By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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No refund of CENVAT Credit on the onsite services not provided from India, since it does not fulfill the conditions of export of services.
Facts:
The Appellant, an Indian entity entered into a contract to develop software for a US based customer. The offsite activities were performed in India and onsite activities were carried out by the Appellant’s US based subsidiary. There was no privity of contract between the US based subsidiary and the customer. The subsidiary billed the Appellant for the work done by it. The services provided to the customer were claimed to be export of services. For the payments made to its subsidiary, service tax was discharged considering it to be import of services and was claimed as CENVAT Credit and being unable to utilise, applied for refund.
Department after allowing refund claim in totality for initial years, rejected the claim proportionately to the extent of onsite services for subsequent years stating that onsite activities were not provided from India and therefore, there was violation of condition of Rule 3(2)(a) of the Export of Services Rules, 2005.
It was argued that if the onsite services were held to be not provided from India then the same would not take colour of import of services and therefore, service tax pad thereon should be eligible for refund u/s. 11B of the Central Excise Act, 1944.
Held:
High Court observed that onsite services were admittedly rendered by the US subsidiary to the customer and there was no privity of contract between them and hence could not be regarded as export of services since the condition that the services should be provided from India, was not fulfilled and thus no refund proportionate to onsite services was granted. Further, the alternative argument in respect of refund was not entertained by the Court since an application for refund under the same was not made.
