No Denial of Accumulated CENVAT Credit Refund even if Exported Service is Non-Taxable: CESTAT directs ₹61.12L Refund [Read Order]

The Bangalore Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in its recent ruling directed the refund of ₹61,12,804 to an Information Technology EnabledServices (ITES) provider holding that the refund of accumulated Central Value Added Tax (CENVAT) credit cannot be denied merely because the exported services were not taxable at the relevant time.

The appellant Symphony Marketing Solutions India Pvt. Ltd., is engaged in providing IT Enabled Services to overseas clients. The company had filed a refund claim for ₹61,12,804 for CENVAT credit under Rule 5 of the CENVAT Credit Rules (CCR) 2004, read with Notification No. 5/2006-Central Excise (Non-Tariff) dated 14 March 2006.

The department issued a show cause notice rejecting the refund claim on the ground that the services exported by the appellant were in the nature of “Business Support Services” which became taxable only with effect from 16 May 2008 and are not “Information Technology Software Services”.

On appeal to the Commissioner of Central Excise (Appeals) the rejection was upheld.

The appellant submitted that the classification proposed by the Revenue was under Business Support Service. However, the services which they exported were ‘Information Technology Enabled Service’ albeit they are eligible to claim cash refund of accumulated CENVAT credit under Rule 5 of CCR, 2004.

The appellant relied on Karnataka High Court ruling on mPortal India Wireless Solutions Pvt. Ltd. vs. CST (2012) to support his claim where the court had held that the refund of accumulated CENVAT credit under Rule 5 of the CCR, cannot be denied even if the exported service is non-taxable.

The bench comprising D.M. Misra (Judicial Member) and R. Bhagya Devi (Technical Member) found merits in the appellant's contention and concluded that the appellant was eligible for refund of accumulated credit.

The Tribunal further by relying on the mPortal India Wireless Solutions observed that the department’s inconsistent conduct in allowing refund claims for earlier and later periods without raising any dispute about the nature of exported services further supported the appellant’s claim.

Accordingly the appeal was allowed with consequential relief, if any, as per law.

The appellant was represented by Prasad Paranjape, while the Department was represented by Akshay Kumar.

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