In relief to Rolex Watch Company Private Ltd, the Mumbai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has directed the service tax department to reconsider their refund claim.
The appellant company challenged the decision of the department on two grounds, firstly, the exclusion of some of the activities from the ambit of service tax and secondly, the ineligibility of a portion of CENVAT credit taken by them for monetization.
The counsel for the appellant, Advocate Sushant Murthy claimed that the ‘consideration’ pursuant to a contractual obligation with M/s Rolex SA for rendering services outside the ‘taxable territory’ should be relieved of the tax component in accordance with rule 5 of CENVAT Credit Rules, 2004.
The bench comprising Technical Member Mr. C J Mathew held that “it is ironical that a tax administration, otherwise keen to perceive ‘service’ in any contractual obligation involving financial flows, contends ‘no service, no consideration’ in the present dispute to deflect eligibility for a refund; a clear instance of, and because it is a revenue administration that does not bind itself to consistent approach, ‘running with the hounds and hunting with hares’ that does not appeal either logically or legally. The lower authorities have not identified the terminal entities that the appellant is purportedly ‘intermediary’ for, the manner in which the ‘intermediary’ service is recompensed in the channelizing of ‘consideration’ from the customer to the supplier or the origin of the supply of service in the course of which the ‘intermediary’ facilitation by the appellant occurs. The adjunct proposition of ‘no service’ to obfuscate this lacuna brings the contradiction to the fore – the determination of ‘intermediary’ is founded upon the obligations in a contract which should not only have been redundant but also not acknowledgeable as a contract if the proposition that the compensation terms therein, not being ‘consideration’ in the absence of ‘service’, are an internal arrangement for reimbursement of expenses is also accepted. Logic and legality are obviously invisible in the conclusions of the lower authorities.”
The Tribunal further observed that “the nature of the service is irrelevant for the purpose of rule 5. All that is required in compliance with the conditions laid down therein which, inter alia, include the undertaking of exports as specified in rule 6A of Service Tax Rules. As pointed out by Learned Counsel, all the conditions therein had been complied with; any counters thereto in the impugned order are, for the reasons supra, without the authority of law. Therefore, the denial of the refund is not within the authority of the law. The appellant, as the provider of ‘service’ outside the ‘taxable territory’, is entitled to be relieved of the tax burden in the value of ‘service’ so exported.”
Concluding the order, the bench held that “However, there is only passing mention of the entitlement in the event of eligibility; all that can be deduced is that the original authority does not controvert eligibility of ` 10,77,183/-. The claim is for a higher amount and the conformity of the remaining portion of the claim to the formulation in rule 5 of CENVAT Credit Rules, 2004 needs the attention of the competent authority.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.
