By TIOL News Service

MUMBAI, FEB 11, 2016: THE appellant had filed a refund claim on 12.01.2006 u/r 5 of the Export of Services Rules, 2005 being tax paid on input services utilized for export of services during the period September 2004 to June 2005.

The adjudicating authority rejected the refund claim on the ground that the appellant did not submit the relevant documents and the procedures as envisaged in notification 12/2005-ST dated 19.04.2005 are not applicable for exports made prior to that date.

The Commissioner (A) agreed but also held that the refund claim for the period post 19.04.2005 is to be reconsidered after scrutinizing the documents. To that extent, he remanded the matter.

The appellant is before the CESTAT and submits that it is not disputed by the Revenue that they had exported the services and/or eligible to avail CENVAT credit on the inputs and input services. Reliance is placed on the decision in WNS Global Services P. Ltd. - 2008-TIOL-228-CESTAT-MUM as upheld by the Bombay High Court to emphasize that benefit of export rebate should not be denied.

The AR submitted that the Export of Services Rules were brought into the statute effective from 15.03.2005 and the refund claims prior to the said date are not governed by the said rules; that provisions of notification 12/2005-ST dated 19.04.2005 issued in exercise of rule 5 of the Export of Services Rules, 2005 cannot be applied retrospectively.

The Bench noted that both the lower authorities had misdirected the findings regarding the non-applicability of the Rules in this case.

It was further observed -

"6.2. The provisions of Export of Service Rules 2005 was brought into statute under notification no. 9/2005-ST dated 03-03-2005 and rebate of the services tax paid under Rule 5 of the said Rules was brought into effect in statute from 19.04.2005. Appellant had field a refund claim under the said Rule 5 of the Export of Service Rules, 2005, on a contention period prior to 19.04.2005, they have exported the services hence eligible to claim to the service tax paid on the input services used for the export of services. Both the lower authorities have held that since notification no. 12/2005 dated 19.04.2005, permits rebate of the service tax paid in the respect of export of output services is effective from 19.04.2005, any export made after 19.04.2005 are only eligible for the refund in the said Rule 5, we are afraid that such an interpretation would defeat the entire wisdom of the government of India in making the export of services competitive in the international market. The view and the findings recorded by both the lower authorities are flawed for more than one reason.

(a) Firstly, we find that the said Rule 5 though brought into statute in Export of Service Rules 2005 from 19.04.2005, cannot be said having applicable only for the exports made from 19.04.2005. In order to appreciate the correct position, we reproduce the relevant part of said rules which reads as under.

"5. Where any taxable service is exported, the Central Government may, by notification, grant rebate of service tax paid on such taxable service or service tax or duty paid on input services or inputs, as the case may be, used in providing such taxable service and the rebate shall be subject to such conditions or limitations, if any, and fulfillment of such procedure, as may be specified in the notification."

It can be seen from the above reproduced Rule that the said Rule talks about granting of rebate of service tax paid and does not speak about that said Rule will be effective from a particular date. The said Rule talks about issuance of notification which in this case is 12/2005 which reads as under.

x x x

It can be seen from the above reproduced notification that the said notification also does not indicate that an assessee has to export the services on or after 19.04.2005 to avail benefit of rebate of CENVAT credit. A plain reading of the notification indicates that taxable services has to be exported in terms of Rule 3 and payment of export of such taxable services has to be received in India in convertible foreign exchange and the duty/tax has been paid on input or input services. All these contentions are satisfied in this appeal filed by the appellant."

After extracting the decision of the Bench in the case of WNS Global Services Pvt. Ltd. and the order of the High Court, the Bench concluded -

"It can be seen … that the higher judicial forums are holding that when it comes to substantial benefit the absence of specific embargo in the rules, the benefit should not be denied to an assessee."

Holding that the impugned order was not sustainable, the same was set aside and the appeal was allowed with consequential relief.

In passing: Hopefully, the Revenue appeal is not lurking in some dusty files…

(See 2016-TIOL-392-CESTAT-MUM)