2022 (2) TMI 1121 - AT - Service Tax

Appeal partially allowed, remand for further consideration of remaining claim under CENVAT Credit Rules

The appeal was allowed in part, granting relief for a specific amount and remanding the matter to the original authority for further consideration of the ... Refund of accumulated CENVAT credit - input services deployed for rendering of service to M/s Rolex SA, Geneva - exports or not - July 2012 to December 2013 - rule 5 of CENVAT Credit Rules, 2004 - N/N. 27/2012-CE(NT) dated 18th June 2012 - HELD THAT:- There are two obligations that devolve on the appellant, viz, promotion and marketing of Rolex watches in India and undertaking repairs/replacement during the warranty period for which neither the customer nor the overseas entity are charged. That the ‘consideration’ in the contract, having nought to do with actual turnover in India or the nature and extent of repairs, is for the contracted activity is plausible; in any case, the manner of computation does not, of itself, deprive the obligated financial flow from acceptability as ‘consideration’ for service - It would appear that, for any ‘post-warranty’ repair/ replacement, which dealers are unable to handle, the undertaking of such work by the appellant entitles them to bill the customer which is ‘taxable service’ rendered in ‘taxable territory’ and not in dispute here. The appellant does render service in ‘taxable territory’ and that due tax is discharged on such transactions is common ground. The lower authorities have not identified the terminal entities that the appellant is purportedly ‘intermediary’ for, the manner in which the ‘intermediary’ service is recompensed in the channelizing of ‘consideration’ from the customer to the supplier or the origin of the supply of service in the course of which the ‘intermediary’ facilitation by the appellant occurs. The adjunct proposition of ‘no service’ to obfuscate this lacuna brings the contradiction to the fore – the determination of ‘intermediary’ is founded upon the obligations in a contract which should not only have been redundant but also not acknowledgeable as contract if the proposition that the compensation terms therein, not being ‘consideration’ in the absence of ‘service’, are an internal arrangement for reimbursement of expenses is also accepted. Logic and legality are obviously invisible in the conclusions of the lower authorities. The nature of the service is irrelevant for the purpose of rule 5. All that is required is compliance with the conditions laid down therein which, inter alia, include undertaking of exports as specified in rule 6A of Service Tax Rules. As pointed out by Learned Counsel, all the conditions therein had been complied with; any counters thereto in the impugned order are, for the reasons supra, without authority of law. Therefore, the denial of the refund is not within the authority of law. The appellant, as provider of ‘service’ outside the ‘taxable territory’ is entitled to be relieved of the tax burden in the value of ‘service’ so exported - there is only passing mention of the entitlement in the event of eligibility; all that can be deduced is that the original authority does not controvert eligibility of ₹ 10,77,183/-. The claim is for a higher amount and the conformity of the remaining portion of the claim to the formulation in rule 5 of CENVAT Credit Rules, 2004 needs the attention of the competent authority. The matter remanded to the original authority for considering the submissions of the appellant for the remaining portion of the claim - appeal allowed by way of remand. Issues:- Exclusion of activities from service tax- Ineligibility of CENVAT credit for monetizationExclusion of Activities from Service Tax:The appeal involved a dispute regarding the exclusion of certain activities from the ambit of service tax and the ineligibility of a portion of CENVAT credit taken by the appellant for monetization. The appellant sought a refund of accumulated CENVAT credit for input services deployed for rendering services to another entity. The lower authorities rejected the claim, stating it was an internal transfer of funds and limited any potential entitlement to a specific amount due to documentary deficiencies. The issues were framed as eligibility under CENVAT Credit Rules, 2004 and the appropriateness of disallowing credit beyond a certain amount for refund.Ineligibility of CENVAT Credit for Monetization:The appellant contended that they had promptly responded to the service tax authorities' requests for information, disputing the finding of dereliction in furnishing relevant details. They argued that the impugned activity qualified as exports, highlighting inconsistencies in the determination of non-export status by the lower authorities. Reference was made to a Tribunal decision supporting the appellant's position.Intermediary Services and Taxable Territory:The appellant's counsel argued that the impugned activity was wrongly categorized as intermediary services, affecting the determination of the taxable territory. They emphasized that the service provided was outside the taxable territory and should be relieved of the tax burden under CENVAT Credit Rules, 2004. The appellant's obligations under the contract were analyzed to establish the nature of the service provided and the consideration received.Compliance with Export Rules:The appellant contended that the impugned activity met the conditions specified in the Export of Services Rules, 2005, and compliance with the relevant rules was crucial for eligibility under CENVAT Credit Rules, 2004. They asserted that the denial of the refund was not legally justified as all necessary conditions had been fulfilled.Operative Part of the Order:The appeal was allowed in part, granting relief for a specific amount and remanding the matter to the original authority for further consideration of the remaining claim. The decision was pronounced in open court, emphasizing the specific amount eligible for refund and the need for further assessment by the competent authority.