Custom, Excise & Service Tax Tribunal
Texas Instruments (India) Pvt Ltd vs Bangalore Ltu (Appeals) on 12 May, 2022
Service Tax Appeal No. 2081 of 2012
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 2081 of 2012
[Arising out of Order-in-Appeal No.JMJ/46/2012dated 24.04.2012 passed by the
Commissioner ofCentral Excise and Service Tax (Appeals) LTU, Bangalore]
M/s. Texas Instruments (India) ....Appellant
Pvt Ltd
Bagmane Tech Park, 66/3, Adjacent LRDE
Byrasandra, C.V.Raman Nagar Post,
Bangalore 560 093
VERSUS
Commissioner of Central Excise, ....Respondent
Customs and Service Tax, Bangalore-LTU UNIT JSS TOWERS, 100 FEET RING ROAD, BANASHANKARI III STAGE BANGALORE KARNATAKA 560085 WITH
(i) Service Tax Appeal No. 27990 of 2013 [Texas Instruments (India) Pvt Ltd Vs CCE & ST, Bangalore-LTU] [Arising out of Order-in-Appeal No.167-170/2013dated 19.07.2013 passed by the Commissioner (Appeals) LTU, Bangalore]
(ii) Service Tax Appeal No. 27991 of 2013 [Texas Instruments (India) Pvt Ltd Vs CCE & ST, Bangalore-LTU] [Arising out of Order-in-Appeal No.167-170/2013dated 19.07.2013 passed by the Commissioner (Appeals) LTU, Bangalore]
(iii) Service Tax Appeal No. 27992 of 2013 [Texas Instruments (India) Pvt Ltd Vs CCE & ST, Bangalore-LTU] [Arising out of Order-in-Appeal No.167-170/2013dated 19.07.2013 passed by the Commissioner (Appeals) LTU, Bangalore]
(iv) Service Tax Appeal No. 27993 of 2013 [Texas Instruments (India) Pvt Ltd Vs CCE & ST, Bangalore-LTU] [Arising out of Order-in-Appeal No.167-170/2013dated 19.07.2013 passed by the Commissioner (Appeals) LTU, Bangalore] 1 Service Tax Appeal No. 2081 of 2012
(v) Service Tax Appeal No. 21447 of 2015[Texas Instruments (India) Pvt Ltd Vs CCE & ST, Bangalore-LTU] [Arising out of Order-in-Appeal No.37& 38/2015/LTU dated 23.03.2015 passed by the Commissioner (Appeals), LTU, Bangalore]
(vi) Service Tax Appeal No. 21448 of 2015 [Texas Instruments (India) Pvt Ltd Vs CCE & ST, Bangalore-LTU] [Arising out of Order-in-Appeal No.40/2015/LTU dated 25.03.2015 passed by the Commissioner (Appeals), LTU, Bangalore]
(vii) Service Tax Appeal No.21474 of 2015 [Texas Instruments (India) Pvt Ltd Vs CCE & ST, Bangalore-LTU] [Arising out of Order-in-Appeal No.42/2015/LTU dated 30.03.2015 passed by the Commissioner (Appeals), LTU, Bangalore] APPEARANCE:
Shri Ravi Raghavan, Advocate for the Appellant ShriP.Gopakumar, Authorized Representative for the Respondent CORAM: HON'BLE MR. RAMESH NAIR, JUDICIAL MEMBER HON'BLE MR. P. ANJANI KUMAR, TECHNICAL MEMBER FINAL ORDER NO. 20231-20238/2022 DATE OF HEARING:30/03/2022 DATE OF DECISION: 12/05/2022 PER: P. ANJANI KUMAR The above set of appeals are filed by the appellants i.e., M/s. Texas Instruments India Pvt. Ltd., are an STPI unit. Brief facts of the case are that the appellants engaged in the development of semi-conductor designs and semi-conductor related software. They have registered themselves for payment of service tax for providing services under the category of Consulting Engineers, ITSS, Business Auxiliary Services, Management Consultancy Services, etc., and are into export of services. The appellants have filed various refund claims that came to be rejected by the Original Authority, on following grounds:2
Service Tax Appeal No. 2081 of 2012
(i) Refund of credit of additional duty of customs (CVD) on inputs imported by them, is not admissible.
(ii) Refund of credit of service tax on certain input services like renting of immovable property, of ITSS Services and Consulting Engineering services procured locally and Air passenger transport services,is not admissible.
(iii) Refund of service tax paid under Reverse Charge Mechanism (RCM) in respect of ITSS services,Management or Business Consultant Services, Management, Maintenance and Repair Services, Business Support Services, paid under RCM, is not admissible.
(iv) Refund of services locally procured but billed in US Dollars is not admissible.
(v) Refund is not admissible on defective invoices.
Various appeals filed by the appellants before the learned Commissioner (A) came to be rejected by the impugned orders. Hence, these appeals.
2. Learned counsel Shri Ravi Raghavan appearing on behalf of the appellants submits that the issues involved appeal-wise and issue-wise as follows:
3. Appeal No.ST/02081/2012, ST/27990 to 27993/2013: Learned counsel submits that the department contends that the marketing services provided to Texas, Singapore, do not qualify as export of service as per the Export of Service Rules since the service is not used in India; the appellant is not eligible to avail CENVAT credit in respect of Event Management Services, Security Service, Outdoor Catering Service, etc., on the ground that there is no nexus of the inputs/output services provided by them; refund of credit of CVD paid on imported goods is not available as the STPI 3 Service Tax Appeal No. 2081 of 2012 unit is eligible to procure the inputs locally. Learned counsel submits that all the above issues have been decided in their favour by CESTAT vide Final Order No.21794-21798/2014 dated 26.9.2014.
3.1 Learned counsel submits that department has also denied refund on credit of service tax on renting of immovable property for the reason that the address mentioned in the invoices is not matching with that of registered premises and that break-up was not providing for the rent area used for provision of output service. He submits that the issue is decided in their favour by the decision of mPortal India vs. CST: 2012 (27) STR 134 (Kar.) and Orient Bell Ltd. vs. CCE:2 2017 (52) STR 56 (Tri. -All.). 3.2 Learned counsel submits that department has denied refund of service tax paid on ITSS for the reason that it is procured locally and billed in INR and has no nexus with the exported output service. He submits that the issue is decided in their favour in the case of Hollister Medical India: 2017 (49) STR 426 (Tri. -Del.).
3.3 Department has rejected the credit with regard to the invoice raised in USD by the service providers located in India and that the appellant has not produced any evidence on record as to the exact amount of service tax discharged in Indian Rupees. Learned counsel submits that the vendors have discharged service tax in respect of the said invoices and they have produced sample certificates from the vendors indicating that the service tax was paid by them in INR.
4. Appeal No.ST/21447/2015: Credit of service tax paid on RCM basis on ITSS was disallowed on the ground that there is no clarity on the nexus between the input service and the output service; the learned 4 Service Tax Appeal No. 2081 of 2012 counselsubmits that the ITSS services procured from overseas entities is essential to the output activity of the appellant; he places reliance on Knoah Solutions Pvt. Ltd. v. Commissioner of Customs, 2017 (3) GSTL 273 (Tri.- Hyd.).
4.1 Learned counsel submits that refund of credit of service tax on services procured locally but billed in USD was denied; he submits that the services were in the nature of ITSS relating to software development, customization, etc., as can be seen from the agreements and statement of works with the vendors.
4.2 Learned counsel submits that refund of credit of service tax paid on ITSS and Consulting Engineering services procured locally and billed in INR was denied alleging that they have no nexus with the exported output service; he submits that the appellant is engaged in in provision of ITSS service and hence, Consulting Engineering services are integrally connected to the same; the places reliance on Commissioner vs. Hollister Medical India"
2017 (49) STR 426 (Tri. -Del.).
4.3 Refund of credit of service tax on some input services used in the provision of output services exported were denied alleging lack of nexus;
learned counsel submits that the disputed services are integrally related to the output service; it is covered by the decisions of Tribunal in the cases of Chevron Phillips Chemicals v. Commissioner of CGST, 2021 (53) GSTL 268 (Tri. -Mumbai) and Goldman Sachs Services v. Commissioner of CT, 2021 (52) GSTL 425 (Tri. -Bang.).
5. Appeal No.ST/21448/2015: Refund of credit of service tax on input services in the provision of output services exported is denied due to the 5 Service Tax Appeal No. 2081 of 2012 absence of nexus. Learned counsel relies on the Board Circular DOF No. 334/1/2012-TRU dated 16.3.2012 wherein it clarifies that no correlation is required as the intention of the Government is to allow refund to the exporters. He places reliance on 24/7 Customer Pvt Ltd V. Commissioner of Central Tax, Bengaluru 7 East 2021-TIOL-160- CESTAT-BANG.He further submits that the Department cannot dispute the appellants' eligibility to credit during the refund proceedings; and credit, if any, sought to be disallowed, has to be disputed by initiation of separate proceedings for recovery under Rule 14 of the CCR, 2004; for this submission, he placed reliance on M/s. Gemini Software Solutions Pvt. Ltd. vs. CCE, Trivandrum 2020-TIOL140-CESTAT-BANG.
5.1 Refund of credit on renting of immovable property was denied on the ground that the premises not appearing in the registration certificate; this service was not having any nexus with the output activity. The submissions on item have already been given above in respect of other appeals. 5.2 Refund of credit on air transport services was denied alleging that the 'ticket' does not have the prescribed details, in the absence of which, the refund claim cannot be verified as the nexus of the service with the output activity cannot be established.Learned counsel submits that in accordance with the amended Rule 4A of the Service Tax Rules, 1994, the credit can be taken on the basis of an 'invoice, bill or challan' in respect of an aircraft operator; that the e-ticket produced by the Appellant satisfies the conditions therein; the tickets are for the employees of the appellant for the purposes of business travel. For this submission, he places reliance on Manhattan Associates (I) Dev. Centre Pvt. Ltd. v. CST, 2017 (5) GSTL 99 (Tri. -Bang.). 6
Service Tax Appeal No. 2081 of 2012 5.3 Refund of CVD on inputs was denied on the ground that the items imported are 'Capital Goods' andRule 5 refund is only for 'inputs and input services'; the appellant has procured goods such as components for board, magnetic lock, etc., without which output service cannot be provided; further, the learned counsel submits that as held by this Hon'ble Tribunal in Apotex Research Private Limited, 2014-TIOL-1836-CESTAT-BANG, 100% EOUs need not pay CVD at all.
5.4 Refund of credit of service tax of services procured locally but billed in USD was denied as the nexus was unclear as the nature of activities was not forthcoming. The services were in the nature of ITSS relating to software development, customization, etc. which was visible from the Agreements and Statement of Works with the vendors
6. Appeal No. ST/21474/2015: Refund of credit relating to Management Consultant Service, Management, Maintenance and Repair Service or Business Support Service of service tax under RCM was denied as there was no evidence to prove that these services were used directly for export. Learned counsel relied on Board Circular 16.3.2012 and places reliance on 24/7 Customer Pvt Ltd V. Commissioner of Central Tax, Bengaluru East 2021-TIOL-160- CESTAT-BANG.
6.1 Refund of credit of service tax on some input services procured locally and used in the provision of output services, is denied, due to the absence of nexus. Learned counsel submit that the Department cannot dispute the appellants' eligibility to credit during the refund proceedings; credit, if any, sought to be disallowed, has to be disputed by initiation of separate proceedings for recovery under Rule 14 of the CCR, 2004; and places 7 Service Tax Appeal No. 2081 of 2012 reliance on M/s. Gemini Software Solutions Pvt. Ltd. vs. CCE, Trivandrum 2020- TIOL-140-CESTATBANG.; the input services are used for the purpose of carrying out the appellant's business and nexus has been explained in detail to the lower authorities.
6.2 Refund of CVD on inputs was denied on the ground that the items imported are 'Capital Goods' and Rule 5 refund is only for 'inputs and input services'; the appellant has procured goods such as components for board, magnetic lock, etc., without which the output service cannot be provided; learned counsel relies on Apotex Research Private Limited, wherein it has been held that 100% EOUs need not pay CVD at all.
6.3 Refund of credit of service tax of services procured locally but billed in USD was denied as the nexus was unclear as the nature of activities was not forthcoming; the services were in the nature of ITSS relating to software development, customization, etc. which was visible from the Agreements and Statement of Works with the vendors; and is covered by the appellant's own case vide CESTAT Final Order No.21794-21798/ 2014 dated 26.09.2014. 6.4 Refund of credit of service tax on input services in the provision of output services exported is denied due to the absence of nexus and the fact that the efficiency of the exports will not be affected in the absence of these activities; the learned counsel submits that the various activities of Maintenance, Management, Repair Service, Security services, ITSS, Business Support Service, etc. were inherent to the business of the appellant; he places reliance on Chevron Phillips Chemicals v. Commissioner of CGST, 12 2021 (53) GSTL 268 (Tri.-Mumbai) and Goldman Sachs Services v. Commissioner of CT, 2021 (52) GSTL 425 (Tri.-Bang.). 8
Service Tax Appeal No. 2081 of 2012 6.5 Refund was denied on the export of Marketing services alleging that the same cannot be considered as export of service under Rule 4 of the POPS Rules, 2012; the establishment at which the service is consumed is the place where goods sold are installed or located. He submits that the activities of the Appellant do not require the goods to be made physically available to the Appellant and hence, do not come under the purview of Rule 4 and hence, place of provision cannot be determined basis the 'performance in India'; the default Rule 3 to apply, meaning the place of provision will be the place of 'recipient of services' which is outside India. 6.6 Refund on the credit availed in respect of specific invoices raised by M/s. Spirent Communications Ltd. and M/s. NASCOM was denied on the ground that no services have been received under the said invoices. The learned counsel submits that the services received from Spirent Communications in respect of the maintenance of software is integral and essential to the output activity of the Appellant; the Appellant has been receiving 'Business Auxiliary Services' from NASCOM, which is necessary for the Appellant's output service and not 'club association services' as alleged by the Learned Commissioner.
7. Learned Authorized Representative reiterates the findings of the impugned orders and submits that the learned Commissioner has examined the claim of the appellants and has given specific findings in each of the refund claims as to how an input service claimed for refund was not eligible. With reference to the appellant's claim of refund on account of services received by them from a third party and for which the payment was made in USD, he submits that the services were not availed by the appellant but by 9 Service Tax Appeal No. 2081 of 2012 their overseas entities for which amount has been paid in USD. The appellants have received the money from their overseas entities in USD and paid to the Indian service provider in INR. The appellant was not the service recipient and therefore, refund of the service tax paid is not applicable to the appellants. He further submits that in some cases, the appellants did not produce necessary documents to the satisfaction of the authorities in order to settle the claims; in some cases, they have claimed refund on invoices issued in favour of premises, claimed to be their own premises, but the billing was in the name of the premises which is not mentioned in the registration certificate. He submits that for verification of documents in some of the claim's issue may be remanded back to the original authority.
8. Heard both sides and perused the records of the case. We find that in all, the learned Counsel for the appellants has given written submissions in respect of the Appeal Nos. ST/02081/2012, ST/27990/2013, ST/27991/2013, ST/27992/2013, ST/27993/2013, ST/21447/2015, ST/21448/2015, ST/21449/2015& ST/21474/2015. However, we find that Appeal No. ST/21449/2015 was not listed by the Registry for hearing on 30.03.2022. Moreover, it is also not clear whether this appeal i.e., ST/21449/2015 pertains to the appellants herein or otherwise. Therefore, the same cannot be taken up for decision along with others. Accordingly, we proceed to decide the other seven appeals.
9. We find that the impugned orders denied refund claimson the issue that there is no nexus of the input services with the services exported. Admissibility of credit and refund thereof in respect of Marketing Services where payments are claimed to have been received in USD is also disputed. 10
Service Tax Appeal No. 2081 of 2012 We find that as far as the nexus is concerned, input credit availed on the following services is under dispute:
Sl. Service Sl. Service
No No
1 Business Auxiliary 17 Renting of Immovable
Services Property Services
2 Management or 18 Internet Telephony
Business Consultants Services/
Services Telecommunication Service
3 Chartered Accountant 19 Advertising Agency's Service
Services
4 Business Support 20 Commercial Training or
Services Coaching Service
5 Event Management 21 Courier Services
Services
6 Legal Consultancy 22 Security Agency Service
Services
7 Sponsorship Services 23 Other Services
8 Consultancy Services 24 Architect Services and
Design Services
9 Market Research Agency 25 Consulting Engineer's
Services Service
10 Scientific or Technical 26 Rent Management Service
Consultancy Services
11 Company Secretary 27 Information Technology
Services Software Services
12 Erection, Commissioning 28 Interior Decorators Services
& Installation Services
13 Storage & Warehousing 29 Market Research Agency
Services Services
14 Waste Management 30 Sponsorship Services
Services
15 Management, 31 Supply of Tangible goods
maintenance and Repair services
service
16 Manpower Recruitment 32 CVD
and supply Agencies
Service
10. Learned Counsel for the appellants relies on the decision in their own case vide Final Order Nos.21794-21798/2014 dated 26.09.2014, 21568/2015 dated 14.07.2015 & 21206-21207/2014 dated 27.07.2017; he also relies on ratio ofother cases such as: mPortal India Vs CST, Orient Bell Ltd. Vs CCE, CCE Vs Hollister Medical India, Apotex Research Private Limited, Knoah Solutions Pvt. Ltd., Chevron Phillips Chemicals, Goldman Sachs Services, Customer Pvt. Ltd. Vs CCT, Bengaluru, Gemini Software Solutions 11 Service Tax Appeal No. 2081 of 2012 Pvt. Ltd., Manhattan Associates (I) Dev.CentrePvt.Ltd.,(all supra). As far as the issue of nexus is concerned, the same stands covered by various decisions as above and others which have been delivered subsequent to the passing of the impugned orders. We find that vide the Final Order of this Bench cited by the appellants, the issue has been remanded back to the original authority for appreciation of the principle of nexus in the light of the above judgments. Vide Final Order dated 26.09.2014 (supra), it was directed that the issue of nexus be determined in the light of the directions given in the Interim Order. We find that this Bench has also decided the nexus in respect of various services in the case of Samsung R&D Institute India Bangalore Pvt. Ltd. 2020 (34) GSTL 213 (Tri. Bang.). We find that the issue of nexus in respect of the services, raised in the impugned orders are now settled. Therefore, on the issue of nexus, we are inclined to accept the contentions of the appellants and allow the appeals to that extent.
11. Coming to the issue of refund of credit of service tax wherein invoices were raised in the USD, in respect of ITSS Services.It is seen that the refund relates to invoices raised by many companies (around twenty); though the services were procured in India, receipts were in foreign currency; the appellant's claim that they have sub-contracted part of their activity to these vendors. It is a argument of the appellants that these services were utilised by them while rendering service to the overseas entity. However, we find that as per the tripartite agreement between TI, USA, TI, India and the vendors payments are made in foreign currency by TI, USA, implying thereby that the service recipient is TI, USA and not the appellant. Therefore, the services of vendors can be at best treated as export by the vendors themselves and not the TI, India, the appellant. We find that Original and 12 Service Tax Appeal No. 2081 of 2012 Appellate Authoritieshave given correct finding in this regard. As an example, we find it useful to extract the findings on the issue from one of the orders. In respect of Appeal No.ST/21448/2015, the Original Authority finds as follows:
27.5. As per the Agreement, the assessee has agreed to procure from the above units the services relating to "software development/ customization, Application Specific Integrated Circuit (ASIC) design, verification and validation, physical design, design-for-test (DFT) and analog engineering from its service centres situated in India (Offsite) and also onsite on It locations".
27.6. Further, as per the agreement Deliverable shall be deemed to include in both source code and object code forms, the final version and all intermediate versions of the software and all routines and subroutines, as well as all program materials flowcharts, notes, outlines, work papers an the like created or developed in connection therewith, the resulting screen formats and other visual effects of the software, and any formulae, processes, algorithms, ideas and other information not generally known to the public, whether or not protected by copyright, developed or generated by the vendors in the course of supplying Services.
27.7. I have perused the documents submitted in this regard (master service agreements) wherein it is observed that the agreement is a tripartite agreement between TI Inc. USA, TI India and the vendors. It is also seen that the payments for the services rendered will be made by TI Inc. USA, to the vendors which implies that the actual recipient of the service is TI Inc. USA only and not TI India. It appears that it is only a financial arrangement between the inter-companies of the Texas Instruments that the payment will be made by TI India, which will be later reimbursed by TI USA. Further, the perusal of the agreement between the parties indicates that on a broad sense agree to collaborate on the work activities, which does not throw light on the specifications of services rendered by these companies to M/s. TI India. Therefore, the said services under this category cannot be treated as received by the assessee and used for providing the exported output services. 27.8. The assessee has only submitted formats of work agreements/ statement of work/ Work orders, which are unsigned and which does not contain any particulars of the agreed upon contract/ project etc. Further, perusal of the invoices indicates that the invoices are raised against a specific work order/ statement of work. However, the assessee has failed to provide the corresponding work orders/ work agreements to prove that the said services are actually used by TI India and not TI Inc. USA and the same are input services used in relation to the exported output services. Thus, I observe 13 Service Tax Appeal No. 2081 of 2012 that the nature of Services the assessee receive from their vendors are not clear and it cannot be established that these services are utilized by M/s TI India in providing exported output services.
27.9. Further, in respect of the amounts claimed by the assessee pertaining to other service providers such as M/s Interra Systems, M/s L&T, M/s Mind Tree Ltd., M/s Tessolve. I also observed that the assessee has not produced any evidences like agreements, Statement of Works and Certificate from their vendors that the said services are actually used by TI India and not by TI Inc. USA and the same are input services used in relation to the exported output services and they have paid service tax. Also the assessee had not provided any evidence on record to prove that the service tax is being discharged by their vendors and proved the nexus of the input services with the export of output services.
27.10. In addition to the discrepancies mentioned above, it is also noticed from the input invoices submitted by the assessee that in some of invoices it is mentioned in the location of services provided column as "OFFS/ Offshore", hence if the services provided are offshore, it cannot be input service for M/s Texas Instruments India Pvt. Ltd., Bangalore. Further, in respect of all the invoices above there are agreements/ Statement of Works as per which the service is delivered, assessee has not furnished the agreements/ statement of works for verification, also in most of the cases description mentions that "Services as per annexure enclosed" the annexures are also not submitted by the assessee for verification. The assessee has not established how these kinds of services/ Projects are used in the exported services. As per Para 3.4 of Board's Circular 120/1/2010, from the documents furnished by the assessee the nature of the input service cannot be clearly ascertained, hence no nexus can be established nor has been established by the assessee with the exported output service.
27.11. In respect of similar refund claim filed by the assessee for the earlier period, the claim under the above category was disallowed by this officeand the Commissioner (Appeals), LTU, Bangalore in his OIA No.180/181/2013 dated 06.08.2013 has allowed the refund subject to verification of original documents such as agreements, statement of works and certificate from their vendors that they have paid service tax to the Govt. As none of these documents and certificates have been furnished by the assessee, in the absence of any proof to show as to how much service tax, in Indian rupees has been actually paid by their vendors, I am unable to sanction refund under the above category.
27.12. In the light of the above observations, I hold that the assessee is not eligible for refund of Rs.3,10,18,063/- claimed by them under Rule 5 of CENVAT Credit Rules, under the above category.14
Service Tax Appeal No. 2081 of 2012
12. In view of the above finding and the facts of the case, it is clear that even as per the tripartite contracts, the appellants are a sort of middle-man in respect of the services rendered by the vendors. While TI, USAreceives the services rendered by the vendors and pays for the same in USD, TI, India acts only as a facilitator in receiving the money in USDfrom TI, USA and making payments to the Indian vendors in INR. The appellants, therefore, cannot be held to be receivers of the input services rendered by the vendors and used in the export of services to TI, USA. We are of the considered opinion that the appellants take neither take the credit of service tax paid on the services rendered by the vendors nor claim the same as refund.
13. In view of our discussion as above, we allow all the appeals partly in the following terms:
(i) The issue of nexus between various input services and the export services is settled in favour of the appellants.
(ii) Appellants are not eligible to take the credit of service tax paid on the services rendered by the vendors, for which they received payment from TI, USA in USD, and consequentially, the appellants are not eligible to claim refund of the same. To this extent, the impugned orders are upheld as may be applicable.
(Order pronounced in the open court on 12/05/2022) (RAMESH NAIR) JUDICIAL MEMBER (P. ANJANI KUMAR) TECHNICAL MEMBER 15