TaxTMI 
TaxTMI 
2014 (5) TMI 616
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....both of which had been provided to their offshore clients i.e. were Export of Service under Export of Service Rules, 2005. These services, however, were also being provided to their domestic clients. During the period till 28.2.2006, the Call Centre Services (Business Auxiliary Service) were fully exempt from service tax under notification no.8/2003-CE dated 20.06.2003 and this exemption was withdrawn w.e.f. 1.3.2006 from which date this service became a taxable service. According to Department, the BPO service, which involved processing of mediclaims, etc. and transaction processing for their clients, became taxable under Section 65(zzzq) read with Section 65(104)(c) of the Finance Act, 1994 w.e.f. 1.4.2006. The appellant during the period from 1.4.2005 to 28.02.2006 took cenvat credit of Rs.4,95,56,617/- in respect of various input services, which were used in providing the Business Auxiliary Service of call centres and BPO services to their foreign clients. According to the appellant, during this period, they had not taken any cenvat credit of input services which were used in providing the output services of call centres (BAS) and BPO service to their domestic clients. Subseque....
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....t credit, in question, in respect of various input services had been availed during the period from 1.4.2005 to 28.2.2006 and the input services in respect of which this cenvat credit had been taken, had been used for providing the services of call centre (Business Auxiliary Service) and BPO Service, which had been exported i.e. provided to the foreign clients, that though during the period of dispute, the call centre service (Business Auxiliary Service) was fully exempt from service tax under notification no.8/2003-CE and since this service has been exported, in terms of Export of Service Rules, 2005, the Cenvat Credit Rules 2005, the appellant would not be required to reverse the cenvat credit and would be entitled to utilize that credit for payment of service tax on the taxable services provided to their domestic clients in view of the provisions of Rule 5 of the Cenvat Credit Rules, 2004, that as regards the BPO service provided to their foreign clients, this service pertained to processing of mediclaims and transaction processing, that the same was classifiable as Business Auxiliary Service and since the same had been exported, in terms of Rule 5 of the Cenvat Credit Rules, 20....
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....ices used for the export of the such taxable services would be entitled for rebate in terms of notification no.12/05-ST, that the ratio of the above judgements of the Tribunal is squarely applicable to the facts of this case, as the cenvat credit, in question, had been taken in respect of the input services which had been used in or in relation to providing BPO service and Call Centre Service (Business Auxiliary Service), which, in turn, had been exported and this cenvat credit can, under Rule 5 of the Cenvat Credit Rules, 2004, be utilized for payment of service tax on the taxable services provided to domestic clients of the appellant and if this is not possible, the assessee would be entitled for its cash refund, that in this case the cenvat credit, in question, has been utilized by the appellant for payment of service tax on the taxable services provided to their domestic clients during the period 2006-07 and 2007-08, that the impugned order denying the cenvat credit, in question, by invoking Rule 6(1) of the Cenvat Credit Rules, 2004 is not sustainable as Rule 6(1) is not applicable when the output service provided by utilizing the cenvated input services have been exported wit....
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.... taken in respect of input services used in or in relation to the providing of Call Centre Service or BPO Service provided to their Indian clients, in respect of which no service tax was payable and this claim of the appellant is not disputed by the department. The cenvat credit of Rs.4,95,56,617/- taken by the appellant in respect of input services used in or in relation to the providing of Call Centre Service or BPO service, which were exported out of India, has been utilized by them for payment of service tax on the taxable services provided to their Indian clients during 2006-07 and 2007-08. The appellants contention is that since the BPO service and Call Centre Service, both of which were taxable as Business Auxiliary Service had been exported out of India, the appellant, in terms of Rule 5 of the Cenvat Credit Rules, 2004 would be entitled for cenvat credit of the service tax paid on the input services used, irrespective of the fact that Call Centre Service during the period of dispute was unconditionally exempted from service tax under notification no.8/2003-ST and the BPO service was not a taxable service. The departments stand is that since during the period of dispute, ....
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.... Service (Business Auxiliary Service) provided to overseas clients is concerned, there is no dispute that this is taxable service under Section 65 (105)(zzb) read with Section 65(19) of the Finance Act, 1994 and the same was fully exempt from service tax during the period of dispute in terms of exemption notification no.8/2003-ST. The question as to whether the appellant would be eligible for cenvat credit in respect of the input services used in providing this service which had been exported without payment of service tax and whether this credit could be utilized by them in terms of Rule 5 of the Cenvat Credit Rules, 2004 for payment of service tax on taxable service provided to their domestic clients or their on inability to utilize this cenvat credit for payment of service tax on domestic service transactions, whether its cash refund would be available in terms of this rule, stands answered in favour of the appellant by the judgement of the Tribunal in the case of Zenta Pvt. Ltd. reported in 2012-TIOL-624-CESTAT-MUM, wherein the Tribunal has held that if the assessee is providing a taxable service, although exempt by way of notification, but which had been exported, the assessee....
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....uestion arises as to whether the appellant would be eligible for cenvat credit in respect of input services used in or in relation to providing of this service in terms of Rule 5 of the Cenvat Credit Rules. 9.1 The relevant portion of Rule 5 of the Cenvat Credit Rules, as it existed during the period of dispute, is reproduced below:- Where any input or input service is used in the manufacture of final product which is cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate product cleared for export, or used in providing output service which is exported, the CENVAT credit in respect of the input or input service so used shall be allowed to be utilized by the manufacturer or provider of output service towards payment of, (i) Duty of excise on any final product cleared for home consumption or for export on payment of duty; or (ii) Service tax on output service, And where for any reason such adjustment is not possible, the manufacturer or the provider of output service shall be allowed refund of such amount subject to such safeguards, conditions and limitations....
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...., the cenvat credit would not be available in respect of inputs or input services used in or in relation to providing of this service, whether for offshore clients or for domestic clients. Therefore, the appellant were not entitled for cenvat credit of service tax paid on input services used in or in relation to providing of the BPO service during the period of dispute, even if the same had been exported. 10. In view of the above discussion, while the appellant have correctly taken cenvat credit in respect of input services used in or in relation to the providing of call centre service (Business Auxiliary Service) for export, they were not entitled for cenvat credit in respect of the BPO service provided to their offshore client and as such, the credit of input services in respect of BPO service has been wrongly taken by them and wrongly utilized for payment of service tax in respect of their domestic service transactions. 11. Next comes the question of limitation, as while the cenvat credit demand is for the period from 1.4.2005 to 28.02.2006, the show cause notice had been issued on 23.10.2009. In this case the show cause notice for demand of cenvat credit for the period from 1....