2024 (5) TMI 780 - AT - Service Tax

Interest on delayed refund - it is submitted that interest on refund is required to be paid from 03 months of the date of application and that interest on belated refund is a statutory mandate of law - Business Auxiliary services - export of services - HELD THAT - The issue is squarely covered being decided by the Tribunal in the case M/S. MICROSOFT CORPORATION (I) (P) LTD. VERSUS CST. NEW DELHI 2014 (10) TMI 200 - CESTAT NEW DELHI (LB) where it was referred to third Member. The third Member has observed Having held that services involved were export of services the same are not liable to be sustained against the appellants. The services rendered by the appellant to the overseas entity i.e M/s Microsoft Singapore qualify to be exports and for that reason the issue stands decided in favour of the appellants. As far as the grant of interest is concerned the submissions of the the appellant agreed upon that the provision of interest are automatic and the appellants are entitled to payment of interest at the rate prescribed statutorily from time to time on the refunds which are delayed beyond the statutory period of three months. Appeal allowed.

Summary

Issues Involved:
The issues involved in the judgment include the qualification of Business Auxiliary Services (BAS) as exports under the Export Rules, the eligibility for interest on refund claims, and the appeal against the rejection of interest by the Commissioner (Appeals).

Qualification of Business Auxiliary Services (BAS) as Exports:
The appellants, engaged in providing Marketing Support Services to Microsoft Operations PTE Ltd., Singapore, filed a refund claim under Rule 5 of CENVAT Credit Rules, which was partially sanctioned. However, a Show-Cause Notice was issued to reject the refund and recover the amount granted. The key contention was whether the services provided by the appellants qualified as exports under the Export Rules. The conditions of recipient location outside India and consideration received in foreign exchange were not disputed. The dispute centered around whether the services were used, delivered, and provided outside India. The appellants argued that the services, though performed in India, were for the benefit of Microsoft Singapore, making them eligible as exports. Reference was made to Circular No. 111/05/2009-ST to support this position.

Precedents and Legal Interpretations:
The appellants relied on a previous Tribunal decision and the principles laid down by the Hon'ble Delhi High Court to support their claim that the services provided should be considered exports. The Counsel highlighted that the issue had been previously decided in their favor by a three-Member Bench, emphasizing the binding nature of such decisions. Additionally, the Counsel cited various legal cases to argue for the applicability of interest on refund claims, emphasizing the statutory mandate for interest payment on delayed refunds.

Decision and Rationale:
After considering the arguments presented by both parties, the Tribunal found that the issue was squarely covered by previous decisions and that the services provided by the appellants to Microsoft Singapore qualified as exports. The Tribunal emphasized that the services were for the benefit of the foreign entity and were not liable to service tax. Additionally, the Tribunal agreed with the appellants regarding the entitlement to interest on delayed refunds, citing statutory provisions mandating such payments. Consequently, the Tribunal allowed the appellants' appeals and rejected the Department's appeals against the grant of interest.

Conclusion:
In conclusion, the Tribunal ruled in favor of the appellants, determining that the Business Auxiliary Services provided qualified as exports under the Export Rules. The Tribunal also upheld the appellants' entitlement to interest on delayed refunds. As a result, the appellants' appeals were allowed, while the Department's appeals were rejected.