2020 (9) TMI 938 - AT - Service Tax

Refund of Service Tax - Information Technology Software Services - Department contends that the Information Technology Software Services was not taxable for the relevant period and it became taxable only w.e.f. 16.05.2008 hence refund under Rule 5 of CCR, 2004 is not available - unregistered premises - nexus between the output services provided and input services availed - HELD THAT - Notification No. 5/2006 has been amended by the Finance Act, 2010 substituting the words used for in place of used in . It is also found that it has been clarified that the retrospective changes are made to ensure that the provisions of refund Notification and the CCR are aligned - also, most of the services utilized by the appellants are held to be input services for providing output services in the field Information Technology Services. Moreover, going by the explanation submitted by the appellants before the lower authorities it is found that the services are integral and required for the rendering of output services. Further, as elucidated in CBEC vide Circular No. 120/1/2010 dated 19.01.2010, input services and their nexus with output service needs to be construed in a harmonious manner. Also, there is force in the appellant s arguments that the Department did not dispute the availment of credit in the first instant and therefore, it is not open for them to deny the same when a refund is filed. Therefore, the appellants are entitled for refund and the impugned orders are not sustainable to that extent. Appeal allowed - decided in favor of appellant.

Issues Involved:

1. Taxability of Information Technology Software Services (ITSS) during the relevant periods.
2. Eligibility for refund under Rule 5 of the CCR, 2004 and Notification No. 5/2006 CE (N.T).
3. Requirement of registration for claiming Cenvat credit.
4. Nexus between input services availed and output services provided.
5. Retrospective amendment of Notification No. 5/2006 CE (N.T) by the Finance Act, 2010.

Detailed Analysis:

1. Taxability of ITSS:
The Department contended that Information Technology Software Services (ITSS) was not taxable during the relevant periods and only became taxable from 16.05.2008. Consequently, refunds under Rule 5 of the CCR, 2004 were not available for periods before this date. However, the Tribunal referred to multiple case laws, including *mPortal India Wireless Solutions P Ltd Vs CST, Bangalore* and *Axa Business Services Pvt Ltd Vs CST, Bangalore*, which established that even if the export of software was not taxable, the assessee could not be denied Cenvat credit and was entitled to a refund of the accumulated credit.

2. Eligibility for Refund:
The Tribunal noted that Notification No. 5/2006 CE (N.T) was amended by the Finance Act, 2010, substituting the words "used in" with "used for," thus broadening the scope of admissibility of input services. This amendment was recognized in the decision of *CST, Mumbai-II Vs J.P. Morgan Services India Pvt. Ltd*. The Tribunal concluded that the retrospective changes were intended to align the provisions of the refund notification and the Cenvat credit rules, ensuring that refunds were granted on all goods and services on which Cenvat could be claimed by exporters.

3. Requirement of Registration:
The Tribunal found no statutory provision in the Cenvat Credit Rules that mandated registration as a condition precedent for claiming Cenvat credit. The absence of such a provision meant that the rejection of refund claims on the grounds of non-registration was erroneous, as established in *mPortal India Wireless Solutions Pvt Ltd*.

4. Nexus Between Input and Output Services:
The Tribunal examined various case laws, including *CCE, Nagpur Vs Ultratech Cement Ltd* and *CCE, Bangalore-III Vs Stanzen Toyotetsu India (P) Ltd*, which clarified that the definition of "input service" was broad and included services used in relation to the business of manufacturing final products. The Tribunal found that most of the services utilized by the appellants were held to be input services for providing output services in the field of Information Technology Services. The Tribunal also emphasized that the Department did not dispute the credit taken on services initially, and thus could not deny it at the time of granting a refund.

5. Retrospective Amendment:
The Tribunal acknowledged the retrospective amendment of Notification No. 5/2006 CE (N.T) by the Finance Act, 2010, which substituted "used in" with "used for," thereby expanding the scope of input services eligible for refund. This was supported by the CBEC Circular No. 120/1/2010, which clarified that input services should be interpreted in a harmonious manner, considering their impact on the quality and efficiency of the provision of exported services.

Conclusion:
The Tribunal concluded that the appellants were entitled to refunds as the issues raised were no longer res integra. The Tribunal allowed the appeals with consequential relief, noting that the Department's refusal to grant refunds was not sustainable. The Tribunal pronounced the order in open court on 03.09.2020.

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