TMI Blog2016 (2) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... to ST/40425/2014, ST/41019/2015 to ST/41023/2015, ST/551/2011 to ST/554/2011, ST/41015/2015 to ST/41018/2015 - Final Order No. 40247-40265 / 2016 - Dated:- 15-2-2016 - SHRI R. PERIASAMI, TECHNICAL MEMBER AND SHRI P.K. CHOUDHARY, JUDICIAL MEMBER For the Petitioner : Shri Muthu Venkataraman, Adv., Shri Rajaram Ramanan, Consultant, Shri Gopakumar R., Consultant, Shri Ramani NVS, Consultant, Shri Shankararaman, Adv., Ms. Minchu Punoosse, Adv., For the Respondent : Ms. Indira Sisupal, AC (AR) ORDER PER: R. PERIASAMI All the 19 appeals are taken up together for disposal, as the issues involved in these appeals are identical in nature, relating to refund of unutilized CENVAT credit on export of services under Rule 5 of Cenvat Credit Rules, 2004 (CCR). Out of 19 appeals, 15 appeals filed by the appellants are arising out of Order-in-Appeals No.15/2010 dated 15.02.2010, No. 06/2011 dated 04.02.2011, No. 68-71/2013 dated 02.12.2013, No. 05-09/2015 dated 18.02.2015 and No. 01-04/2015 dated 18.02.2015 and the remaining four appeals filed by the Revenue are arising out of one Order-in-Appeal No. No. 39-42/2011 dated 30.08.2011. 2. The brief facts of the case are t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligible for refund of CENVAT credit of input services availed on the software maintenance service. Aggrieved by these orders, the appellants preferred appeals and the Commissioner (Appeals) upheld the orders of the adjudicating authority and rejected the appeals. 4. Appeal Nos. ST/40422/2014 to ST/40425/2014 and ST/41019/2015 to ST/41023/2015 were filed against OIA s against the restriction in refunds and the adjudicating authority restricted the refund amount by adopting the formula prescribed under Notification No. 05/2006 -CE (NT) dated 14-03-2006. The details of the appeals are as under:- S. No Period Appeal No. OIA No. OIO No. Refund claimed Refund Granted Refund rejected (under dispute) 33 Feb 2010 40422/2014 68-71/13 02/12/13 176/11 30/06/11 2,82,13,514 86,33,607 1,95,79,907 34 Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtion of the order, where their refund claim was rejected/restricted and the Commissioner (Appeals) in OIA No, 68 - 71/2013 dated 02/12/2013 and OIA No. 5 - 9/2015 dated 18.02.2015, upheld the impugned order and rejected the appeals. 5. In eight appeals No. ST/551/2011 to ST/554/2011 and ST/41015/2015 to ST/41018/2015, the issues involved in all these appeals are identical but relates to the subsequent period. The appellants claimed refund under Rule 5 of CCR. The adjudicating authority has restricted the refund on the issue of taxability on the software maintenance and service and also on the computation of total export turnover and total turnover as per the formula. The adjudicating authority issued show cause notices asking to show cause why the refund claim could not be restricted or rejected on the ground that by duly working out the formula for computation of the refund provided under Notification No. 5/2006 and had accordingly rejected the refund on the ground raised in show cause notice. Aggrieved by the order, the appellant assesse had preferred an appeal before the Commissioner (Appeals) who had set aside the Order-in-Original and allowed the refund. The table below p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tabular form of issues appeal-wise and reiterated the same. In respect of appeal No.s ST/278/10 and ST/295/11, he submits that the Revenue either restricted or rejected on the input service credit on the only ground that the software maintenance service was not taxable under Notification no. 5/06 prior to 16.05.2008. He drew the attention of the Bench to para - 16 of the adjudication order and submitted that the service provided by the appellants are taxable and further submitted that they have paid service tax on management, maintenance and or repair services. He submits that the payment of service tax on the MMRS is not under dispute and the same has been recorded at para 9 of the OIO No. 39 to 42/2011 dated 30.08.2011 and also submits that they have not claimed any input service credit on the services utilized under SEZ from April, 2007 to September and October to March 08. He drew attention to page 9 and page 49 of the returns, where the service tax amount on MMRS has been paid at page 21 51 where proof of payment of service tax paid both in cash as well as by debiting in CENVAT account under the MMRS service including their services. 7. Without prejudice to the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separate proceedings were initiated. 9. As regards Export turnover Total turnover, it was submitted that they claimed the benefit of refund on export turnover of both SEZ STPI units and that no CENVAT Credit was availed on services received by SEZ units since they were ab-initio exempt. However, for the purpose of turnover, the Appellant had adopted turnover of SEZ STPI units, since Rule 5 of CENVAT Credit Rules is for entity as a whole and not for STPI/SEZ separately. They submitted that while applying the formula the lower adjudicating authority deducted the value of SEZ exports from the export turnover (i.e. numerator) but retained the same in the total turnover (i.e. denominator) thereby drastically reducing their refund claims. It was submitted that the Notification specifically mentions that the formula is to be applied only for the activity to which the claim relates and thus if the department wanted to adopt a stand that the SEZ activities had no relation to the claim, such turnover should have been deducted from the total turnover (i.e. denominator) also. 10. He drew attention to page 73 of OIO (para-6) of Appeal ST/40423/2014, Table 3 and explained in detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e uniformity in the ingredients of both numerator and denominator of the formula since otherwise it would produce anomalies or absurd results. Relying on the said precedents, it was submitted that if the department chose to exclude the SEZ turnover from numerator it also ought to have excluded the same from denominator. 13. Reliance was placed on the decision of the CESTAT Mumbai in the case of Commissioner of Central Excise , Pune III vs. M/s. Computer Land UK Limited 2015 (10) TMI 517, wherein it was held that if the Revenue wanted to reduce the value of invoices from Export turnover then the same should be removed from the total turnover. A paper book containing the provisions and case laws relied by him for the manner of applying the formula was submitted. 14. The learned authorized representative of the Revenue supported the findings made by the lower authorities in the impugned order in respect of Appeal No. 278/2010 and 295/2011 ( i.e. Sl. No. 31 32 of the causelist). She submitted that when software maintenance services were taxable only from 16/05/2008, the question of granting refund in respect of services exported prior to such date does not arise since the servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision with an objective to grant refund of unutilized CENVAT Credit, the refund ought to have been granted in accordance with the claim made by the Appellant rather than restricting the same in a manner which is not the intention of the legislature. Further, it was also submitted that the Appellant did not avail of any CENVAT Credit pertaining to the SEZ operations and that is what is more critical since the refund that is granted is of CENVAT Credit and not that of turnover. 17. As regards, other precedents relied upon by Department representative, they submitted that the decisions pertain only to deemed exports of supplies made to SEZ and in the facts of the Appellant all the exports are physical exports from STPI/SEZ units to customers located outside India and hence the precedents relied upon by the Department in the context of deemed exports are irrelevant. 1. CIT Vs. M/s. Tata Elxsi Ltd.-2011 -TIOL-684-KAR-IT 2. CIT Vs. Gem Plus Jewellery India Ltd.-2011 (33) ITR P.175 (Bom.) 3. ITR Vs. Sak Soft Ltd.-2009 (3113) ITR (AT) 353 (Chen.) 4. CIT Vs. Sudarshan Chemical Industries Ltd.-2003 -TIOL-95-HC-MUM-IT 5. CIT Vs. Chloride India Ltd. -2003 (130) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted by the Revenue. Whereas, while claiming the refund under Rule 5 of CCR, the department choose to argue differently, stating that the said services are exempted. The issue of granting refund of unutilized input credit/input service tax credit used in the export of services under Rule 5 of CCR has been settled by various Honble High Courts and Tribunal. The decision of the Tribunal at Mumbai Bench in the case of KPIT Cummins Infosystems Ltd. Vs. CCE, Pune-I - 2013 -TIOL-931-CESTAT-MUM has dealt the identical issue on the software consultancy service exported during the relevant period and allowed the appeal by following the Honble High Court of Karnataka decision in the case of mPortal India Wireless Solutions Pvt. Ltd. Vs. CST, Bangalore reported in 2011-TIOL-928-HC-KAR-ST. The relevant portion of the said decision is reproduced as under:- :5.1 From the records of the case it is seen that during the impugned period the appellant had exported the following goods/services: (i) Software Maintenance Service, classifiable under the category of Management, Maintenance or Repair Service'; (ii) Software Development service; and (iii) Software Consultancy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CENVAT Credit Rules, 2004 deals with obligation of the manufacturer of dutiable and exempted goods and provider of taxable and exempted services. Under Rule 6(3)(c), the provider of output service shall utilize credit only to the extent of an amount not exceeding 20% of the amount of service tax payable on taxable output service. In the present case, the services provided by the appellant and exported is not a taxable output service inasmuch as software development software service and software consultancy service become taxable only in the Budget 2008. Therefore, the cap of 20% prescribed under Rule 6(3)(c) have no application whatsoever. Therefore, there was no bar on the appellant in availing full credit in respect of IT software services during the material period. 5.5 The appellant has received input/input services for rendering of taxable services during the material period, which has been exported. The hon'ble High Court of Karnataka in mPortal India Wireless Solutions P. Ltd. (supra) case, in a similar situation, held as follows: 6. The assessee is a 100% export oriented unit. The export of software at the relevant point of time was not a taxable service. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the Revenue shall verify the same. The ratio of the above Tribunal decision is squarely applicable to the present case as the Tribunal in the above case has held that the software maintenance service is classifiable under the category of Management and Maintenance or Repair Service (MMRS) during the relevant period and in the present case it is clearly established that the appellants have paid the service tax on MMRS and availed credit. The above decision was followed by the co-ordinate Bangalore Bench of the Tribunal in the case of Apotex Research Pvt. Ltd. Vs. CC, Bangalore (supra). The various Tribunal s decisions relied by the Revenue are not applicable and distinguishable to the facts of the present case. 20. Further the Tribunal Mumbai Bench in the case of CCE, Pune Vs. Barclays Technology Centre (I) Pvt. Ltd - 2014 TIOL-2641-CESTAT-MUM by relying the decision in the case of Tata Consultancy services Ltd. Vs. CST, LTU, Mumbai,- 2012-TIOL-1034-CESTAT-MUM, rejected the revenue appeal and allowed the refund of input services utilized in the export of software services to SEZ. As already discussed in the preceding paragraphs, the appellants have paid service tax on MMRS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value has deducted the value of SEZ exports from the export turn over (numerator) but retained the SEZ export turn over in the total turnover (Denominator). The appellants contended that the adjudicating authority when deducting the value of SEZ exports from the turnover, ought to have deducted the same from the total turnover. Vis-`-vis, or if he has included it in the turn over, he should have also included it in the export turn over. 23. In this regard on identical issue the Mumbai Tribunal Co-ordinate Bench in the case of CCE, Pune Vs. computer land UK Ltd.,- 2015 (10) TMI 517 -CESTAT-MUMBAI discussed the correct method of computation of total turnover vis-`-vis export turnover and upheld the impugned order and rejected the revenue appeal. The relevant portions of the order are reproduced as under. 4. On perusal of the record, it transpires that the first appellate authority has clearly recorded the factual matrix of the case as to there being no dispute that the appellant had rendered export of services and has availed CENVAT credit of the input services received by him. Revenue is only disputing the quantum of the refund claim which has been sanctioned to the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion issuance of invoice, the new Rule 5 of the CCR is not applicable. 16. Applying the provisions described in Para 15 above on the present case, I find that the Appellant have included the Invoice No. Mar'12-01 and Invoice No. Mar 12-02, both dated 30-03-2012, in the present refund claim on the ground that payments in respect of the same were received on 11-04-2012. However, the export of services covered by the said invoices had been completed prior to 31-03-2012, as reflected in the date of issuance of the said invoices. As provisions of new Rule 5 of the CCR are applicable to the exports made on or after 01-04-2012, the exports covered said invoices issued prior to 01-04-2012 have to be excluded from the present refund claim for arriving at export turnover of the present quarter of April 2012 to June 2012. For calculating export turnover of the services and total turnover of services for relevant period of April-June 2012, only those services which were provided after 01-04-2012 need to be considered. Further, it is clear from the figures mentioned in the Order-in-Original that the Appellant had exported their entire turnover and had not provided any services to Dom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ingredients of both the numerator and the denominator of the formula, since otherwise it would produce anomalies or absurd results. Section 10-A is a beneficial section. It is intended to provide incentives to promote exports. The incentive is to exempt profits relatable to exports. In the case of combined business of an assesse, having export business and domestic business, the legislature intended to have a formula to ascertain the profits from export business by apportioning the total profits of the business on the basis of turnovers. Apportionment of profits on the basis of turnover was accepted as a method of arriving at export profits. In the case of Section 80 HHC, the export profit is to be derived from the total business income of the assesse, whereas in Section 10-Am the export profit is to be derived from the total business of the undertaking. Even in the case of business of an undertaking, it may include export business and domestic business, in other words, export turnover and domestic turnover. The export turnover would be a component or part of a denominator, the other component being the domestic turnover. In other words, to the extent of export turnover, there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation No. 5/2006 dated 14.03.2006. As in the present case, the lower authorities while computing the turn over deducted the value of SEZ exports from the export turn over (numerator) and retained the same in the total turnover (denominator) which has resulted in the anomaly and the reduction in the quantum of refund. The Clause 5 of the Notification No. 5/06 dated 14.3.06, clearly stipulates that the formula has to be applied only for the activity to which the claim relates and it is for the entity as a whole. Accordingly, we hold that when the revenue proceeded to include the value of SEZ exports in computing the total turnover, the same should also have been included in computing export turnover. By respectfully following the above Tribunal decision and the Honble High Court decision, we hold that the order of the LA rejecting the refund claim by adopting the wrong method of computation is not justified and liable to be set aside to that extent of restriction of the refund claim. We hold that the value of export turnover should be equal to the total turnover and the value of SEZ exports should be included in the export turnover (numerator). Accordingly, the appellants are eligi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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