Refund of unutilised input service tax credit requires proof of actual consumption for exported services before eligibility is granted.

Refund of unutilised input service tax credit for exported output services is admissible only to the extent the input services were actually consumed in providing the exported services, and the eligibility of the credit must be verified before refund is granted. Because the claim had been rejected on the ground that the input services were not directly related to the output service, the Tribunal required fresh examination of whether the services went into consumption for the exported output service and not for other purposes. The impugned orders were set aside and the matter was remitted for de novo decision after granting a reasonable opportunity of hearing.

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Issues: Whether refund of unused input service tax credit relating to exported output services was admissible, and whether the matter required fresh verification of eligibility of the credit.

Analysis: The Tribunal followed the earlier decision which held that refund is admissible only in respect of services actually consumed for providing the output services exported and that admissibility of the credit must be verified before granting refund. As the claim had been disallowed on the ground that the input services were not directly related to the output service, the matter required reconsideration in the light of that principle after verifying whether the eligible services had in fact gone into consumption for the exported output service and not for other purposes.

Conclusion: The impugned orders were set aside and the case was remitted to the adjudicating authority for fresh decision after granting a reasonable opportunity of hearing to the assessee.

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