2025 (2) TMI 895 - AT - Service Tax

First appellate authority incorrectly applied rule 9 instead of rule 4 for CENVAT credit refund dispute

Getz Pharma Research Pvt Ltd Versus Commissioner of Service Tax –VII

CESTAT Mumbai held that the first appellate authority failed to properly address the dispute regarding CENVAT credit refund for inputs used in ... Denial of entitlement to refund of CENVAT credit accumulated - procurement of ‘inputs’ and ‘input service’ for undertaking ‘development of pharmaceutical stable coleman hydrochloride tablets’ under agreement with foreign entity that were claimed to have been exported - Failure to address the issue properly by appellate authority - Violation of principles of natural justice - HELD THAT:- The first appellate authority had not appreciated the issue in dispute before it which is essential in determining applicability of rule 4 of Place of Provision of Services Rules, 2012. Instead, the first appellate authority ruled on the taxability devolving on the appellant as ‘intermediary’, under rule 9 of Place of Provision of Services Rules, 2012, which was neither proposed in show cause notice nor proposed in appeal of jurisdictional Commissioner of Service Tax. In the light of the elaboration on ‘intellectual property rights’, there are no reasoning as to the manner in which such rights had been created in India. A right relating to ‘intellectual property’ is not, as expressed by the first appellate authority, a provision for incentivizing innovation but is very much for securing property in the manner peculiar to each national jurisdiction. It is not policy but a prescription in law and the vestment of such right must meet the test of law. A right that is not registered in India cannot be deemed to have come into existence in the territory of India. The finding of the first appellate authority is, thus, mis-directed. The consequence in terms of allowing the appeal of jurisdictional Commissioner of Service Tax as well as rejection of the appeal of assessee lacks validity. Conclusion - The impugned order is set aside and the matter remanded back to the first appellate authority for adjudging the validity of the grounds preferred by the respective appellants in accordance with the law as set out in Place of Provision of Services Rules, 2012 and judicial pronouncements now in place. Appeals are allowed by way of remand. The issues presented and considered in the judgment by the Appellate Tribunal CESTAT Mumbai involve the denial of entitlement to a refund of CENVAT credit accumulated between July 2013 and June 2014 by M/s Getz Pharma Research Pvt Ltd. The key legal question revolves around the compliance with the stipulation for the export of service as set out in rule 6A of the Service Tax Rules, 1994, specifically focusing on the 'place of provision of service' being in India. The dispute centers on whether the activity undertaken by the appellant qualifies as an export of service and the applicability of rule 4 of the Place of Provision of Services Rules, 2012.The detailed analysis of the issues includes a consideration of the relevant legal framework and precedents. The Court interpreted the rules and regulations governing the export of services and the creation of intellectual property rights. The Court examined the key evidence and findings related to the appellant's claims for refund and the jurisdictional Commissioner of Service Tax's arguments. The application of the law to the facts involved a thorough review of the provisions of the Service Tax Rules and the Place of Provision of Services Rules. Competing arguments were presented by the appellant's counsel and the Authorized Representative, which were analyzed by the Court. The Court concluded that the first appellate authority had not properly appreciated the issue at hand and remanded the matter back for further adjudication in accordance with the relevant legal provisions and judicial pronouncements.The significant holdings of the judgment include the Court's determination that the first appellate authority had erred in its interpretation of the law regarding the creation of intellectual property rights and the taxability of the appellant as an intermediary. The Court emphasized the importance of complying with the Place of Provision of Services Rules and ensuring that intellectual property rights are created in accordance with the law. The final determination was to set aside the impugned order and remand the matter back to the first appellate authority for a reassessment based on the correct legal principles.In conclusion, the judgment highlights the complexities involved in determining the export of services and the creation of intellectual property rights within the context of tax laws. The Court's decision underscores the need for a thorough analysis of the legal framework and adherence to established legal principles in resolving disputes related to tax refunds and service provisions.