M/s. Cross Tab Marketing Services P. Ltd. vs C.C.G.S.T., Mumbai East

This appeal is directed against order in appeal No PK/398/ME/2018 dated 22.05.2018 of the Commissioner of CGST & Central Excise (Appeals-II), Mumbai. By the impugned order Commissioner (Appeals) has held as follows:

"9. In view of the above discussion, the total Cenvat credit to the extent of Rs 7,77,628/- is allowed as admissible Cenvat credit for consideration of sanctioning of refund and the total Cenvat Credit to the extent of Rs 5,56,690/- is held as inadmissible and in respect of the remaining amount of refund claim as discussed supra, the appellant is directed to produce the necessary documents to the adjudicating authority and the Adjudicating Authority should examine the same before considering the sanction of refund claim to the appellant. Accordingly the impugned order of the lower adjudicating authority need partial modification to that extent and are modified.

In view of the above, the impugned order is partially modified and the appeal filed by the appellant is partially allowed as per above terms."

2.1 The appellant is engaged in export of service and was availing the benefit of CENVAT credit of duty and service tax paid on various input services namely-

➢ renting of immovable property service.

➢ Internet Telecommunication services

➢ Membership and subscription services

➢ Market research services

➢ Conveyance services

➢ Courier Services

➢ Banking Services

➢ Office Maintenance services

➢ Web server hosting services

➢ Professional Fees

➢ Printing and Stationary

➢ Air Travel Agency Services

2.2 The said availment of credit was being reflected by the appellant in their statutory records as also in the returns.

2.3 Appellants preferred a refund claim on 28th July 2013 seeking the refund of accumulated credit in terms of provisions of Rule 5 of CENVAT Credit Rules, 2004 read with Notification No 27/2012-CX (NT), for the quarter July-September, 2012.

2.4 The said refund claim was rejected by the Deputy Commissioner Service Tax Div-IV Mumbai-II.

2.5 Against the rejection of the refund claim, appellants preferred appeal before Commissioner (Appeals). The Commissioner (Appeals) has vide the impugned order as per para 1, supra, partially allowed the appeal of the appellants.

2.6 Aggrieved by the impugned order appellants are in appeal before CESTAT

I have heard, Shri Parth Shah, Chartered Accountant, for the Appellant and Shri Dilip Shinde, Assistant Commissioner, Authorized Representative, for the Revenue.

4.1 I have considered the impugned order along with the submissions made in appeal and during the course of arguments.

4.2 Commissioner (Appeals) has vide the impugned order that held that CENVAT credit taken by the appellant on following services is inadmissible as they do not qualify as input services-

➢ Air travel agent services (para 7.1)

➢ Banking and Financial Services (para 7.3)

➢ Cab Operator Services (para 7.5)

➢ Courier Services (para 7.7)

➢ Maintenance and Repair Services (para 7.10)

➢ Market Research Agency Service (para 7.11)

4.3 Rule 5 of the CENVAT Credit Rules, 2004 was amended by the Notification No 18/2012 -CX (NT) dated 07.03.2012 to provide as under.

Refund of CENVAT Credit. -(1) A manufacturer who clears a final product or an intermediate product for export without payment of duty under bond or letter of undertaking, or a service provider who provides an output service which is exported without payment of service tax, shall be allowed refund of CENVAT credit as determined by the following formula subject to procedure, safeguards, conditions and limitations, as may be specified by the Board by notification in the Official Gazette:

Refund amount = (Export turnover of goods+ Export turnover of services) x Net CENVAT credit Total turnover

Where,-

(A) "Refund amount" means the maximum refund that is admissible;

(B) "Net CENVAT credit" means total CENVAT credit availed on inputs and input services by the manufacturer or the output service provider reduced by the amount reversed in terms of sub-rule (5C) of rule 3, during the relevant period;

(C) "Export turnover of goods" means the value of final products and intermediate products cleared during the relevant period and exported without payment of Central Excise duty under bond or letter of undertaking;

(D) "Export turnover of services" means the value of the export service calculated in the following manner, namely:-

Export turnover of services = payments received during the relevant period for export services + export services whose provision has been completed for which payment had been received in advance in any period prior to the relevant period - advances received for export services for which the provision of service has not been completed during the relevant period;

(E) "Total turnover" means sum total of the value of -

(a) all excisable goods cleared during the relevant period including exempted goods, dutiable goods and excisable goods exported;

(b) export turnover of services determined in terms of clause (D) of subrule (1) above and the value of all other services, during the relevant period; and

(c) all inputs removed as such under sub-rule (5) of rule 3 against an invoice, during the period for which the claim is filed.

(2) This rule shall apply to exports made on or after the 1st April, 2012: Provided that the refund may be claimed under this rule, as existing, prior to the commencement of the CENVAT Credit (Third Amendment) Rules, 2012, within a period of one year from such commencement: Provided further 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 and Service Tax Drawback Rules, 1995, or claims rebate of duty under the Central Excise Rules, 2002, in respect of such duty; or claims rebate of service tax under the Export of Services Rules, 2005 in respect of such tax.

Explanation 1.- For the purposes of this rule,-

(1) "export service" means a service which is provided as per the provisions of Export of Services Rules, 2005, whether the payment is received or not;

(2) "relevant period"  means the period for which the claim is filed.

Explanation 2.-For the purposes of this rule, the value of services, shall be determined in the same manner as the value for the purposes of sub-rule (3) and (3A) of rule 6 is determined."

4.4 From the plain reading of the said rule it is evident that the amended rule 5, does not require establishment of any nexus between the input services and the exported services. The rule only provides that the admissible refund will be proportional to the ratio of export turnover of goods and services to the total turnover, during the period under consideration, of the Net CENVAT credit taken during that period. Undisputedly in the refund proceedings under Rule 5 of CENVAT Credit Rules, 2004 as amended any such attempt whereby credit availed during the period under consideration is sought to be denied or varied, is not permissible. If the quantum of the Cenvat Credit is sought to be varied, by holding that certain services do not qualify as input services then the same could have been done by invoking the provisions of Rule 14 of the CENVAT Credit Rules, 2004. In my view the Commissioner (Appeal)/ Adjudicating Authority has misdirected himself by undertaking such exercise while adjudging the refund claim filed in terms of Rule 5. In the case of Accelya Kale Solutions Ltd. Vs. Commissioner of Central Goods Service Tax and Central Excise, Mumbai [2018-TIOL2452-CESTAT-MUM]. tribunal observed, as under:-

"3. Rule 5 of Cenvat Credit Rules, 2004, was substituted vide Notification No. 18/2012-CE (NT) dated 17.03.2012, with effect from 01.04.2012. The said substituted rule has prescribed the formula for claiming refund of service tax by the service provider. Under such amended rule in vogue, there is no requirement of satisfying the nexus between the input services and the output service provided by the service provider. Consequent upon substitution of the said Rule in the Union Budget - 2012, the Tax Research Unit (TRU) of CBEC vide letter dated 16.03.2012 has clarified as under:-

"F.1. Simplified scheme for refunds:

A simplified scheme for refunds is being introduced by substituting the entire Rule 5 of Cenvat Credit Rules, 2004. The new scheme does not require the kind of correlation that is needed at present between exports and input services used in such exports. Duties or taxes paid on any goods or services that qualify as inputs or input services will be entitled to be refunded in the ratio of the export turnover to total turnover.""

4.5 Similar view has been expressed by the tribunal in case of TPG Capital India Pvt Ltd [Final Order No A/86651-86655/2019 dated 20.09.2019]. Tribunal has observed therein stating as follows:

"4. However, it is seen that no objection was raised by the revenue at the time of availing of credit. Rule 5 allows refund of accumulated credit and at the time of grant of refund, the Revenue is not permitted to examine the availability of the CENVAT credit. Such an exercise was required to be adopted by the Revenue at the time of availment of credit, by way of initiation of separate proceedings. Having not done that, it is not permissible to raise the objection at the time of grant of refund in terms of the said rule. The reliance by the Learned Advocate to the Circular no. 120/01/2010-ST dated 19.01.2010 clarifying the issue that by observing that there cannot be different yardstick for establishing nexus for taking of credit and for refund of credit, is appropriate. Otherwise also, we find the issue stands decided by the many decisions of the Tribunal. One such reference can be made to the Tribunal decision in the case of Barclay Global Service Centre Pvt. Ltd. & Ors. V. Commissioner of Central Excise & Service tax, Noida [2019-TIOL-1714-CESTAT-ALL]. It stands held in the said decision that as no objection was raised by the Revenue at the time of availing the credit, such objection cannot be raised at the time of deciding the refund claim in terms of provision of Rule 5."

4.6 In view of the discussions as above I am not in position to sustain the impugned order to the extent indicated. Since the Commissioner (Appeals) has by the impugned order held the refund to be admissible, to the extent of CENVAT Credit held admissible by him subject to verification of the documents by the original authority I modify his order to this extent i.e. that entire credit as claimed by the Appellant for determining the refund amount is held admissible if not held admissible in proper proceedings initiated under Rule 14 of the CENVAT Credit Rules, 2004.

5.1 The appeal filed is thus allowed subject to verification of the subject documents by the adjudicating authority, for which the matter is remanded to original authority.

5.2 Original Authority is also directed to dispose of these refund claims in the remand proceeding within three months of receipt of this order, after affording hearing to the appellant.

(Order pronounced in the open court)