Whether refund can be granted even if registration was not taken at the time of export of services and at the time of receiving input services?

PJ/CASE LAW/2015-16/2632

Case:-COMMISSIONER OF SERVICE TAX, MUMBAI-I VERSUS SURE-PREP (INDIA) PVT. LTD

Citation:-2015(38) S.T.R. 44 (Tri.-Mumbai)

Brief Facts:-The assessee performs the activity of 100% export of services namely ‘Business Auxiliary Service and filed refund under notification 5/2006-CE (N.T.). The lower appellate authority sanctioned the refund and the Revenue is in appeal with stay application against impugned Order-in-Appeal before the Tribunal. As the matter involves verification of the facts, the appeal itself is being taken up with consent of both sides.

Appellant’s Contention:-The Revenue submits that the order is being contested on two grounds; first, the Service Tax registration had not been taken at the time of export of the services and, secondly, that the input services were used for providing output services before the registration was taken, and, therefore, refund cannot be granted in terms of conditions of Notification No. 5/2006-C.E. (N.T.), dated 14-3-2006 issued under Rule 5 of the Cenvat Credit Rules, 2004.The Revenue also states that the question of limitation has not been gone into by the lower authorities and the refund has been sanctioned on merits. The Revenue also contested that the Commissioner (Appeals) has not gone into the nexus of input services vis-à-vis the output services.

Respondent’s Contention:-The Respondent argued that the they performs only one activity i.e. 100% export of services namely ‘Business Auxiliary Service’. All the records and books of accounts establish that the input services on which Service Tax has been paid were received and they have been used for providing the output services. The Respondent also relies on Hon’ble Karnataka High Court judgment in the case of mPortal India Wireless Solutions P. Ltd.v. C.S.T., Bangalore - 2012 (27)S.T.R.134 (Kar.)and the Tribunal orders in the cases of Commissioner of Service Tax, Bangalore - 2014 (33)S.T.R.(270) (Tri.-Bang.), KPIT Cummins Infosystems Ltd. v. Commissioner of Central Excise, Pune-I - 2013 (32)S.T.R.356 (Tri.-Mumbai) and Wipro BPO Solutions Ltd. v. Commissioner of Service Tax, Delhi - 2012 (25)S.T.R.371 (Tri.-Del.)to justify her contention that refund can be granted even if registration was not taken at the time of export of services and at the time of receiving input services.

Reasoning of judgment:-The Tribunal heard both the parties and considered the rival contentions. The issue hinges on the admissibility of refund of Cenvat credit which has got accumulated due to export of services. The mechanism for granting refund is provided under Notification No. 5/2006-C.E. (N.T.). As per para 3(b) of the Appendix to the notification, the provider of output services has to submit an application indicating the registered premises from which export services are provided. The Tribunal agreed with the Respondent that this is a procedural formality provided in Appendix to the Notification and nowhere in the Notification condition is laid that refund will be granted only if the Service Tax registration has been taken at the time of export of services. This contention is supported by the judgment in the case of mPortal India Wireless Solutions P. Ltd. (supra) cited above to which the Revenue has no answer. Further, The Tribunal is of the view that it can be verified from the records whether the input services were received and utilised for providing the export services. The lower authorities have not done any such verification.

As regards the nexus of input services and output services, the Tribunal also agree with the respondent that all the services are used for providing the output services as held in the case of Ultratech Cement Ltd. -2010 (260)E.L.T.369 (Bom.) = 2010 (20)S.T.R.577 (Bom.). The bald statement of the adjudicating authority that input services are not used to provide output services is not supported by any logic and shows non-application of mind.

In view of the above, the Tribunal remand the case, for the limited purpose of verification as discussed in para 5 above, to the adjudicating authority to whom the respondent will produce all relevant documents to satisfy that input services were received and utilised for export services, within one month of the receipt of this order. As the matter is already six years old and the respondent is suffering for no fault of theirs, in the larger interest of justice The Tribunal further direct the adjudicating authority to’ decide the case within three months of the receipt of this order. The respondent is at liberty to approach the Tribunal if the order is not passed within three months.

Decision:-Appeal allowed by way of remand.

Comment:-The crux of this case is that there is no requirement of service tax registration at the time of export of services per judgment in the case of mPortal India Wireless Solutions P. Ltd. However, as the revenue department has not done any verification that the input services were received and utilised for providing the export services, the case was remanded for the limited purpose to ascertain the usage of input services for providing export services. It is worth noting here that the verification that input services were used for providing export services is not to be done at the time of filing the refund claim and rather it should be verified at the time of availing the cenvat credit itself.

Prepared by: Bharat Rathore

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PJ/CASE LAW/2015-16/2632

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