Whether refund of Works Contract Service is available under Rule 5?

PJ/CASE LAW/2016-17/3142

Case:M/s RED HAT INDIA PVT LTD VERSUS PRINCIPAL COMMISSIONER, SERVICE TAX, COMMISSIONERATE, PUNE

Citation:2016-TIOL-1300-CESTAT-MUM

Brief Facts:These two appeals are directed against Orders-in-Appeal No. PUN-SVTAX-000-AAP-148-15-16 dated 3/11/2015 & No. PUN-SVTAX-000-AAP-228-15-16 DATED 21/1/2016 passed by the Commissioner of Service Tax (Appeals) Pune.
The fact of the case is that the appellants are engaged in the providing export of services. They filed refund claim under Rule 5 of Cenvat Credit Rules, 2004. The Adjudicating authority has sanctioned majority of amount, however rejected the claim on certain services. Aggrieved by the rejection portion of the Original order, appellant filed appeal before the Commissioner (Appeals). The Commissioner also partly allowed the refund, however partly rejected the refund on services on Works Contract Services, Short Terms Accommodation Services. The Commissioner has rejected the refund of works contract service on the ground that the said services was excluded from the definition of the input service under Rule 2(l) of Cenvat Credit Rules, 2004 and in respect of short term accommodation service the refund was disallowed on the ground that the accommodation is for employees of the company and therefore the same is not input service. Aggrieved by the impugned order, appellant filed this appeal.

Appellant Contentions:The Learned Consultant for the appellant fairly concede that he is withdrawing the claim of refund in respect of short term accommodation and also in respect of the refund related to one invoice dated 1/11/2014 on M/s. Benchmark Engineering Pvt Ltd. As regard works contract service, he submits that this service is related to monthly maintenance of photocopier, computer and building premises of the appellant. He submits that the exclusion of works contract service is provided in the definition of input service only in respect of works contract which is used for construction services, whereas in the present case the subject works contract service is for maintenance of various equipment and building and not for building construction. Therefore it does not fall under the exclusion category. As regard the claim for interest, he submits that there is admitted delay in sanctioning of refund therefore the interest should have been given by the sanctioning authority along with refund claim. The interest on delayed sanction of refund is statutory as provided under Section 11BB of Central Excise Act, which is applicable in case of refund under Rule 5 also. In this support, he placed reliance on judgment ofCommissioner of Central excise vs. Reliance Industries Ltd. [2010 (259) ELT 356 (Guj)] = 2010-TIOL-928-HC-AHM-CX, which was upheld by the Hon'ble Supreme Court as reported in [2011 (274) ELT A110 (SC)]- 2011-TIOL-123-SC-CX-LB.

Respondent Contentions:On the other hand, Ld. Asstt. Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order.

Reasoning of Judgment:CESTAT have carefully considered the submissions made by both sides and perused the record.
After considering the submission made by Ld. Counsel that the appellant is foregoing the refund in respect of short term accommodation and in one of the invoice dated 1/11/2014 of M/s. Benchmark Engineering Pvt Ltd. issues remain to be decided by him are as under:
(a) Whether the appellant is entitle for Cenvat Credit and consequential refund under Rule 5 in respect of Works Contract Service which is for maintenance of office equipment and building.
(b) Whether appellant is entitled for interest on delayed sanctioned of refund claim.
As regard the admissibility of refund in respect of Works Contract Services, lower authorities have rejected the claim only on the ground that Works Contract Service stand excluded from the definition of input service provided under Rule 2 (l) of Cenvat Credit Rules, 2004, which is reproduced below:
(l) "input service" means any service,-
(i) used by a provider of output service for providing an output service; or
(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal,
and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal;
(m) "input service distributor" means an office of the manufacturer or producer of final products or provider of output service, which receives invoices issued under rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider or, as the case may be;
(n) "job work" means processing or working upon of raw material or semi-finished goods supplied to the job worker, so as to complete a part or whole of the process resulting in the manufacture or finishing of an article or any operation which is essential for aforesaid process and the expression "job worker" shall be construed accordingly;
(na) "large taxpayer" shall have the meaning assigned to it in the Central Excise Rules, 2002 ;
(naa) "manufacturer" or "producer", in relation to articles of jewellery or other articles of precious metals falling under heading 7113 or 7114 as the case may be of the First Schedule to the Excise Tariff Act , includes a person who is liable to pay duty of excise leviable on such goods under sub-rule (1) of rule 12AA of the Central Excise Rules, 2002 ;
(o) "notification" means the notification published in the Official Gazette;
(p) "output service" means any taxable service , excluding the taxable service referred to in sub-clause (zzp) of clause (105) of section 65 of the Finance Act, provided by the provider taxable service, to a cutomer, client, subscriber, policy holder or any other person, as the case may be, and the expressions ‘provider' and ‘provided' shall be construed accordingly;
(q) "person liable for paying service tax" has the meaning as assigned to it in clause (d) of sub-rule (1) of rule 2 of the Service Tax Rules, 1994 ;
(r) "provider of taxable service" include a person liable for paying service tax;
(s) "second stage dealer" means a dealer who purchases the goods from a first stage dealer;
(t) words and expressions used in these rules and not defined but defined in the Excise Act or the Finance Act shall have the meanings respectively assigned to them in those Acts.
From the above rule, it is clear that Works Contract Services are excluded only when it is use for construction service, whereas in the present case input services were used for maintenance of office equipment and building therefore, this particular works contract service does not fall under the exclusion category in the definition of input service, therefore works contract service in the present case is input service and eligible for refund under Rule 5. As regard the service of short term accommodation and works contract service only related to invoice No. Misc Bill/Red Hat/Pune/13-14/01 dated 14/2/2014, since the appellant has withdrawn the claim of refund on this, the rejection of refund on services of short term accommodation and service involved in the said invoice of M/s. Benchmark Engineering Pvt Ltd stand upheld.
As regard the interest on delayed refund, Tribunal is of the view that irrespective of any circumstances whatsoever, if there is delay beyond three months from the filing of refund, the department is duty bound to grant the interest for the delayed period in sanctioning the refund. The sanction of refund is as per the prescribed rate of interest under Section 11BB of the Central Excise Act. The judgment relied by the Ld. Counsel in case of Reliance Industries Ltd. (supra) which is also upheld by the supreme Court, supports the appellant's present case. Tribunal finds that there is absolutely no reason for not granting the interest on the delayed sanction of refund claim. Therefore, it is directed that appellant shall be granted interest under Section 11BB. In view of the above discussion, appeals are partly allowed.

Decision:- Appeal partly allowed.

Comment:-The gist of this case is that Refund under Rule 5 cannot be denied for Works contract Service which is used for maintenance of office equipment and building as this particular works contract service does not fall under the exclusion category in the definition of input service, therefore works contract service in the present case is input service and eligible for refund under Rule 5. Secondly, interest on refund for delayed period in sanctioning the refund should be granted if there is delay beyond three months from the filing of refund.

Prepared By:-Hushen Ganodwala

Comments

PJ/CASE LAW/2016-17/3142

Post a Comment

Query