TMI Blog2014 (5) TMI 616X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax shall be deemed to be the output service. Thus, in terms of definition of ‘output service’ in Rule 2 (p) of the Cenvat Credit Rules, 2004, the ‘output service’ has to be a ‘taxable service’. A ‘taxable service’ is the one in respect of which, in terms of the provisions of Section 66 of the Finance Act, 1994, the tax at the prescribed rate is required to be paid and these services are those services which are specified in various clauses of Section 65(105). A service which is not specified in any of the clauses of Section 65(105) of the Finance Act, 1994, could not be treated as a ‘taxable service’ during the period of dispute. Since BPO service which was provided by the appellant to their offshore client and which involved transaction processing and the processing of mediclaims, etc. was not a taxable service during the period of dispute and it became taxable as ‘Support Service for business of Commerce’ w.e.f. 1.5.2006 under Section 65(105)(zzzq) read with Section 65(104) (c) ibid, during the period of dispute, this service would not be covered by the provisions of Rule 5 of the Cenvat Credit Rules, 2004 and accordingly, the cenvat credit would not be available in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce tax under notification no.8/2003-CE dated 20.06.2003 and this exemption was withdrawn w.e.f. 1.3.2006 from which date this service became a taxable service. According to Department, the BPO service, which involved processing of mediclaims, etc. and transaction processing for their clients, became taxable under Section 65(zzzq) read with Section 65(104)(c) of the Finance Act, 1994 w.e.f. 1.4.2006. The appellant during the period from 1.4.2005 to 28.02.2006 took cenvat credit of Rs.4,95,56,617/- in respect of various input services, which were used in providing the Business Auxiliary Service of call centres and BPO services to their foreign clients. According to the appellant, during this period, they had not taken any cenvat credit of input services which were used in providing the output services of call centres (BAS) and BPO service to their domestic clients. Subsequently, the above mentioned credit was used for payment of service tax on the taxable services provided to their domestic clients during 2006-07 and 2007-08. The department was of the view that since during the period from 1.4.2005 to 28.2.2006 the service of call centre (Business Auxiliary Service) was fully exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d been exported i.e. provided to the foreign clients, that though during the period of dispute, the call centre service (Business Auxiliary Service) was fully exempt from service tax under notification no.8/2003-CE and since this service has been exported, in terms of Export of Service Rules, 2005, the Cenvat Credit Rules 2005, the appellant would not be required to reverse the cenvat credit and would be entitled to utilize that credit for payment of service tax on the taxable services provided to their domestic clients in view of the provisions of Rule 5 of the Cenvat Credit Rules, 2004, that as regards the BPO service provided to their foreign clients, this service pertained to processing of mediclaims and transaction processing, that the same was classifiable as Business Auxiliary Service and since the same had been exported, in terms of Rule 5 of the Cenvat Credit Rules, 2004, the appellant were eligible for cenvat credit of the service tax paid on the input services used in or in relation to providing the BPO service exported out of India, that even if, as per the department s allegations, the BPO service is treated as Business Support Service which was not taxable and which b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich had been used in or in relation to providing BPO service and Call Centre Service (Business Auxiliary Service), which, in turn, had been exported and this cenvat credit can, under Rule 5 of the Cenvat Credit Rules, 2004, be utilized for payment of service tax on the taxable services provided to domestic clients of the appellant and if this is not possible, the assessee would be entitled for its cash refund, that in this case the cenvat credit, in question, has been utilized by the appellant for payment of service tax on the taxable services provided to their domestic clients during the period 2006-07 and 2007-08, that the impugned order denying the cenvat credit, in question, by invoking Rule 6(1) of the Cenvat Credit Rules, 2004 is not sustainable as Rule 6(1) is not applicable when the output service provided by utilizing the cenvated input services have been exported without payment of service tax. 4. Shri Amresh Jain, the learned Departmental Representative, defended the impugned order by reiterating the findings of the Commissioner in the impugned order and pleaded that in terms of Rule 6(1) of the Cenvat Credit Rules, 2004 no cenvat credit is admissible in respect of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the appellant in respect of input services used in or in relation to the providing of Call Centre Service or BPO service, which were exported out of India, has been utilized by them for payment of service tax on the taxable services provided to their Indian clients during 2006-07 and 2007-08. The appellants contention is that since the BPO service and Call Centre Service, both of which were taxable as Business Auxiliary Service had been exported out of India, the appellant, in terms of Rule 5 of the Cenvat Credit Rules, 2004 would be entitled for cenvat credit of the service tax paid on the input services used, irrespective of the fact that Call Centre Service during the period of dispute was unconditionally exempted from service tax under notification no.8/2003-ST and the BPO service was not a taxable service. The departments stand is that since during the period of dispute, while Call Centre Service was fully and unconditionally exempted under notification no.8/2003-ST and BPO service being Business Support Service and not Business Auxiliary Service, was not taxable at all and the same became taxable w.e.f. 1.5.2006 under Section 65(105) (zzq) read with Section 65 (104)(c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption notification no.8/2003-ST. The question as to whether the appellant would be eligible for cenvat credit in respect of the input services used in providing this service which had been exported without payment of service tax and whether this credit could be utilized by them in terms of Rule 5 of the Cenvat Credit Rules, 2004 for payment of service tax on taxable service provided to their domestic clients or their on inability to utilize this cenvat credit for payment of service tax on domestic service transactions, whether its cash refund would be available in terms of this rule, stands answered in favour of the appellant by the judgement of the Tribunal in the case of Zenta Pvt. Ltd. reported in 2012-TIOL-624-CESTAT-MUM, wherein the Tribunal has held that if the assessee is providing a taxable service, although exempt by way of notification, but which had been exported, the assessee would be entitled to take cenvat input credit in terms of Rule 5 of the Cenvat Credit Rules, 2004. We find that same view has been taken by the Tribunal in the case of M/s. Dell International Services India Pvt. Ltd. reported in 2009-TIOL-1957-CESTAT-Bang., and also in the case of M/s. mPortal (Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of dispute, is reproduced below:- Where any input or input service is used in the manufacture of final product which is cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate product cleared for export, or used in providing output service which is exported, the CENVAT credit in respect of the input or input service so used shall be allowed to be utilized by the manufacturer or provider of output service towards payment of, (i) Duty of excise on any final product cleared for home consumption or for export on payment of duty; or (ii) Service tax on output service, And where for any reason such adjustment is not possible, the manufacturer or the provider of output service shall be allowed refund of such amount subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification: Provided that no refund of credit shall be allowed if the manufacturer or provider of output service avails of drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995, or claims rebate of duty under the Central Excise Rules, 2002, in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. 10. In view of the above discussion, while the appellant have correctly taken cenvat credit in respect of input services used in or in relation to the providing of call centre service (Business Auxiliary Service) for export, they were not entitled for cenvat credit in respect of the BPO service provided to their offshore client and as such, the credit of input services in respect of BPO service has been wrongly taken by them and wrongly utilized for payment of service tax in respect of their domestic service transactions. 11. Next comes the question of limitation, as while the cenvat credit demand is for the period from 1.4.2005 to 28.02.2006, the show cause notice had been issued on 23.10.2009. In this case the show cause notice for demand of cenvat credit for the period from 1.4.2005 to 28.2.2006 has been issued on 23.10.2009 by invoking the extended period and the same would survive only if the departments allegation of the Appellants having suppressed the relevant information from the department and having contravened the provisions of Finance Act, 1994 and of the Cenvat Credit Rules, 2004 with intent to evade payment of service tax by wrongly availing cenvat credit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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