Rule 5 of the Export of Services Rules, 2005, read with rule 5 of the Cenvat Credit Rules, 2004 - Rebate of service tax - Period 19-4-2005 to 30-4-2005 and 1-5-2005 to 31-5-2005 - Whether there cannot be two different yardsticks, one for permitting credit and other for eligibility for granting rebate; therefore, without questioning credit taken, eligibility to rebate cannot be questioned - Held, yes - Assessee-company was engaged in rendering customer care services on behalf of foreign clients - For providing said services, it used several input services - Assessee filed declaration in terms of Notification No. 12/2005-ST, dated 19-4-2005, issued under rule 5, and claimed rebate of service tax paid on input services - Revenue rejected rebate claim observing that some services had no direct nexus with output services; some services were only used in maintenance and repair of capital assets and; some services could not be considered as input services; and that required declaration had not been filed before export of services - Whether since there was no dispute raised by department about eligibility of credit to assessee which it had taken, there was no reason to deny rebate - Held, yes - Whether late filing of declaration as per Notification dated 19-4-2005 is only a procedural lapse, and, therefore, Commissioner (Appeals) rightly allowed rebate claim of assessee - Held, yes [Paras 6.7, 7.9 and 8.1]
The assessee was engaged in rendering customer care services on behalf of foreign clients through the medium of telephone, e-mail and web based interaction. The said services fell under the category of ‘Business auxiliary services’. For providing said output service it used several input services. By Notification No. 12/2005-ST, dated 19-4-2005, issued under rule 5, the Central Government granted rebate of service tax paid on input services used for rendering services exported. To claim rebate, the assessee as per requirement of that notification filed declarations for relevant periods and thereafter, filed rebate claim for the relevant periods. The original authority rejected the claim observing that some services had no direct nexus with the output services ; that some services could not be considered as input services; that some services were only used in maintenance and repair of capital assets and; that the required declarations had not been filed before the export of services. On appeal, the Commissioner (Appeals) allowed the rebate claim.
The eligibility to the credit of the duty paid on inputs and the credit of tax paid on input services is not contingent on whether the services are exported or not. It was incidental that the assessee was exporting entire services. It could as well be rendering, or may render in future, the same services to domestic customers. It could be partly providing the said services to domestic customers and could be partly exporting services. In all the situations, the criteria for the eligibility of the credit will be the same. [Para 6.4]
In the instant case, the assessee was admittedly providing only taxable services. The show-cause notice did not question the validity of the CENVAT credit taken on the various services used by the assessee. As a result, if it was rendering the same services to domestic customers, partly or fully, it would be entitled to use the credit to pay service tax. [Para 6.5]
Rule 5 of the CENVAT Credit Rules provides for refund of credit of duty on inputs and credit of service tax on input services used in providing output services. [Para 6.6]
From rule 5 of the CENVAT Credit Rules, it is clear that there cannot be two different yardsticks, one for permitting credit and the other for eligibility for granting rebate. Whatever credit has been permitted to be taken, the same is permitted to be utilized and when the same is not possible, there is provision for grant of refund or as rebate. Without questioning the credit taken, the eligibility to rebate cannot be questioned. [Para 6.7]
In common parlance, if the cost of such goods and services becomes part of the cost of the final product or the cost of the output services, as the case may be, then they are understood as input and input services in relation to said final products or the output services. [Para 7.1]
The definition of the term ‘input services’ is an inclusive definition. When services used in connection with setting up the premises and also services used in connection with repair of the premises are considered as ‘input services’, it would be appropriate to consider services used for in-between-activities, namely, day-to-day maintenance as also part of the input services. [Para 7.3]
The show-cause notice alleged that the assessee had used imported input services and in connection with procurement of such services, it had also used certain other input services by using telephone, telex, fax, e-mail, etc., and such services used for procuring such input services could not be treated as input services. This appeared to be erroneous. Using telephone, telex, fax, e-mail, etc, could not be treated as output services provided by the assessee. Therefore, such input services used in connection with procurement of other input services have to be treated necessarily as input services. [Para 7.4]
The imported ‘Management consultancy services’ had been used only in relation to providing services which were exported. Obviously, the cost of such imported services forms part of the value of exported services. Further, the cost of services used in procuring such services from foreign country also necessarily go into the cost of imported input services. The position did not change, even when service tax on the imported services was paid by the assessee in view of the special legal provision. [Para 7.5]
The Tribunal in the case of CCE v. Deloitte Tax Services India (P.) Ltd.  16 STT 449 (Bang. - CESTAT) has held that services such as equipment hiring, professional consultation service, recruitment service, security service, telephone service, transport service, training service, facility operation service, courier service, cafeteria service and advertisement service are to be considered as input services in relation to rendering of business auxiliary services. [Para 7.8]
In the instant case, there was no dispute raised by the department about the eligibility to the credit to the assessee which it had taken. Further, the terms ‘inputs’ and ‘input services’ used in the Export Service Rules have been given the same meaning as in CENVAT Credit Rules as per rule 2(b) and rule 2(c) of the Export of Services Rules. In substantially the same situation, rule 5 of the CENVAT Credit Rules provides for refund of credit of duty on inputs and credit of service tax on input services used in providing output services. Therefore, there was no reason to deny the rebate. [Para 7.9]
The notification itself has extended the concessions subject to such conditions, limitations and also prescribed the procedure. The filing of declaration has been listed under the procedure. Therefore, late filing of the declaration as per Notification dated 19-4-2005 is only a procedural lapse. The declaration relates to both inputs as well as input services. The verification in respect of input services is mainly based on documents unlike in the case of inputs. [Para 8.1]
The document based verification can be at a later point of time. The non-observance of a procedural condition in the instant case was of a technical nature and could not be used to deny the substantive concession. Further, in respect of export, a liberal view is required to be taken. Non-fulfilment of the procedure cannot lead to denial of the benefit under the beneficial legislation providing for export benefits. [Para 8.3]
The appeals by the department were rejected.
CASES REFERRED TO
CST v. Keane Worldzen India (P.) Ltd. [Final Order No. 268/2008 dated 7-12-2007] (para 5), Kamakhya Steels (P.) Ltd. v. CCE 2000 (121) ELT 247 (Trib. - LB) (para 5), CCE v. Deloitte Tax Services India (P.) Ltd.  16 STT 449 (Bang. - CESTAT) (para 5) and CCE v. Dynaspede Integrated Systems Ltd. 2002 (147) ELT 541 (Trib. - Chennai) (para 5).
Vijai Kumar for the Appellant. Abhishek Rastogi and Dheeraj Srivastava for the Respondent.