By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Whether, refund of CENVAT credit under Rule 5 of CCR is admissible even if some of the services exported are otherwise exempted from service tax by exemption notification? Held, Yes.
Facts:
Appellant engaged in providing I.T. enabled services included taxable as well as exempt services. All its services were exported and no service was provided in the DTA . While calculating refund of CENVAT as per formula mentioned in Rule 5(1) of CENVAT credit rules, 2004, the Appellant added all services exported, whether dutiable or exempted to both “Export Turnover” and “Total Turnover” as specified in Clause 5 of Notification No. 5/2006- CE (NT) dated 14-03-2006. The contention of the revenue was that, while calculating refund, although services exempted by exemption notification were to be included in “Total Turnover”, it should be deducted from “Export Turnover” on the ground that, no service tax credit is admissible against exempt services.
Held:
Tribunal held that as per Clause (D) of Rule 5(1) of CENVAT Credit Rules, 2004, in the definition of ”Export turnover of Services”, there is no distinction with respect to payments received from export of services. Further, there is no evidence on record that Appellant has taken any input service tax with respect to exempted services exported out of India. The logic of giving cash refund of taxes used, in relation to export of goods/services under Rule 5 of CENVAT Credit Rules, 2004, is to have ‘Zero rated’ exports and in case of the appellant, no exempted service is provided in the domestic tariff area.
Therefore it was held that even exempted services will be added to the “export turnover of services” and all the unutilized service tax credit pertaining to exported service (including otherwise exempt service) will be admissible as refund under Rule 5 of the CENVAT Credit Rules, 2004.
