By TIOL News Service

BANGALORE, JUNE 16, 2014: THE appellant is a 100% EOU registered under STPI for export of computer software and ITES. Their basic area of work is providing product designs, modeling and analysis in car engineering etc. the appellants had entered into agreements with 2 car manufacturers in South Korea for providing design and analysis services. The appellants filed several refund claims for the period from December 2007 to August 2009 on a quarterly/monthly basis. In all there are 12 refund claims involved. All these refund claims have been rejected and appellants are in appeal.

The issues involved in the appeals are:

- Whether relevant date specified under Section 11B of Central Excise Act 1944 is relevant for refunds under Rule 5 of the CENVAT Credit Rules, 2004 read with Notification 5/2006-C.E. (N.T.) dated 14.03.2006?

- Eligibility of services as input services for grant of refund.

- Whether CENVAT credit availed on the input services before payments for the services received.

The Department's case : the Notification No. 5/2006-CE (N.T) itself states that the time limit for filing refund claims shall be governed by provisions of Section 11B of the Central Excise Act 1944 and as per Section 11B, the appellants are supposed to file their refund claims within one year from the date of export of their services. In this case claims have been filed beyond the period of one year from the date of export and therefore refund claims are time-barred.

The lower authorities have also taken a view that there is no nexus between the input services and the output services and therefore appellant is not eligible for CENVAT credit itself and therefore refund is not admissible.

Assessee/Appellant's Case : Counsel submitted that since all the refund claims have been filed within one year from the date of receipt of consideration for the services rendered, if it is accepted that the period under Section 11B has to be considered treating the relevant date as date of receipt of consideration, he would not be going into detailed discussion about the issue as to whether limitation under Section 11B has to be considered at all. He relies on the decision of the Tribunal in the case of CCE, Pune-I Vs. Eaton Industries P. Ltd. - 2011-TIOL-166-CESTAT-MUM to support his submission that relevant date for filing the refund claim in case of export of services is the date of payment for services exported and not the date when services were provided.

Tribunal's Findings : No contrary decision has been produced by the AR. It is also found that in the case of goods exported, the relevant date would be the date of export of goods but the same analogy may not be applicable in respect of relevant date for the purpose of refund. The liability to pay tax or duty arises in the case of manufactured goods as soon as they are manufactured whereas in the case of service tax till the law was amended, only when the consideration was received, the liability to pay tax arose. Without clearance of goods, the liability to pay tax does not arise and in the absence of liability to pay tax, further proceedings also would not happen. That being the situation, invariably even if the taxable event is manufacture, the calculation of tax took place after removal and for the purpose of calculation of duty liability it is always the date of removal that is considered. That being the position, it would be appropriate that the relevant date for calculating the time limit under Section 11B also should be the date on which consideration is received. Having regard to all these circumstances the decision of the Tribunal even though it has not discussed all these aspects, would be applicable to the facts of this case. The counsel submitted that all the refund claims are within time if the date of receipt of consideration is taken into account.

As regards nexus and the admissibility of CENVAT credit on construction service, these issues have been dealt with in detail in the case of Infosys Ltd. V. CST, Bangalore - 2014-TIOL-409-CESTAT-BANG. Wherein the definition of ‘input services' have been considered and admissibility of CENVAT credit in respect of various services and the rationale to take such a view has been discussed. The counsel stated that he has no objection if the matters are remanded for calculating the refund claim following the decision of the Tribunal in the case of Infosys Ltd. In the case of Infosys Ltd. a view was taken that in respect of construction services credit would be admissible and in respect of other services, Tribunal agreed that the original authority should consider each service separately in the light of that decision.

The discussion above would show that the issue relating to nexus as well as the admissibility of CENVAT credit are in favour of the assessee and a more detailed consideration of each service in the light of Infosys decision of this Tribunal would be appropriate as regards services other than construction service which was not considered by the Tribunal.

Decision : the impugned orders are set aside and the matters are remanded to the original adjudicating authority to consider the refund claims afresh except for the construction services and in respect of other services in the light of the decision in the case of Infosys Ltd . and determine the admissible refund amount in accordance with law. Needless to say the appellant shall be given a reasonable opportunity to present their case if any portion of the refund is proposed to be rejected.

In Passing Also See : 2014-TIOL-1035-CESTAT-MUM

(See 2014-TIOL-1034-CESTAT-BANG)