Madras High Court
The Commissioner Of Gst & Central ... vs M/S.Sutherland Global Services ... on 24 February, 2021
CMA.No.1303 of 2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 24.02.2021
CORAM :
The Honourable Mr.Justice T.S.SIVAGNANAM
and
The Honourable Ms.Justice R.N.MANJULA
Civil Miscellaneous Appeal No.1303 of 2020
The Commissioner of GST & Central Excise,
Chennai South Commissionerate
MHU Complex,
No.692, Anna Salai,
Nandanam, Chennai – 600 035. ...Appellant
Vs
M/s.Sutherland Global Services Pvt. Ltd.,
No.383, Velachery Tambaram Road,
Vijayanagaram,
Chennai – 600 042. ...Respondent
Civil Miscellaneous Appeal filed under Section 35G of Central Excise
Act, 1944 r/w. Section 83 of Finance Act, 1944 against the impugned order
of the Hon'ble Tribunal in Final Order No.40611/2018 dated 14.03.2018 on
the file of the Customs, Excise & Service Tax Appellate Tribunal, Chennai.
For Appellant : Mr.V.Sundareswaran
Standing Counsel
For Respondent : Mr.Joseph Prabakar
1/10
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CMA.No.1303 of 2020
JUDGMENT
(Delivered by T.S.Sivagnanam,J)
This appeal filed by the revenue under Section 35G of the Central
Excise Tax, 1944 [hereinafter referred to as “CST Act”] is directed against
the order dated 14.03.2018 passed by the Customs, Excise and Service Tax
Appellate Tribunal, South Zonal Bench, Chennai ['the Tribunal' for brevity]
in Final Order No.40611/2018.
2.The appeal has been admitted on 18.09.2020 to decide the following
substantial questions of law:
“i) Whether, the Tribunal was justified in allowing
the refund of the accumulated CENVAT Credit when the
Output Service of Call Centre provided by the Assessee
was exempted under the Notification, having been
exported to foreign country, ignoring the effect of Rule 6
of the CENVAT Rules 2004?
ii) What is the interpretation and interplay of Rules
5 and 6 of CENVAT Rules and can a refund under Rule 5
be granted by the Excise Department Authorities even
though the Services exported out of India are exempted
from payment of any Duty?”
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CMA.No.1303 of 2020
3.The assessee is a 100% export oriented unit and Software
Technology Park of India [STPI] registered with the Service Tax
Department under the “Business Auxillary Service”[BAS] and the assessee
exports taxable services like Call Centre Service and Technical Support
Service. The assessee claimed refund under Rule 5 of the CENVAT Credit
Rules, 2004 [hereinafter referred to as “CCR”]. The original authority
rejected the claim of refund partially since the output services are not
eligible for availing the credit. The services were rent-a-cab service, event
management and video production service, clearing and forwarding
services, operation, repairs and maintenance supply [water supply] and in
respect of import of service availed prior to 01.03.2006 for which claim was
made in November 2006. The original authority opined that the first four
category of services as mentioned above are not eligible input services since
there is no corresponding output service that arises out of those input
services. With regard to the fifth category of service, the output service
having been exempted during the period from 01.03.2006 in terms of
notification No.8/2003-ST dated 20.06.2003, claim having been made in
November 2006 is not sustainable.
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CMA.No.1303 of 2020
4.The assessee being aggrieved by the order-in-original dated
15.12.2008 filed an appeal before the Commissioner of Central Excise
[Appeals], Chennai [hereinafter referred to as “Commissioner [Appeals]].
The said appeal was allowed by order dated 30.06.2010 following an earlier
order in so far as it related to the refund of CENVAT credit on exempted
output service relating to the period prior to March 2006 for which claim
was made by the assessee in November 2006. In respect of the other four
claims for refund, the Commissioner [Appeals] remanded the matter to the
adjudicating authority to follow the guidelines issued by the Board in
Circular No.120/1/2010-ST dated 19.01.2010. The revenue being aggrieved
by the order passed by the Commissioner[Appeals] filed an appeal before
the Tribunal which was dismissed by the impugned order.
5.Mr.V.Sundareswaran, learned Standing Counsel vehemently contend
that under the very scheme of the CCR, 2004, an assessee is not entitled to
take CENVAT credit of the service tax paid on input services used for
provision of exempted service. In this regard, the learned counsel referred
to Rule 2(e) of the CCR, which defines 'exempted services'. Further, it is
contended that any output service provided, providing a taxable service
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CMA.No.1303 of 2020
which is unconditionally exempted by way of notification is barred from
taking CENVAT credit irrespective of the fact that the said service is
provided to domestic clients and to foreign clients and if such output service
provider takes such credit, then it would result in wrong availment of credit.
The learned counsel has drawn our attention to notification No.8/2003-ST
dated 20.06.2003 and the relevant provision of the CCR and sought to draw
a distinction by comparing Rule 5 with that of Rule 6 of CCR and the
statutory Form A prescribed under Rule which is the application for refund
of CENVAT credit under Rule 5 of CCR, 2004. Based on the above, it is
submitted that the Tribunal erroneously rejected the revenue's appeal.
6.Mr.Joseph Prabakar, learned counsel for the respondent sought to
sustain the order passed by the Tribunal by pointing out that the Tribunal
rightly took note of the distinction brought out in the language adopted in
Rule 5 and Rul6 of the CCR and the Tribunal also took note of the earlier
decisions of the other Hon'ble High Courts and rightly dismissed the appeal
filed by the revenue.
7.We have elaborately heard Mr.V.Sundareswaran, learned Senior
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CMA.No.1303 of 2020
Standing Counsel appearing for the appellant/revenue and Mr.Joseph
Prabakar, learned counsel appearing for the respondent/assessee.
8.The legal issue which is brought before this Court to be decided
which have framed as substantial questions hereinabove has been
considered in the earlier decisions rendered by the Hon'ble High Courts. It
appears that the earliest of the decision was in the case of Repro India
Limited vs. Union of India [2009 (235) ELT 614(Bom)]. This decision was
relied on by the High Court of Himachal Pradesh in the case of
Commissioner of Central Excise vs. Drish Shoes Ltd. [2010 (254 ELT 417
(HP)]. The substantial questions of law which were framed for
consideration in the said decision were identical to that of the substantial
questions of law which have been framed in this appeal though the language
adopted may be slightly different. The Court after elaborately considering
the scheme of the CCR, taking note of Rules 3, 5 and 6 held that it is clear
from a bare reading of Rule 5 of the CCE that a manufacturer who exports
final product which are exempt can claim refund of CENVAT.
9.The revenue filed an appeal against the above decision before the
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CMA.No.1303 of 2020
Hon'ble Supreme Court which was dismissed, Commissioner vs. Drish
Shoes Ltd. [2018 (360) ELT A191(SC)]. Similar view was taken by the
High Court of Judicature at Bombay in Union of India vs. Sharp Menthol
India Ltd. [2011 (270) ELT 212 (Bom)], wherein the Hon'ble Court referred
to the decision in Repro India Limited and held that the assessee therein was
entitled for refund. In the said decision, elaborate discussion has been made
with regard to the scheme of the Rules and the distinction which has to be
drawn between Rule 5 and Rule 6 of the CCR. The decision in Sharp
Menthol India Limited was affirmed by the Hon'ble Supreme Court in
Union of India vs. Sharp Menthol India Limited [2015) 320 ELT
A104(SC)].
10.In yet another decision of the High Court of Judicature at Bombay
in the case of Commissioner of Central Excise & Cus., Aurangabad vs.
Jolly Board Ltd. [2017 (50) STR 131 (Bom)], identical issue was
considered and the Court held that the assessee was eligible for refund of
unutilized CENVAT credit of duty paid in terms of Rule 5 of the CCE. In
the said decision, the Court has referred to the decision in the case of Drish
Shoes Limited and Repro India Limited. Identical view was taken by the
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CMA.No.1303 of 2020
High Court of Rajasthan in the case of Commissioner of CGST, Rajasthan
vs. Medicamen Biotech Limited [2019 (368) ELT 324 (Raj.)].
11.Thus, the legal position as set out in the preceding paragraphs will
clearly show that the asessee was entitled for refund. Further, we also find
that the Tribunal has rightly interpreted the words used in Rules 5 and 6 by
pointing out that the words used in Rule 6 are “exempted goods/services”,
whereas Rule 5 does not use these words and uses the words “final
product/output service”. Furthermore, the Tribunal also took note of the
decision in the case of Repro India Limited and Drish Shoes Limited
which we have referred supra. Further, the Tribunal also rightly took into
consideration the effect of the notification No.8/2003-ST by pointing out
that it is an exemption applicable within the territory of India and goods
which are dutiable as well as exempted can be exported, so also, output
services which are taxable and exempted can also be exported. Therefore,
the Tribunal rightly held that the export need not necessarily confine to
dutiable products or taxable services. The idea of Rule 5 was also clearly
set out by stating that it is to avoid export of duty/taxes. Therefore, we find
that there is no error in the order passed by the Tribunal.
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CMA.No.1303 of 2020
12.Accordingly, the appeal filed by the revenue is dismissed and the
substantial questions of law are answered in favour of the assessee. No
costs.
(T.S.S.,J.) (R.N.M.,J.)
24.02.2021
Index: Yes/No
Internet:Yes/No
Speaking Judgment/Non speaking Judgment
cse
To
1.Customs, Excise & Service Tax
Appellate Tribunal,
South Zonal Bench, Chennai
2.The Commissioner of GST & Central Excise,
Chennai South Commissionerate
MHU Complex, No.692, Anna Salai,
Nandanam, Chennai – 600 035.
https://www.mhc.tn.gov.in/judis/
CMA.No.1303 of 2020
T.S.SIVAGNANAM,J
AND
R.N.MANJULA,J
cse
C.M.A.No.1303 of 2020
24.02.2021
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