Refund of Unutilized CENVAT Credit can be claimed on Export of Legal Services under Rule 5 of CENVAT Credit Rules, 2004: Delhi HC [Read Order]

The Division bench of Delhi High Court held that refund of unutilized CENVAT credit can be claimed on export of legal services under Rule 5 of CENVAT Credit Rules, 2004.

The present appeal is preferred against the order dated 02.09.2021 passed by the Customs, Excise and Service Tax Appellate Tribunal, (CESTAT) New Delhi. The assessee, Anand and Anand is a firm of legal practitioners, which renders legal services to its clients both in India, as well as outside India. Pertinently, the assessee specializes in rendering services in the field of intellectual property rights and as per a finding of fact returned by the Tribunal, 75-80% of its receipts are from export of legal services.

The assessee has, thus, for the periods mentioned hereinabove, sought a refund of unutilized CENVAT credit on account of the export of legal services under Rule 5 of the 2004 Rules.The record shows that insofar as the period covered by the first set of appeals [which, as noticed above, comprised four appeals] is concerned, the revenue had, in the first instance, sanctioned a refund of unutilized credit. This decision, however, was subjected to review by the Principal Commissioner, Service Tax in the exercise of powers under Section 84(1) of the 1994 Act.

Consequently, a decision was taken, by the revenue, to prefer appeals against the Orders-in-Original, whereby a refund had been sanctioned in favour of the assessee. The Commissioner of Appeals reversed the Orders-in-Original passed in favour of the assessee. It is in this background that the assessee, was constrained to move the Tribunal. Aggrieved by the order of the Tribunal the Revenue is in appeal before the Tribunal.

Akshay Amritanshu, Counsel for the Revenue has submitted that the Tribunal has committed a serious error in allowing the appeal preferred by the assessee by misinterpreting the provisions of the 2004 Rules.

J K Mittal, Counsel for the assessee emphasized the point that what was excluded from the definition of “output services”, was that part where the service provider was located within the taxable territory and the service tax was paid by the recipient (on reverse charge basis), who, like the service provider, is also located within the taxable territory.

The Bench consisting of Justice Rajiv Shakdher and Justice Tara VitastaGanju observed that “A plain reading of Rule 5 of the 2004 Rules would show that as long as the service provider provides an output service which is exported without payment of service tax, such service provider will be eligible for refund of CENVAT credit.”

To Read the full text of the Order CLICK HERE

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