TMI Blog2007 (3) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... On scrutiny of the rebate claims it was noticed that the claimant was not eligible for rebate of service tax paid on input services as the services exported by them is exempted and the said input services were not actually related to exported output service and the documents submitted by them in support of their claim fails to fulfill the conditions prescribed in the Notification No. 12/2005-S.T., dated 19-4-2005. Therefore, four show cause notices were issued to the appellants by the Assistant Commissioner of Service Tax, Division-I, Service Tax Commissionerate, Bangalore as to why the said rebate claims should not be rejected. A Corrigendum to the notice was issued asking them to show cause to the Assistant Commissioner of Customs, Customs Division. The appellants contended that though the services exported by them were exempted during the relevant period they are still eligible for rebate as the services rendered by them, though exempted, were taxable. The lower authority took up the adjudication of these show cause notices in view of Board's Circular No. 828/5/2006-CX, dated 20-4-2006. The lower authority took a stand that the call center Services provided by the appellants wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in the grounds of appeal. Para 3 of the Board's circular supra has clearly stated the simplified procedure and the authorities to sanction the unutilized input/input service credit to the manufacturers and service providers. The same is reproduced here for ready reference: Para 3: " the claim for refund of such unutilized credit/rebate will be filed with the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise having jurisdiction over the factory of manufacturer or warehouse or EOU or respective maritime Commissioner as the case may be" Secondly all 100% EOU in Bangalore are under Administrative control of customs authorities and appellant being a STP unit who is registered in customs division and exporting the service, come under the jurisdiction of the customs department in terms of Board's Circular No. 31 /2003-Customs, dated 7-4-2003. Further, notification issued under Rule 3 Central Excise Rules 2001, has empowered the customs authorities viz, the Assistant Commissioner/Deputy Commissioner of customs and Commissioner of Customs (Appeals) to act as central excise officers in respect of 100% EOUs/STPI Units in so far as it relates to central e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the client; or (vii) A service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relations services, management or supervision, and includes services as a commission agent, but does not include any information technology service and any activity that amounts to "manufacture" within the meaning of clause (f) of section 2 of the Central Excise Act, 1944 (1 of 1944). Explanation : For the removal of doubts, it is hereby declared that for the purposes of this clause-. (a) "Commission agent" means any person who acts on behalf of an other person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while acting on behalf of another person - (i) deals with goods or services or documents of title to such goods or services; or (ii) collects payment of sale price of such goods or services; or (iii) guarantees for collection or payment for such goods or services; or (iv) undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services is exempted excepting in a certain situations. Rule 6 of Cenvat Rules 2004 are reproduced below: Rule 6 : Obligation of Rule 6. manufacturer of dutiable and exempted goods and provider of taxable and exempted services. — (1) The CENVAT credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or exempted services, except in the circumstances mentioned in sub-rule (2). [Provided that the Cenvat credit on inputs shall not be denied to job worker referred to in, Rule 12AA of the Central Excise Rules 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule.] (2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or * ], and manufactures such final products or provides such * input services, [ * output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input service meant for use in the manufacture of du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such final products at the time of their clearance from the factory; or (b) if the exempted goods are other than those described in condition (a), the manufacturer shall pay an amount equal to ten per cent. of the total price, excluding sales tax and other taxes if any, paid on such goods, of the exempted final product charged by the manufacturer for the sale of such goods at the time of their clearance from the factory; (c) the provider of output service shall utilize credit only to extent of an amount not exceeding twenty per cent of the amount of service tax payable on taxable output service. <?xml:namespace prefix = st2 ns = "urn:schemas:contacts" /> Explanation I. - The amount mentioned in conditions (a) and (b) shall be paid by the manufacturer or provider of output service by debiting the CENVAT credit or otherwise. Explanation II. - If the manufacturer or provider of output service fails to pay the said amount, it shall be recovered along with interest in the same manner, as provided in rule 1t4 for recovery of CENVAT credit wrongly taken. [Explanation III. - For the removal of doubts, it is hereby clarified that the credit shall not be allowed on input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case may to be.] 10. The Explanation III under sub-rule (3) of Rule 6 clearly states that no credit shall be permissible when the final product/services exported is exempted from payment of duty/service tax. Sub-rules (4) (5) of Rule 6 also clearly debars such availment. However, these provisions get nullified by sub- rule (6) of Rule 6 by excluding the goods which are exported under bond in terms of the provisions of the Central Excise Rules 2002. In other words, by virtue of sub rule 6, certain removals which are permitted without payment of duty are excluded from the restrictions. One such exclusion is that when the goods are exported under bond without payment of duty as contained in Rule 6(6)(v) of the rules. Here, as the final output service is exempted, exporting of such service under bond does not arise. The appellant is an 100% EOU exporting services and they were allowed to procure inputs/capital goods both imported as well as indigenous without payment of duty and fulfill export obligation for which they execute a bond under the Customs Act/Excise Act for the duty foregone. As they did not export any goods under bond in terms of Central Excise Rules 2002, these p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received in India in convertible foreign exchange; (b) that the duty, rebate of which has been claimed, has been paid on the inputs; (c) that the service tax and cess, rebate of which has been claimed, have been paid on the input services; (d) the total amount of rebate of duty, service tax and cess admissible is not less than five hundred rupees; (e) no CENVAT credit has been availed of on inputs and input services on which rebate has been claimed; and (f) that in case,-. (i) the duty or, as the case may be, service tax and cess, rebate of which has been claimed, have not been paid; or (ii) the taxable service, rebate for which has been claimed, has not been exported; or (iii) CENVAT credit has been availed on inputs and input services on which rebate has been claimed, the rebate paid, if any, shall be recoverable with interest as per the provisions of section 73 and section 75 of the Finance Act, 1994 (32 of 1994) as if no service tax and cess have been paid on such taxable service. 3. Procedure : ………] 3.1 Filing of declaration. - The provider of taxable service to be exported shall, prior to date of export of taxable service, file a declaration with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, along with documents evidencing such export. 12. The appellants have exported the taxable service in terms of Rule 3. The rebate claimed has been paid on the inputs/input services and the amount of rebate claimed is also more than Rs. 500. Thus, they have fulfilled the main conditions of the above notification. The lower authority had however rejected the claim on non-production of evidence on export proceeds realization certificate from the bank and non-availability of input credit on the exempted output services viz, call center services. The interpretation of the lower authority does not appear to be correct inasmuch as it is meant to say that if any service is exempted by virtue of notification, such services will not fall under the category of 'taxable services'. As explained earlier, exempt services are nothing but taxable services and therefore cannot be termed as non-taxable services just because the same is exempt from payment of service tax by virtue of a Notification. Call center service, which is a business auxiliary service is taxable service under clause (105) of Section 65 of the Finance Act, 1994 but exempted under Notification No. 8/2003-S.T. dated 20-11-200 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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