Refund of appellant rejected based upon wrong application of formula by the authority.

PJ/Case Law/2018-2019/3486

Case:MUSIGMA BUSINESS SOLUTIONS PVT. LTD. Versus COMMR. OF S.T., BANGALORE-V
Citation:2018 (11) G.S.T.L. 385 (Tri. - Bang.)

Issue:Refund of appellant rejected based upon wrong application of formula by the authority.

Brief facts:The present appeal is directed against the impugned order dated 7-12-2016 passed by the Commissioner (Appeals) whereby the Commissioner (Appeals) has upheld the finding of the Assistant Commissioner relating to the Export Turnover (ETO) and Total Turnover (TTO) for the purpose of calculating the refund amount.

Briefly the facts of the present case are that the appellant is registered under Information Technology Software Services and they have filed refund claim for refund of unutilised CENVAT credit under Rule 5 of the CENVAT Credit Rules read with Notification No. 27/2012-C.E. (N.T.), dated 18-6-2012 on 6-3-2014 for the period April to June, 2013. Thereafter a show cause notice dated 23-5-2014 was issued proposing to reject the refund claim of Rs. 46,08,626/-. After following the due process of law, the Assistant Commissioner vide order-in-original dated 22-12-2015 sanctioned Rs. 17,08,178/- and rejected the balance amount. Aggrieved by such rejection, appellant filed appeal before the Commissioner (Appeals) along with other appeals. The Commissioner (Appeals) has upheld the decision of the Assistant Commissioner. Hence the present appeal.

Appellant’s contention:Learned consultant for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without considering the legal position of the law and also it has been passed on assumptions and presumptions. He further submitted that the Department has rejected the claim for refund on technical ground without appreciating the facts and the provisions of the law in an appropriate perspective. He further submitted that the appellant is exporting the Information Technology Software Services and had paid service tax on certain input services for providing taxable output service which has been exported and the entire remittances have been received in foreign convertible exchange. He further submitted that the finding of the Assistant Commissioner whether he has taken the ETO as Rs. 36,53,44,212/- by excluding reimbursement of expenses and other charges which are not towards the services exported and the TTO as Rs. 56,72,99,787/-. The learned consultant agreed that reimbursement of expenses and other charges has to be excluded but his objection was with regard to computation of TTO. He further submitted that the respondent has not applied the same principle by excluding reimbursement of expenses and other charges which are not towards the services exported in computing the TTO. He also submitted that the expenses and other receipts reduced from ETO should also be reduced from TTO since the appellant had only ETO during the claim period. He also submitted that the respondent has wrongly computed the TTO and applied the formula wrongly. He also submitted that there should be uniformity in the ingredients of both the numerator and the denominator of the formula otherwise it would produce anomalies or absurd results.
Respondent’s contention: On the other hand the learned AR reiterated the findings of the impugned order.

Reasoning of judgment: After considering the submissions of both the parties and perusal of the material on record, I find that it is necessary at this stage to see the concept of TTO vis-à-vis ETO as defined in Rule 5(1)(E) of CENVAT Credit Rules, 2004 which is reproduced hereinbelow :-

“Total Turnover” means export turnover of services determined in terms of clause (D) of sub-rule (1) and the value of all other services, during the relevant period.

The relevant extract of Rule is given as under:-
        (E) “Total turnover” means sum of total of the value of-
(a)   All excisable goods cleared during the relevant period including exempted goods, dutiable goods and excisable goods exported;
(b) Export turnover of services determined in terms of clause (D) of sub-rule (1) above and the value of all other services, during the relevant period; and
(c)   All inputs removed as such under sub-rule (5) of Rule 3 against an invoice, during the period for which the claim is filed.
Since the appellant had no other services apart from export services during the refund claim period, the export turnover of services determined in terms of clause (D) of sub-rule (1) shall be the total turnover.

Further it was held that the appellant during the relevant period has only ETO, therefore, reimbursement of expenses has to be excluded from the ETO as well as TTO and only then it will give the fair results. Therefore, both the authorities had wrongly applied the formula as prescribed under Rule 5(1)(E) of CENVAT Credit Rules, 2004 read with Notification No. 27/2012-C.E. (N.T.), dated 18-6-2012. In view of the wrong application of the formula, the refund has been rejected. In view of these facts, this case needs to be remanded back to the original authority to re-compute the TTO as per Rule 5(1)(E) read with Notification No. 27/2012-C.E., dated 18-6-2012. Accordingly, I set aside the impugned order and remand the case to the original authority to re-compute the TTO and then decide the refund claim of the appellant. The original authority will follow the principle of natural justice and pass a reasoned order.
Decision: Matter remanded for re-computation.
Comment:The kernel of the case is that the refund claim was rejected based upon application of wrong formula as prescribed under Rule 5(1)(E) of CENVAT Credit Rules, 2004 read with Notification No. 27/2012-C.E. (N.T.), dated 18-6-2012and total turnover . The expenses and other receipts reduced from ETO should also be reduced from TTO. But the appellant had only ETO during the claim period. Hence, 100% refund should be granted to him. But the department has considered the deductions for ETO but not for TTO. Thus the matter was remanded to the original authority to re-computed the total turnover. Although the matter was remanded only for re-computation of refund claim but analogy was clear that deductions for ETO and TTO should be same.

Prepared By:ARUNDHATI BAJPAI

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