2023 (5) TMI 300 - AT - Service Tax

Appeals allowed for export of services, refund of CENVAT credit granted under Service Tax Rules.

M/s. Watson Pharma Private Ltd. Versus Commissioner, Service Tax-V, Mumbai

M/s. Watson Pharma Private Ltd. Versus Commissioner, Service Tax-V, Mumbai - TMI Issues Involved:1. Eligibility for refund of unutilized CENVAT credit under Rule 5 of the Cenvat Credit Rules, 2004.2. Determination of the place of provision of service under Rule 3 or Rule 8 & 9 of the Place of Provision of Services Rules, 2012.3. Classification of services as intermediary services.4. Compliance with the principles of natural justice.Summary:1. Eligibility for Refund of Unutilized CENVAT Credit:The appellants, M/s Watson Pharma Private Limited, filed for refunds of unutilized CENVAT credit under Rule 5 of the Cenvat Credit Rules, 2004, arguing that they exported services without payment of service tax and could not utilize the CENVAT credit on inputs or input services used in providing these services. The Original Adjudicating Authority sanctioned the refund, finding that the appellants met all conditions specified in Rule 5 of the CENVAT Credit Rules, 2004, and Rule 6A(1)(f) of the Service Tax Rules, 1994.2. Determination of Place of Provision of Service:The Commissioner (Appeals) concluded that the services provided by the appellants to the foreign service recipient could not be treated as export of services under Rule 6A(1) of the Service Tax Rules, 1994. The Commissioner (Appeals) determined that the place of provision of service was the location of the service provider in India, under Rule 9 of the Place of Provision of Services Rules, 2012, and thus denied the refund claims.3. Classification of Services as Intermediary Services:The Commissioner (Appeals) classified the services provided by the appellants as intermediary services, arguing that the appellants were working as agents of the foreign service recipient and that the intellectual property rights created in India made the services intermediary in nature. However, the Tribunal found that the appellants provided the main services themselves and did not act as intermediaries, as defined under Rule 2(f) of the Place of Provision of Services Rules, 2012.4. Compliance with Principles of Natural Justice:The Tribunal noted that the Commissioner (Appeals) made the classification of services as intermediary services without giving the appellants reasonable opportunity for personal hearing or notice. This was deemed a violation of the principles of natural justice. The Tribunal also found that the Commissioner (Appeals) went beyond the scope of the show cause notice and the grounds of appeal preferred by the department.Conclusion:The Tribunal set aside the impugned order of the Commissioner (Appeals) and allowed the appeals of the appellants with consequential relief, concluding that the services provided by the appellants qualify as export of services under Rule 6A of the Service Tax Rules, 1994, and that the appellants are eligible for the refund of CENVAT credit.