The Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has rejected claims made by Tech Mahindra in respect of refund of unutilized cenvat credit for on-site services to overseas clients.
The bench of Dr. Suvendu Kumar Pati (Judicial Member) and Anil G. Shakkarwar (Technical Member) has observed that cenvat credit is cenvat credit of service tax paid on transactions that completely took place beyond the territorial jurisdiction of India and under the provisions of Section 64 of Finance Act, 1994, service tax was not leviable on the same. Therefore, the denial of refund of the cenvat credit is upheld.
The Appellant/assessee, Tech Mahindra provides information technology software services to its clients located outside India. Appellant provides the said services under two modules which shall be hereinafter referred to as Model-I and Model-II.
The transactions that are under Model-I are not under dispute in the present appeals and, therefore, details of the same are not required because in the case of Model-I, appellant directly enters into contracts with overseas customers for providing information technology software service (ITSS). Appellant raises invoice on overseas customers for entire service rendered and the said transactions are not in dispute in the present appeal.
Model-II covers only approximately 2% of the total transactions that take place between the appellant and their overseas customers. In Model- II outside India subsidiaries are involved. In this model the customers enter into a contract with a subsidiary of the appellant located outside India and then the entire contract is assigned to the appellant in India. Appellant assigns the onsite components of the contract to overseas subsidiaries.
Overseas subsidiary raises an invoice for the entire contract value on overseas customers. Appellant raises an invoice for the entire contract value on the overseas subsidiary. Overseas subsidiary raises another invoice on the appellant and recovers the cost plus markup of onsite services provided by the subsidiary to the overseas customer. Appellant discharges service tax under reverse charge on the invoice value for invoices which are raised by overseas subsidiaries of the appellant.
In Model-II transactions, onsite service is provided by subsidiaries out of India. The subsidiary is out of India, the client is out of India and the service is also provided out of India. Service tax paid under reverse charge on the value of invoice raised by the subsidiary on the appellant for doing onsite work in respect of overseas customers for which an invoice is raised to recover cost plus markup is availed by the appellant as cenvat credit.
The cenvat credit is sought to be refunded by the appellant under Rule 5 of Cenvat Credit Rules, 2004 through Batch-I appeals for the period from October 2014 to June 2017. Due to ongoing dispute with Revenue as to whether such cenvat credit is admissible to the appellant or not under the provisions of Rule 2(l) of Cenvat Credit Rules, 2004, alternatively the appellant started filing claim for refund of entire service tax paid by it for the period from April 2015 to June 2017.
The appellant contended that Service tax is a contract based levy and leviable on each contract of service and the supply under each contract is distinct provision of service. The onsite services provided by the appellant through overseas subsidiaries under Model-II qualify as export of service. c. The entire contract value should be taken into account for calculating the export turnover to determine the refund claim as per Rule 5 of Cenvat Credit Rules, 2004.
“Even if it allow the appeals, the refund sanctioning authorities will not be in a position to decide the quantum of refund to be allowed to the appellant in each individual refund claim dealt with in each appeal of Batch-II appeals. Therefore, such an order will be unimplementable order and an unimplementable order is not sustainable in law and, therefore, for want of sufficient information, we are not able to pass orders for allowing refund in case of Batch-II appeals. We, therefore, hold that in the absence of complete information required to pass orders, we are not able to allow appeals in Batch-II appeals” the tribunal said.
Case Details
Case Title: Tech Mahindra Ltd. Versus Commissioner of Service Tax-I, Pune
Case No.: Service Tax Appeal No. 86917 of 2016
Date: 21.03.2025
Counsel For Petitioner: Jay Chheda
Counsel For Respondent: S. Varalakshmi
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