2023 (9) TMI 1100 - AT - Service Tax

Tribunal rules in favor of assessee in refund case, corrects errors and allows refund claims

The Tribunal ruled in favor of the assessee in a case involving rejection of refund claims as time-barred, error in computation of eligible credit, ... Refund of input service tax credit - export of services - rejection on the ground that the refund claim filed is beyond the time limit of one year as provided under Section 11B of Central Excise Act, 1944 read with Rule 5 of CENVAT Credit Rules, 2004 - error in computation of the total eligible credit - services have no nexus with the output services provided by the assessee - wrong application of formula for calculating the eligible refund. Rejection of refund alleging that the refund claim filed is beyond the period of one year - HELD THAT:- The authorities below have computed the period of one year form the date of invoice. The Larger Bench of the Tribunal in the case of CCE & CST, BENGALURU SERVICE TAX-I VERSUS M/S. SPAN INFOTECH (INDIA) PVT. LTD. [2018 (2) TMI 946 - CESTAT BANGALORE] has held that in the case of refund in respect of services exported, the relevant date for computation of the period of one year is the date of realization of the foreign exchange and not the date of invoice. Following the said decision, this issue answered in favour of the assessee and against the Department. Rejection on the ground that error in computation of the total eligible credit - HELD THAT:- It is seen that the assessee is discharging Service Tax under Manpower Recruitment and Supply Agency Services as the recipient of service under reverse charge mechanism. This cannot be considered as the domestic turnover. While applying the formula, the output service provided by the assessee in the domestic area has to be considered. The quantum of domestic turnover in regard to renting of immovable property would be only Rs.39,85,984/-. On the basis of records, this issue is found to be in favor of the assessee and against the Department. However, the same requires to be remanded to the original authority for recalculation by applying the correct domestic turnover. Rejection of refund in respect of various services alleging that these services have no nexus with the output services provided by the assessee - period prior to 01.04.2011 - HELD THAT:- The authorities below have relied upon the decision in the case of COMMISSIONER OF CENTRAL EXCISE, NAGPUR VERSUS MANIKGARH CEMENT WORKS [2009 (11) TMI 142 - CESTAT, MUMBAI] which has in turn relied upon the decision of the Hon’ble Apex Court in the case of Maruti Suzuki Ltd. (supra), the decision rendered by the Hon’ble Apex Court in the case of M/S. MARUTI SUZUKI LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI-III [2009 (8) TMI 14 - SUPREME COURT] is with regard to inputs and not input services. The same is not applicable to the facts of the case. After considering the various services, we are of the view that the rejection of the refund claim alleging that these services have no nexus with the output service provided by the assessee is without legal or factual basis. The issue is held in favor of the assessee and against the Department. Wrong application of formula for calculating the eligible refund - HELD THAT:- While calculating the refund, the authorities below have deducted this amount of Rs.5,07,018/- instead of applying the total input credit availed by the assessee. It is found that the contention of the assessee is correct. The total input credit availed by the assessee which is Rs.5,82,75,522/- has to be taken for calculating the eligible refund. This issue is found in favour of the assessee and against the Department. However, the issue requires to be remanded to the adjudicating authority for calculating the correct eligible refund. The Department has filed an appeal against this issue alleging that the credit availed after the last date of export is not eligible for refund. It is noted that the export being a continuous process and when the refund claim is filed periodically for different quarters, there is no requirement of one to one co-relation. The credit availed for the exports have to be considered. The Commissioner (Appeals) has rightly granted refund in respect of Rs.7,19,638/-. This issue is found in favour of the assessee and against the Department. The matter remanded to the adjudicating authority to reconsider the issues with regard to calculation of eligible refund - appeal allowed by way of remand. Issues Involved:1. Rejection of refund claims as time-barred.2. Error in computation of eligible credit.3. Rejection of refund claims for services without nexus to output services.4. Wrong application of the formula for calculating eligible refund.Summary:1. Rejection of Refund Claims as Time-Barred:The primary issue is whether the refund claims filed by the assessee are beyond the period of one year as stipulated under Section 11B of the Central Excise Act, 1944. The authorities computed the period from the date of the export invoice, which led to the rejection of Rs.1,23,87,964/-. However, the Tribunal referenced the Larger Bench decision in M/s. Span Infotech India Pvt. Ltd., which held that the relevant date for computation is the date of realization of foreign exchange. Consequently, the Tribunal ruled in favor of the assessee, determining that the refund claims were within the time limit.2. Error in Computation of Eligible Credit:The second issue pertains to the incorrect application of the domestic turnover in the formula for calculating eligible credit. The authorities erroneously included Service Tax paid on Manpower Recruitment and Supply Agency Services under reverse charge mechanism, instead of the actual domestic turnover related to renting of immovable property, which is Rs.39,85,984/-. The Tribunal found this issue in favor of the assessee and remanded it to the original authority for recalculation using the correct domestic turnover.3. Rejection of Refund Claims for Services Without Nexus to Output Services:The third issue involves the rejection of refund claims for various services such as outdoor catering, rent-a-cab, and event management, alleging no nexus with the output services provided by the assessee. The period in question is prior to 01.04.2011, when the definition of input services included 'activities relating to business.' The Tribunal noted that similar refunds were allowed in the assessee's own case for different periods and clarified that the decision in Maruti Suzuki Ltd. pertains to inputs, not input services. Thus, the Tribunal ruled this issue in favor of the assessee.4. Wrong Application of Formula for Calculating Eligible Refund:The fourth issue concerns the incorrect application of the formula for calculating eligible refund, where the authorities deducted Rs.5,07,018/- from the total input credit availed by the assessee. The Tribunal agreed with the assessee that the total input credit of Rs.5,82,75,522/- should be used for calculation and remanded the issue to the adjudicating authority for recalculating the correct eligible refund.Additional Issue:The Department challenged the refund of Rs.7,19,638/- allowed by the Commissioner (Appeals), arguing that credit availed after the last date of export is ineligible. The Tribunal upheld the Commissioner (Appeals)'s decision, noting that in continuous export processes, periodic refund claims do not require one-to-one correlation.Conclusion:The Tribunal remanded the matter to the adjudicating authority to reconsider the issues regarding the calculation of eligible refund as per the observations made. The Department's appeal was dismissed, and the assessee's appeal was partly allowed and partly remanded.