Custom, Excise & Service Tax Tribunal
Orosoft Solutions Pvt Ltd vs Commissioner Of Gst & Cx-Thane on 23 August, 2022
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, MUMBAI
REGIONAL BENCH
Single Member Bench
Excise Appeal No. 88130 of 2019
(Arising out of Order-in-Appeal No. PVNS/111/Appeals Thane/TH/2019-20
dated 21.08.2019 passed by the Commissioner of GST & Central Excise
(Appeals Thane), Mumbai)
M/s. Orosoft Solutions Pvt. Ltd. Appellant
A-307, Western Edge II,
Off Western Express Highway,
Borivali (E), Mumbai 400 066.
Vs.
Commissioner of GST & CE, Thane Respondent
Navprabhat Chambers, Ranade Road, Dadar (W), Mumbai 400 028.
Appearance:
Shri Bhavin S. Mehta, Chartered Accountant, for the Appellant Shri P.K. Acharya, Superintendent, Authorised Representative for the Respondent CORAM:
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) Date of Hearing: 23.08.2022 Date of Decision: 23.08.2022 FINAL ORDER No. A/85940/2022 This appeal is directed against Order-in-Appeal No. PVNS/111/Appeals Thane/TH/2019-20 dated 21.08.2019 passed by the Commissioner of GST & Central Excise (Appeals Thane), Mumbai. By the impugned order, the Commissioner (Appeals) has upheld the order of the Deputy Commissioner, CRS CGST & CX, Thane. By the order-in-original the adjudicating authority has modified the refund claims filed by the appellant under Rule 5 of the Cenvat Credit Rules, 2004.
2.1 Appellant is engaged in providing support services to its group companies located outside India and they also provide services to domestic clients in India. Appellant filed refund applications under Rule 5 of the Cenvat Credit Rules read with Notification No. 05/06-CE(NT) dated 14.03.2006 for the period October 2009 to March 2010 and April 2010 to September 2010.
2 E/88130/2019 2.2 These refund claims were rejected in part. Against the part rejection of the refund claims appellant preferred appeals to the Commissioner (Appeals). The Commissioner (Appeals) by the impugned order has upheld the part rejection of the refund claims and hence these appeals.
3.1 We have heard Shri Prasad Paranjape, Advocate for the appellant and Shri Prabhakar Sharma, Superintendent, Authorised Representative for the Revenue.
3.2 Arguing for the appellant, learned counsel submits:-
The lower authorities should not reject the refund claims for the reason that the services as claimed by them to be exported were not exported. However, the refund claims have been modified on the following two grounds:-
Certain input services which were used for output services abroad were received in the premises which were not the part of the registered premises of the appellant at the material time. While calculating the cenvat credit availed during the quarter, the Assistant Commissioner has deducted the amount of cenvat credit that could have been utilized towards the payment of service tax on the services provided domestically. On the first issue, the issue is now settled without proceedings for denial of credit in terms of Rule 14 of the Cenvat Credit Rules. In proceedings under Rule 15 the quantum of cenvat credit claimed could not have been modified. In the present case no such proceedings have been initiated during the material period to deny any amount of cenvat credit. For this purpose reliance is placed on the following:-
Circular No.120/01/2010-ST, dated 19.01.2020 Morgan Stanley Advantage Services Ltd. [2015 (37) STR 639 (Tri.-Mum)] Convergys India Pvt. Ltd. [2009 (16) STR 198 (Tri.-
Del.)] 3 E/88130/2019 Cross Tab Marketing Services Pvt. Ltd. [2021 (55) GSTL 29 (Tri.-Mum)] BNP Paribas India Solution Pvt. Ltd. [2022 (58) GSTL 539 (Tri.-Mum)] BNP Paribas India Solutions Pvt. Ltd. [2020 (2) TMI 224-CESTAT-Mumbai.
Accordingly modification of refund claim on this ground cannot be sustained.
On the second issue, refund claim has been rejected for January and February 2017 as time barred for the reason that refund application in respect of the quarter January to March 2017 has been filed after prescribed limit of one year of the receipt of export proceeds as per Notification No. 27/2012-CE (NT) dated 18.06.2012 as amended by Notification 14/2016-CE (NT) dated 01.03.2016. Refund application has been filed by the appellant on 27.03.2018, hence has been filed within a period of one year from the close of quarter. Accordingly in view of order No. A/85662-85663/2019 dated 04.04.2019, the refund for this should not have been held to be time barred.
In the case of Diaspark Infotech Pvt. Ltd. [2019-VIL-65- CESTAT-DEL-ST] it has been held that non-reflection of cenvat credit in ST-3 return cannot be a ground for denial of the refund. In the present case appellant has erred by not reflecting the export turnover in the ST-3 return. In their own case Commissioner (Appeals) vide order-in- appeal No. PVNS/23/APPEAL THANE/TH/2019-20/1137 dated 24.05.2019 has held that ST-3 cannot be only reliable source for verifying the balance cenvat credit at the end of the quarter and has allowed the appellant to claim cenvat credit on two invoices which were inadvertently not recorded in ST-3 but recorded in cenvat register and balance sheet.
In their case as they are exporting entire services, their export turnover is equal to the total turnover if certain cervices are to be excluded from the export turnover, the same will get excluded from the total turnover also thereby 4 E/88130/2019 the quantum of the refund will continue to remain the same.
3.3 Learned Authorised Representative reiterates the findings recorded in the impugned order.
4.1 I have considered the impugned order along with the submissions made in appeal and during the course of arguments.
4.2 Following three issues have been raised for consideration in the present appeal:-
i) Whether refund claim could have been modified by disallowing certain credit held to be ineligible without initiating proceedings under Rule 14 of Cenvat Credit Rules.
I find that the first ground for modification of refund claims is that certain credits which have been taken for computation of the refund in terms of Rule 5 of the Cenvat Credit Rules are ineligible credits. However, admittedly no proceedings have been initiated against the appellant for denial of such credit in terms of Rule 14 of the Cenvat Credit Rules. In absence of such proceedings, the lower authorities cannot be justified in modifying the refund claims for this reason. This is the view which has been expressed by the Tribunal in BNP Paribas Solution India Pvt Ltd [2022 (58) GSTL 539 (Tri.-Mum)]. The relevant para is reproduced below:-
"5. I have heard Learned Counsel for the Appellant and Learned Authorised Representative for the Revenue and perused the case records including the written submission and the case laws filed by the respective sides. There is no doubt that Rule 5 ibid provides for refund of accumulated Cenvat credit subject to compliance of the procedure/guideline laid down under the notifications issued thereunder. The refund of Cenvat credit on the services in issue was mainly denied to the Appellant on the ground of 'no nexus' between the input services and the export services. The issue which falls for consideration in these Appeals is whether the department can deny refund of Cenvat credit under Rule 5 ibid alleging that there was no nexus between the 5 E/88130/2019 output and input services. It is well settled legal position that denial of Cenvat credit can be done only by issuing notice under Rule 14 ibid. Having allowed the Cenvat credit or by not denying the same, the department cannot reject refund of Cenvat credit under Rule 5. It is well settled principle that availment of Cenvat credit, its utilisation and refund are different aspects dealt with under CCR, 2004. Rule 5 provides for any refund of Cenvat credit and nowhere in this Rule there is a provision to determine the correctness about the availment of Cenvat credit. Its only Rule 14 ibid which provides for recovery of irregularly availed Cenvat credit. I find force in the submission of Learned Counsel that since availment of credit has not been questioned by the department in terms of Rule 14 ibid, the refund benefit cannot be denied on the ground of non-establishment of nexus between input and the output services. This Tribunal in Appellant's own case on an identical issue, for the period April, 2012 to March, 2013 and April, 2016 to September, 2016 in the matter of M/s. BNP Paribas India Solutions Pvt. Ltd. v. Commissioner of CGST, Mumbai East reported in 2020 (2) TMI 224-CESTAT Mumbai, set aside the denial of refund by the department to the Appellant on the ground of non-establishment of nexus between the input and output services, after discussing Rule 5 ibid in detail. The relevant extract of the said order is as under :
"xxxx xxxx xxxx
6. Rule 5 of the Cenvat Credit Rules was substituted by Notification No. 18/2012-C.E. (N.T.), dated 17-3-2012 (w.e.f. 1- 4-2012). Under the said substituted rule, it has been provided that the manufacturer or the service provider has to claim the refund as per the formula prescribed therein. Considering such amendment of Rule 5, the Tax Research Unit of Department of Revenue vide circular dated 16-3-2012 has clarified that the new scheme under Rule 5 does not require the kind of correlation that is needed at present between exports and input services used in such exports. Since the amended rule w.e.f. 1-4-2012 does not provide for establishment of nexus between the input and the output services and the benefit of refund is to be extended only on compliance of the formula prescribed therein, I 6 E/88130/2019 am of the view that denial of refund benefit on the ground of non-establishment of nexus cannot be sustained, I find that this Tribunal in the case of Maersk Global Services Centres (I) Pvt. Ltd. (supra) has extended the refund benefit on the ground that establishment of nexus between the input and the output services cannot be insisted upon. The relevant paragraphs in the said decision is extracted hereinbelow :
"7. In this case, the department has not disputed the fact regarding export of output service by the appellant. The dispute raised in the present case were in context with non- establishment of nexus between the input and output services, service description provided in the invoices were not confirming to the input service definition provided under Rule 2(l) ibid and the invoices were not submitted by the appellant, establishing the fact that the refund benefit should be granted to it. So far as establishing the nexus between input and the output service is concerned, I find that this Tribunal in the case of Accelya Kale Solutions Ltd. (supra) by relying upon the letter dated 16-3- 2012 of TRU has held that under Rule 5 ibid, refund of input service credit is permissible on compliance of the formula prescribed therein and not otherwise. The relevant paragraphs in the said order are extracted hereinbelow :
3. Rule 5 of Cenvat Credit Rules, 2004, was substituted vide Notification No. 18/2012-C.E. (N.T.), dated 17-3-2012, with effect from 1-4-2012. 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 16-3-2012 has clarified as under :-
"F.1 Simplified scheme for refunds :
1. A simplified scheme for refunds is being introduced by substituting the entire Rule 5 of 7 E/88130/2019 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.
2. xx xx xx
4. On perusal of the statutory provisions read with the clarifications furnished by the TRU, it transpires that under the substituted Rule 5 of the rules, there is no requirement of showing the nexus between the input service and the output service provided by the assessee. Since the refund under the said amended rule is governed on the basis of receipt of export turnover to the total turnover, establishing the nexus between the input and output service cannot be insisted upon for consideration of the refund application."
8. In view of above, the impugned order, insofar as it has denied the refund benefit on the ground of non-establishment of nexus between the input and output services, is set aside and the appeal is allowed in favour of the appellant."
There is no dispute that the aforesaid decision of this Tribunal in appellants' own case covered both pre-and post-amendment 8 E/88130/2019 period and also the services which are in issue herein. So far as the decision in the matter of Maersk Global (supra) is concerned, I am afraid that the Learned Authorised Representative is not correct in his submission that the said decision pertains to pre- amendment period. Similarly, while interpreting Rule 5 this Tribunal in the matter of M/s. Cross Tab Marketing Service Pvt. Ltd. v. C.C. GST, Mumbai East; reported in 2021-VIL-466- CESTAT-MUM-ST = 2021 (55) G.S.T.L. 29 (Tri. - Mumbai) vide order dated 17-9-2021 held that the amended Rule 5 ibid does not require establishment of any nexus between input and export 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 and the net Cenvat credit taken during that period. Indisputably, in the refund proceedings under Rule 5 ibid as amended, any such attempt to deny or to vary the credit availed during the period under consideration is not permissible. If the quantum of the Cenvat credit is to be varied or to be denied on the ground that certain services do not qualify as input services or on the ground of 'no nexus', then the same could have been done only by taking recourse to Rule 14 ibid."
Tribunal in the case of Qualcomm India Pvt Ltd [2020 (43) GSTL 402 (T-Hyd)] wherein the bench observed as follows:
"6.Rule 3 of the Cenvat Credit Rules, 2004 is the enabling provision, which entitles a manufacturer of excisable goods and the provider of output service to take Cenvat credit of the duties and taxes paid on the inputs and the input services, with the objective of utilisation of the same for payment of Excise duty on the products and service tax on the output services. In case of exportation of output service, there is no question of utilisation of Cenvat credit available in the books of accounts. Thus, Rule 5 ibid provides for refund of accumulated Cenvat credit, subject to compliance of the procedures/guidelines laid down under the notifications issued thereunder. We find that the refund benefit was denied to the assessee-appellant on the sole ground that there was no nexus between the input services and the output service exported by the appellant. Further, in Revenue's appeal, 9 E/88130/2019 it has been contended that certain disputed services are not conforming to the definition of input service provided under Rule 2(l) ibid. Insofar as taking of irregular Cenvat credit is concerned, Rule 14 ibid clearly mandates that in case of irregular availment of credit or its utilisation, such credit can be recovered from the assessee and for effecting the recoveries, the provisions of Section 11A of the Central Excise Act, 1944/Section 73 of the Finance Act, 1994 shall apply mutatis mutandis. It is an admitted fact on record that the department has not invoked the provisions of Rule 14 ibid for effecting recovery of the alleged irregular Cenvat credit availed by the assessee-appellant. Thus, under such circumstances, it can be said that taking of Cenvat credit on the disputed services by the appellant is in conformity with the Cenvat statute. Rule 5 ibid nowhere specifies that Cenvat credit can be denied on the ground of irregular availment or utilisation of the same. Thus, in absence of specific provisions contained in the statute, denial of the refund benefit provided under Rule 5 ibid, in our considered opinion, cannot stand for judicial scrutiny. Since the department has not specifically alleged regarding actual exportation of services by the assessee-appellant and use/utilization of disputed services for such activities, benefit of refund should be available in terms of the unambiguous provisions contained in Rule 5 ibid, subject only to adherence of the formula laid down thereunder."
ii) Whether refund claim can be modified for the reason that though filed within one year from the close of the quarter includes FIRC which have been received more than one year back.
Appellant filed this refund claim on 27.03.2018 including FIRC received by them during the months of January and February 2017. Lower authorities have rejected the refund claim to the extent it pertained to the FIRC during the months of January and February 2017 holding it to be time barred.
From the perusal of Rule 5 and Notification No. 27/2012 issued thereunder, it is quite obvious that refund claim has to be filed within the period of one year from the close of the quarter. Going by the fact that end of the quarter is treated as starting 10 E/88130/2019 point of the limitation, the artificial bifurcation made by the lower authorities into the method cannot be sustained. Accordingly in my view the order denying refund claim pertaining to the export proceeds received in the months of January and February 2017 cannot be sustained. Hon'ble Karnataka High Court has in the case of Suretex Prophylactics India Pvt. Ltd [2020 (373) E.L.T. 481 (Kar.)] observed as follows:
13. In the instant case, the appellant has obtained registration under the provisions of Finance Act, 1994 in the category of service provider as "scientific and technical consultancy services". As the entire taxable services rendered by the appellant for exporting outside India and on account of appellant not having any domestic service tax liability, the input service credit availed by it on the taxable input services, received by it remained unutilized. Hence, appellant sought for refund of this unutilized input credit under Rule 5 of CENVAT Credit Rules, 2004 by submitting 16 refund claims. Said applications came to be rejected as not having been filed within the limitation prescribed under Section 11B of the Central Excise Act. While answering substantial questions of law (1), (3) & (4) hereinabove, we have already held that provisions of Section 11B of Central Excise Act would be applicable though Section 11B of the Act does not cover refund of Cenvat credit, Notification No. 5/2006 makes it explicitly clear that for the purpose of relevant date for computing one year prescribed under Section 11B, it has to be determined by applying Rule 5 of Cenvat Credit Rules, 2004, necessarily the refund claims ought to have been filed within one year from the relevant date as specified in Section 11B. In other words, time-limit has to be computed from the last date of the last month of the quarter which would be the relevant date for the purposes of examining if the claim is filed within the limitation prescribed under Section 11B or otherwise. The details of the refund claims insofar as it relates to 12 claims was on 3-1-2014 had been filed beyond one year from the last date of the last month of the quarters and as such, they were clearly time-barred. Insofar as remaining 4 claims, matter has been remanded to the original authority, against which there is no appeal by the revenue. Hence, we 11 E/88130/2019 answer the substantial question of law No. 2 that Tribunal was right in holding that the "relevant date for computation of time-
limit will be the end of the quarter" in which FIRC's are received as per the extant Notification No. 27/2012-C.E. (N.T.), dated 18- 6-2012.
iii) Whether refund claim would have been modified for the export turnover without modifying the total turnover.
The formula for determination of the refund claim cannot be admissible as refund in terms of Rule 5 of Cenvat Credit.
Rule 5 of the CENVAT Credit Rules, 2004 as substituted by the Notification No 18/2012-CE (NT) dated 17.03.2012 is reproduced below:
"5. 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;
12 E/88130/2019 (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 sub-rule (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 1stApril, 2012:"
Form A appended to Notification No 27/2012 dated 18.06.2012, prescribing the conditions limitations and safeguards in respect of refund claims filed under the Rule 5 is as follows:
S. Description Amount No. in Rs.
1. Total value of the goods cleared for export and exported during the quarter.
2. Export turnover of the services determined in terms of Clause D of sub-rule (1) of rule 5.
13 E/88130/2019
3. Total CENVAT Credit taken on inputs and input services during the quarter.
4. Amount reversed in terms of sub-rule (5C) of rule 3
5. Net CENVAT Credit = (3) - (4)
6. Total value of all goods cleared during the quarter including exempted goods, dutiable goods and goods for export.
7. Export turnover of services and value of all other services, provided during the said quarter.
8. All inputs removed as such under sub-rule (5) of rule 3, against an invoice during the quarter.
9. Total Turnover = (6) + (7) + (8)
10. Refund amount as per the formula = (1) * (5)/(9), in respect of goods exported.
11. Refund amount as per the formula = (2) * (5)/(9), in respect of services exported.
12. Balance of CENVAT Credit available on the last day of quarter.
13. Balance of CENVAT Credit available on the day of filing the refund claim.
14. Amount claimed as refund, [Amount shall be less than the minimum of (10), (12) and (13) in case of goods or the minimum of (11), (12) and (13) in case of services]
15. Amount debited from the CENVAT account [shall be equal to the Amount claimed as refund (14)] From the above formula it is very clear that the total turnover is defined as Total value of all goods cleared during the quarter including exempted goods, dutiable goods and goods for export.+ Export turnover of services and value of all other services, provided during the said quarter.+ All inputs removed as such under sub-rule (5) of rule 3, against an invoice during the quarter. Thus For determining the total turnover, whatever is the value of export turnover of services/goods in the numerator has to be taken in the denominator, there cannot be any difference between the two. In the present case Revenue authority could not add something to the total turnover which is not reflected in the export turnover of the services.
14 E/88130/2019 4.3 Accordingly the impugned order on this ground also cannot be sustained.
5.1 In the result, appeal is allowed by way of remand.
(Order pronounced in the open court) (Sanjiv Srivastava) Member (Technical) tvu