Knowledge Centre Services Qualify as Management Consultancy, Not Legal Services: CESTAT Holds Classification Cannot Be Challenged at Refund Stage [Read Order]

The Chandigarh Bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) held that Knowledge Centre Services of OSC Export Services Pvt. Ltd. were classified as Management or Business Consultant Services, not Legal Consultancy Services and further ruled that refund proceedings were executionary and service classification cannot be questioned at the refund stage without challenging the original assessment under Rule 14.

The Appeal arising out of Order-in-Appeal Nos. 415/BL/GGN/2011 dated 30.09.2011 and 503/SVS/GGN/2013 dated 11.09.2013 passed by the Commissioner (Appeals), Central Excise, Delhi-III, Gurgaon.

The Appellant, M/s OSC Export Services Pvt. Ltd., engaged in providing Back Office Operations, HR Services, GIS Services, Data Processing and Support Centre Services to their overseas group company, filed a refund claim of Rs.73,71,769/- under Rule 5 of CCR, 2004 for the period October 2008 -December 2008.

The Rule 5 of the CENVAT Credit Rules, 2004, explained that: Refund of CENVAT Credit.

“(1) A manufacturer who clears a final product or an intermediate product for export without payment of duty under bond or letter of undertaking, or a service provider who provides an output service which is exported without payment of service tax, shall be allowed refund of CENVAT credit as determined by the following formula subject to procedure, safeguards, conditions and limitations, as may be specified by the Board by notification in the Official Gazette :

Refund amount = (Export turnover of goods + Export turnover of services) × Net CENVAT credit Total turnover

Where, -

(A) ―Refund amount‖ means the maximum refund that is admissible;

(B) ―Net CENVAT credit‖ means total CENVAT credit availed on inputs and input services by the manufacturer or the output service provider reduced by the amount reversed in terms of sub-rule (5C) of rule 3, during the relevant period;

(C) ―Export turnover of goods‖ means the value of final products and intermediate products cleared during the relevant period and exported without payment of Central Excise duty under bond or letter of undertaking.

(2) This rule shall apply to exports made on or after the 1st April, 2012 :”

The Revenue issued a show cause notice proposing to deny CENVAT credit on the grounds that: (i) credit was availed on Legal Consultancy Services which became taxable only from 1st September 2009; (ii) payment was made after the impugned period; and (iii) credit was availed on Theme Party and Real Estate Services. The Deputy Commissioner sanctioned partial refund of Rs.49,14,850/- and rejected Rs.24,56,919/-.

The Commissioner (Appeals) upheld the rejection through order dated 30.09.2011, leading to the appellant's Appeal No. E/141/2012. Subsequently, the Revenue filed Appeal No. E/60427/2013 against a separate order dated 11.09.2013, which the appellants contested through Cross-objection No. ST/56334/2014.

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The Counsel for the appellant, Deepak Thackur, stated that the rejected refund pertains to Management or Business Consultant Services, wrongly classified by Revenue as Legal Consultancy Services. The classification adopted by the appellant was not challenged during assessment proceedings and cannot be questioned at the refund stage, which was executionary in nature, relying on ITC Ltd. – 2019 (7) SCC 46 and B.T India Pvt. Ltd. – 2023 (119) GSTL 387.

The Tribunal had earlier held in the appellant's own case (Clifford Chance Business Services Pvt. Ltd.) that Knowledge Centre Services qualify as Management or Business Consultant Services. The appellant argued that CENVAT credit of Rs.9,30,378/- cannot be denied merely because payment was made after the service period, as it was paid before filing the refund claim and disclosed in ST-3 Returns.

Further, the Tribunal observed that Credit on Theme Party and Real Estate Services was admissible, and CENVAT credit cannot be denied without initiating proceedings under Rule 14 of CCR, 2004. Regarding Revenue's appeal involving Rs.8,99,742/-, the amount falls below the National Litigation Policy threshold and should be dismissed.

On the other hand, the Authorized Representative for the Revenue, Yashpal Singh, reiterated the findings of the impugned order concerning the appellant's appeal and the grounds of appeal regarding Revenue's appeal. Further, the Department submitted that the appellant itself admitted that even if required to reverse 8% on CENVAT credit availed on exempted services, the maximum credit that could be denied was Rs.9,80,457/-.

The Tribunal consisted of Judicial Member, S.S Garg and Technical Member, P. Anjani Kumar, heard and reviewed the matter.

The Tribunal, after considering the submissions made, held that Revenue cannot deny CENVAT credit while deciding a refund application without challenging the assessment/self-assessment order or invoking Rule 14 of CENVAT Credit Rules, 2004. It was not open for Revenue to decide the classification or eligibility of input services at the refund stage.

The Tribunal stated that the services rendered by the appellant constitute Management or Business Consultant Services, not Legal Consultancy Services. Following the Supreme Court's decision in ITC Ltd. and Delhi High Court's ruling in B.T. India Pvt. Ltd., the Tribunal emphasized that refund proceedings were executionary in nature and cannot be independent of assessment proceedings.

Further, regarding the appellant's admission about Rs.9,80,457/-, the Tribunal noted the situation is revenue neutral as the amount would be credited to the CENVAT account, and without a show cause notice under Rule 14, inadmissible credit cannot be decided at refund stage.

The Revenue's appeal was dismissed as the amount fell below the National Litigation Policy threshold. Accordingly, Appeal No. E/141/2012 was allowed, Appeal No. ST/60427/2013 was rejected, and Cross-objection No. ST/56334/2014 was disposed of. The Order was pronounced in the open court on 19/12/2025.

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