by the Revenue; accordingly the denial of refund on the nexus ground was unsustainable. [Paras 18]The impugned finding that the specified services were not input services for lack of nexus is set aside and the appellant is entitled to the benefit accordingly.Final Conclusion: Impugned orders of the Commissioner (Appeals) are set aside; appeals allowed and the appellant is entitled to consequential reliefs, including grant of refund/credit as per law, insofar as determined above. Issues Involved:1. Whether the appellants are an 'intermediary' and hence the services rendered by them fall outside the scope of export service, making them ineligible for cash refund of accumulated credit under Rule 5 of the CENVAT Credit Rules, 2004.2. Whether certain input services have no nexus with the output services, making them ineligible for cash refund under Rule 5 of the CENVAT Credit Rules, 2004.Detailed Analysis:1. Intermediary Status and Export Service:The appellants provided sales promotion services to an overseas entity, CPC Global, under an agreement dated 14.09.2009. They received commissions in convertible foreign exchange and claimed refunds of accumulated CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004. The Department alleged that the appellants acted as an 'intermediary' as defined under Rule 2(f) of the Place of Provision of Services Rules, 2012 (POPS Rules), rendering their services non-exportable and denying their refund claims.The Tribunal examined the agreement and found that the appellants were engaged in sales promotion exclusively for CPC Global without any interaction with CPC Global's clients or third parties. The Tribunal noted that the definition of 'intermediary' was amended on 01.10.2014 to include 'goods'. For the period before this amendment, the Tribunal held that the appellants could not be considered intermediaries as the definition did not encompass goods. This was supported by the Tribunal's previous decision in Croda India Co. Pvt. Ltd. Vs. CST, Mumbai.For the period after 01.10.2014, the Tribunal analyzed the agreement and concluded that the appellants did not act as intermediaries because they did not negotiate prices or facilitate transactions between CPC Global and its clients. The Tribunal referenced its decisions in Lubrizol Advanced Materials India Pvt. Ltd. and R.S. Granite Machine Tools Pvt. Ltd., which supported the view that the appellants' services were not intermediary services. Consequently, the Tribunal determined that the appellants' services qualified as export services, making them eligible for cash refund of accumulated credit under Rule 5 of the CENVAT Credit Rules, 2004.2. Nexus of Input Services with Output Services:The Commissioner (Appeals) had denied credit on various input services, including Management and Business Consultant services, Business Auxiliary Service, Business Support Service, Membership of Club or Association, Convention Services, Renting of Immovable Property, and Telecommunication services, claiming they had no nexus with the output services provided.The Tribunal disagreed with this finding, citing various judgments that supported the appellants' position. For instance, Management and Business Consultant services were deemed necessary for efficient business operations, and Business Support Services were related to legal, market, and product research activities. Membership of Club or Association services was considered essential for obtaining trade memberships, and Convention Services were necessary for organizing business events. Renting of Immovable Property and Telecommunication services were integral to conducting business operations.The Tribunal concluded that these input services met the definition of 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004, and thus, the appellants were entitled to cash refunds for these services.Conclusion:The Tribunal set aside the impugned orders and allowed the appeals, granting consequential relief as per law. The decision was pronounced in court on 20.12.2019.