One-to-one correlation between output service and input service not required for claiming refund

Case Law

General Motors Technical Centre India Pvt. Ltd. 

Vs

Commissioner of Central Tax [Service Tax Appeal No. 20400 of 2020, dated April 1, 2021]

Facts of the Case :-

Appellant (General Motors Technical Centre India Pvt. Ltd ) is registered with the Service Tax Department and is engaged in providing Consulting Engineer Services to their clients/customers located outside India and are availing the facility of CENVAT credit of service tax paid on input services which are required for providing the resultant output service as per the provision of Cenvat Credit Rules, 2004.

Appellant filed a refund claim for Rs. 4,26,79,323/- on 20/09/2016 for refund of unutilized CENVAT credit in respect of service tax paid on various input services said to have been used for providing output services exported outside India relating to the period OCT, 2015 to Dec, 2015 as per the provisions of Notification No. 27/2012-CE (NT) dated 18/06/2012 read with Rule 5 of Cenvat Credit Rules, 2004.

After following the due process, the original adjudicating authority (“AA”) vide Order-in-Original dated 21/06/2018 granted refund of Rs. 4,15,49,358/-and rejected the balance claim amounting to Rs. 11,29,965/- considering it to be ineligible CENVAT credit on certain services.

Aggrieved by the said order, appellant filed appeal before the Commissioner who upheld the order of the original authority except allowing CENVAT credit of Rs. 34,250/-  availed in respect of Technical Consultancy Services and for the Service Tax Appeal No. 20400 of 2020 remaining amount of Rs. 10,95,715/- the refund claim was rejected mainly on the ground of lack of nexus and for certain services copy of invoice is not produced.

Being aggrieved by the Impugned Order this appeal has been filed.

Issue:

whether the Contention of Respondent was correct in rejecting the refund claim of the Appellant on the ground of lack of nexus between output services and input service used in such services?

Observation of the Tribunal

After considering the submissions of both the parties and perusal of the material on record and after going following points has been observed

  1. Respondent has rejected the refund only on the ground of lack of nexus between the input services and the output services which is exported and the Appellant had filed the invoices and the same has been examined by the A.A. and has also filed the invoices before the Tribunal.
  2. All the services on which the refund has been rejected have been consistently held to be input services in various decisions relied upon by the Appellant and it has been consistently held by the Tribunal in various decisions with a view that after the amendment of Rule 5 of CCR, there is no need for one to one correlation between the input services and the output services.
  3. Board Circular dated 16/03/2012 also clarified that no correlation is required because the intention of the Government is to allow refund to the exporters and the Circular/clarification issued on this subject have to be viewed with the objective of allowing the refund.
  4. Department / Respondent has not questioned the service tax paid on input services at the time when the cenvat credit was taken and as per the decision of this Tribunal in the case of K Line Ship Management India Pvt. Ltd. Vs. CGST, Mumbai West 2019-TIOL-100-CESTAT-MUM., it has been held that the Department is not permitted to question the same at the time of claiming refund.
  5. Further in view of the clarification given by the Tax Research Unit of CBEC vide their letter dated 16/03/2012, the amended Rule 5 of Cenvat Credit Rules does not require correlation between the output service exported and the input service used in such output services exported.
  6. Appellant has availed the services of Rent-a-cab for the purpose of bringing and dropping the employees and this service has been used for providing the output service and the invoices have been produced by the Appellant.
  7. IT was held that, rent-a-cab service in the present case has been used for providing the output service and hence gets covered under the main clause of the definition of “input service”. Therefore, the Appellant is entitled to refund of CENVAT credit of INR 10, 95,715/-.

Conclusion:-

It was Held that, there is no need to establish one-to-one correlation between output service exported and input service used in such services and set aside the order passed by the Commissioner (Appeals) rejecting the refund claim of unutilized CENVAT credit of the assesse.

Therefore, Court has ruled in favour of the petitioner and allowed the appeal