2018 (7) TMI 1217 - AT - Service Tax

Refund of Service Tax paid - export of output service - Rule 5 of the CCR 2004 read with N/N. 27/2012-C.E.(N.T.) dated 18.6.2012 - denial of refund on account of nexus - Held that - The fact is not under dispute that the appellant provides the entire output services to its overseas clients and none of the output services were provided to the clients within the country. Thus it cannot be said that the input services on which refund benefit has been sought were not utilized for providing the exported output service. The amended provisions of Rule 5 of the rules have also been clarified by the Tax Research Unit of Department of Revenue vide Circular dated 16.3.2012. It has been stated therein that the nexus between the input service used in export of service should not be insisted upon and the benefit of refund should be granted on the basis of ratio of export turnover to total turnover demonstrated by the assessee. As per the statutory mandates read with clarification furnished by TRU rejection of refund benefit by the authorities below cannot be sustained for judicial scrutiny. Refund cannot be denied - appeal allowed - decided in favor of appellant.

Summary

Issues: Denial of cenvat benefit for service tax paid on services utilized for export of output service.

Analysis:
The judgment pertains to appeals against orders passed by the Commissioner of GST and Central Excise (Appeals) regarding the denial of cenvat benefit for service tax paid on services used for exporting output services. The appellant sought a refund under Rule 5 of the Cenvat Credit Rules, 2004, along with Notification No.27/2012-C.E.(N.T.) dated 18.6.2012, which was rejected by the original authority citing a lack of nexus between the input services and the exported output service.

The appellant argued that all output services were exported, with no services provided domestically, justifying the refund claim. Reference was made to a Circular dated 16.3.2012 by the Tax Research Unit of the Department of Revenue, emphasizing that correlation between input services and export of service should not be insisted upon for granting service tax refunds. On the contrary, the Revenue contended that since the disputed services were not used for providing the exported output service, the refund should be denied.

The Tribunal noted that all output services were indeed provided to overseas clients, establishing the utilization of input services for exporting the output service. It highlighted the Finance Minister's statement during the Union Budget, simplifying refund procedures without extensive documentation. Additionally, the Circular clarified that refunds should be granted based on the ratio of export turnover to total turnover, without stringent nexus requirements.

Given the lack of objection to the appellant's computation of export turnover to total turnover and the absence of a direct nexus challenge by the department, the Tribunal held that the denial of refund benefits by the lower authorities was not sustainable under statutory provisions and TRU clarification. Consequently, the Tribunal allowed the appeals, overturning the denial of refund benefits for input services used in exporting output services.