Value of exempted service will also be added in export turnover for getting unutilised credit refund.

PJ/Case Law/2014-15/2333

Case:-QUINTILES TECHNOLOGIES (INDIA) PVT. LTD. V/S COMMR. OF S.T., AHMEDABAD

Citation:- 2014 (34) S.T.R. 753 (Tri. – Ahmd.)

Brief facts:- These appeals were filed by the appellant against six order-in-appeal Nos. 49/2013(STC)/SKS/Commr(A)/Ahd,53/2013(STC)/SK5/Commr(A)/Ahd,54/2013(STC)/SKS/Commr(A)/Ahd,56/2013(STC)/SKS/Commr(A)/Ahd all dated 28-3-2013 and OIA Nos. 130/2012 STC)/K.ANPAZHAKAN/Commr(A)/Ahd and 132/2012(STC)/K.ANPAZHAKAN/ Commr.(A)/ Ahd both dated 20-4-2013. Issue involved in all the six appeals were the same, therefore, the same were taken up together for disposal in the common order.

Appellant’s contention:- Shri Prakash Shah (Advocate) appearing on behalf of the appellant argued that appellant is engaged in providing I.T. enable services and have a centralised registration at Ahmedabad for providing Business Auxiliary Services. Appellant has been periodically filling refund claims of unutilised Cenvat credit under rule 5 of the Central Excise Rules, 2004 read with the provisions of Notification No. 5/2008-C.E. (N.T.), dated 14-3-2006. He argued that revenue is wrongly calculating the refund claim amount as per the formula given in rule 5(1) of the Cenvat Credit Rules, 2004. It was contested that value of Technical Testing and Analysis Services are also required to be added both to the ‘Export turnover’ and the ‘total turnover’ defined in explanation to clause 5 of Notification No. 7/2010-C.E. (N.T.), dated 27-7-2010. It was said that sum total of all the services exported, whether dutiable or exempted, should be added to both the Export Turnover and Total Turnover. As appellant was not providing any services to the DTA and all the services were exported therefore the entire Cenvat credit of services taken and lying unutilised by the appellant, were required to be paid to the appellant and no Cenvat credit of any services used in exporting exempted services was taken by the appellant. He also argued that in view of CESTAT, Mumbai order in the case of Zenta Pvt. Ltd. v. CCE, Mumbai- V in appeal No. ST/455/2011[2012(27) S.T.R. 519 (Tri.) = 2012 (284) E.L.T. 45 (Tri.)] full refund of service tax credit was available to the appellant.

Respondent’s contention:- Shri Manoj Kutty (AR) appearing on behalf of the revenue argued that exempted services exported should be included only in the total turnover and not to be added to the export turnover as no service tax credit is admissible for exempted services. Learned AR accordingly defended the order passed by the first appellate authority.

Reasoning of judgement:- The issue involved in the proceedings was only with respect to calculation of refund as per formula given in Rule 5(1) of the Cenvat Credit Rules,2004. The prescribed formula is reproduced below:-

Refund amount= (export turnover of goods + export turnover of services) *net Cenvat credit
Total turnover

Further clauses (D) and(E) of rule 5(1) define the export turnover of services and total turnover as follow:-

“(D) “Export turnover of the services” means the value of the export service calculated in the following manner, namely:-

Export turnover of services= payments received during the relevant period for export services + export services whose provision has been completed for which payment had been received in advance in any period prior to the relevant period – advances received for export services for which the provision of service has not been completed during the relevant period;

(E) “Total turnover” means sum 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.”

It was the case of the appellant that 100% of the credit with respect to services exported should be refundable under rule 5 of the Cenvat Credit Rules, 2004. There is no evidence on record that appellant has taken any input service tax with respect to exempted services exported out of India. As per the definition of ‘Export output of services’, given in clause (D) of rule 5(1) of the Cenvat Credit Rules, 2004, no distinction should be made with respect to payment received from export of services. Further the logic of giving cash refund of taxes used, in relation to export of goods/services under rule 5 of the Cenvat Credit Rules, 2004, is to have ‘Zero rated’ exports. In the case of the appellant, no exempted service was provided in the domestic tariff area. Therefore, even exempted export services should be added to the export turnover of services and all the unutilised service tax credit pertaining to exported service will be admissible as refund under rule 5 of the Cenvat Credit Rules, 2004. This view is also fortified by view taken by CESTAT, Mumbai in the case of Zenta Pvt. Ltd. v. CCE, Mumbai in appeal no. ST /455/2011[2012(27)S.T.R. 519(Tri.)= 2012 (284)E.L.T. 45(Tri.)] which was relied upon by the appellant.

In view of the above observation, appeals filed by the appellants are allowed with consequential relief, if any.

Decision:- appeal allowed.

Comment:- This decision underlines that definition of export services does not exclude the exempted services. If the exempted services are exported then the value of this will also be included in calculating export services. Consequently, the refund of unutilised credit will also be allowed on this export services also.

Prepared by Monika Tak.

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PJ/Case Law/2014-15/2333

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