Citation Codes

Equivalent Citations

citation codes

Case Number

Service Tax Appeal No. 848 of 2009, Service Tax Appeal No. 106 of 2010 and Service Tax Cross Objection No. 115 of 2010

Advocates

Sh. J.P Singh, Advocate
Sh. Sonal Bajaj, SDR
Sh. Sonal Bajaj, SDR
Sh. J.P Singh, Advocate

Judges

Archana Wadhwa, Member (Judicial)
Rakesh Kumar, Member (Technical)

Acts

Section 73(1) of the Finance Act, 1994 and proviso to Section 11A(1) of Central Excise Act, 1944,
provisions of Section 11AC of Central Excise Act, 1944/ Section 78 of Finance Act, 1994
Section 65(105)(zzb) read with Section 65(19) of the Finance Act, 1994.
CENTRAL EXCISE ACT 1944
1.2 Rule 5 of the Export of Services Rules, 2005
Rule 3 of the Export of Services Rules, 2005. 1.3
Rule 5 of the Export of Services Rules, 2005
SECTION 78 FINANCE ACT 1994
Rule 5 of Export of Service Rules, 2005
Rule 5 of the Export of Services Rules
Rule 2(R) of Cenvat Credit Rules, 2006
Rule 2 ( l) of Cenvat Credit Rules, 2004.
Section 73(1) of the Finance Act, 1994
SECTION 83 FINANCE ACT 1994
SECTION 84 FINANCE ACT 1994

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Smart Summary

Structured Summary of the Tribunal Opinion (Per Shri Rakesh Kumar, Member (Technical))

Factual and Procedural Background

M/s Convergys India Services Pvt. Limited (the appellant) provided call centre/customer care services categorized as business auxiliary services under Section 65(105)(zzb) read with Section 65(19) of the Finance Act, 1994, to a foreign client (Convergys Customer Management Group Inc.). Their output services were treated as exports under the Export of Services Rules, 2005 and no service tax was paid on the exported services. The appellant filed rebate claims under Rule 5 of the Export of Services Rules, 2005 for service tax paid on input services used in providing the exported services.

The appellant filed nine rebate claims (July 2005 to March 2006) totaling Rs. 2,88,68,969/-, all within the limitation period under Section 11B of the Central Excise Act, 1944. The Assistant Commissioner (AC) initially sanctioned Rs. 2,50,54,831/- and rejected Rs. 38,14,138/-. The Commissioner (on review under Section 84 of the Finance Act, 1994) subsequently disallowed the sanctioned amount of Rs. 2,50,54,831/-, ordered its recovery under the proviso to Section 73(1) with interest, credited it to the Consumer Welfare Fund (on unjust enrichment grounds), and imposed a penalty of Rs. 2,50,54,831/- under Section 78 of the Finance Act, 1994. The appellant appealed against the Commissioner’s order (Appeal No. ST/848/2009). The revenue, following directions by the Committee of Chief Commissioners, also filed an appeal (No. ST/106/2010) and the appellant filed a cross-objection (ST/CO/115/2010).

Legal Issues Presented

Whether the Commissioner was justified in disallowing the rebate claim under Rule 5 of the Export of Services Rules, 2005 on the ground that certain input services were not specifically declared in monthly declarations under para 3.1 of Notification No. 12/2005‑ST.
Whether the documentary evidence of receipt of payment (FIRCs/FICRs) was insufficient to establish export receipts and thus justified denial of rebate under para 3.4(ii)(b) of Notification No. 12/2005‑ST.
Whether services such as advertisement, chartered accountant and management consultancy qualify as input services for the purpose of rebate and could be denied rebate on the Commissioner’s reasoning that they were not used in providing the exported customer care service.
Whether penalty under Section 78 of the Finance Act, 1994 and recovery under proviso to Section 73(1) could be imposed where the rebate sanction earlier granted by the Assistant Commissioner was later rescinded by the Commissioner on review without evidence of wilful mis‑statement or suppression.
Whether the Commissioner could order crediting the recovered rebate amount to the Consumer Welfare Fund on the basis of unjust enrichment in the context of export rebate (in view of Section 11B of the Central Excise Act and Section 83 of the Finance Act making it applicable to service tax matters).

Arguments of the Parties

Appellant's Arguments

The Commissioner’s crediting of the rebate to the Consumer Welfare Fund was incorrect; principles of unjust enrichment do not apply to export rebate (relying on Tribunal authority).
The appellant had complied with procedures in Notification No. 12/2005‑ST; the AC had earlier verified and sanctioned the rebate after being satisfied.
Services not specifically named in the para 3.1 declarations were covered by the term "Other Services" and it is not feasible to list every possible input service in monthly declarations.
The appellant produced a detailed chart / co‑relation statement showing remittances (FIRCs) corresponding to export invoices; the AC was satisfied with proof of export.
Advertisement, Chartered Accountant and Management Consultancy services are input services (citing the Cenvat definition) and Tribunal precedent in the appellant’s own case (2009 (21) STT‑67) supports rebate eligibility for such services.
No fraud, wilful mis‑declaration or suppression was shown; therefore penalty under Section 78 was unjustified.

Revenue's Arguments (Respondent)

The rebate was correctly denied because the conditions of Notification No. 12/2005‑ST (para 3.1 and para 3.4(ii)(b)) had not been fulfilled (non‑declaration of certain input services and inadequate proof of export via FIRCs).
Advertisement, Chartered Accountant and Management Consultancy services were not used for providing the exported customer care service and hence rebate for those services was not admissible.
Given alleged non‑compliance, recovery and penalty under Section 78 were correctly imposed.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
CCE, Ahmedabad vs. Cadila Laboratories (2002 (142) ELT 279 (SC))	Non‑compliance with procedural requirements in a notification may result in denial of rebate/refund.	The Court held Cadila was not applicable on the facts because there was substantial compliance with Notification No. 12/2005‑ST and no allegation of evasion; therefore denial of rebate on technical non‑mentioning was not justified.
CST, Ahmedabad vs. S. Mohanlal Services (2010 (18) STR 173 (Tri. Ahmd.))	Tribunal view relied upon by appellant that unjust enrichment principle is not applicable to export rebate claims.	The Tribunal referenced this authority for the proposition that unjust enrichment does not apply to export rebate; the Court accepted that unjust enrichment principle could not be applied to deny rebate or credit to Consumer Welfare Fund in this context.
Punjab & Haryana High Court — Convergys' own case (2010 (20) STR 166 (P&H))	Rebate under Rule 5 could not be disallowed for delay in filing the declaration for a specific short period (19.4.2005 to 31.5.2005).	The Tribunal relied on this High Court decision to support the view that a technical lapse in declaration timing or omission should not justify denial of rebate where there is substantial compliance.
Commissioner of Service Tax vs. Converges India (P) Ltd. (2009 (21) STT‑67)	Where input credit has been permitted, there cannot be two different yardsticks; eligibility for credit implies eligibility for rebate.	The Tribunal followed this precedent to hold that advertisement, CA and management consultancy services (accepted as input services for credit) could not be disallowed for rebate; Commissioners denial on this point was unsustainable.
CCE vs. Champher Drugs (1989 (40) ELT 276 (SC))	Principles concerning invocation of extended periods and penal provisions — requirement of evidence before invoking penal consequences.	The Court observed the Commissioner failed to apply the principles from this and other Supreme Court decisions when invoking Section 78 and extended period provisions; therefore penalty and extended‑period demand were unsustainable.
Padmini Products vs. Collector of Central Excise (1989 (43) ELT 195 (SC))	Same cluster of principles on extended period/penalty; high evidentiary threshold before alleging wilful mis‑statement or suppression.	The Tribunal criticised the Commissioner for ignoring this authority; held that in absence of evidence of suppression/wilful mis‑statement the penal provisions should not have been invoked.
Pushpam Pharmaceuticals Company vs. CCE, Bombay (1995 (78) ELT 401 (SC))	Supreme Court guidance on invoking penal and extended‑period provisions — requirement of cogent evidence.	The Court relied on this line of decisions to find the Commissioner’s invocation of penal provisions casual and unsupported by record evidence.
Continental Foundation Jt. Venture vs. CCE, Chandigarh (2007 (217) ELT 177 (SC))	Further Supreme Court authority on standards for extended period and penalties.	Used to reinforce that the Commissioner did not meet the legal standards required for invoking extended period/penalties.
Anand Nishikawa Co. Ltd. vs. CCE, Meerut (2005 (188) ELT 149 (SC))	Authority on invocation of penal provisions and the need for proper examination of evidence before alleging suppression.	The Tribunal cited this case as part of the Supreme Court jurisprudence that the Commissioner ignored when imposing penalties and alleging wilful mis‑statement.

Court's Reasoning and Analysis

The Tribunal analysed each ground on which the Commissioner denied the rebate and imposed penalties. The analysis proceeds issue by issue, based solely on the reasoning contained in the opinion:

Para 3.1 (non‑declaration of certain input services): The Commissioner alleged that fifteen specified input services were not mentioned in the monthly declarations and that they could not be covered by the term "Other Services." The Tribunal noted:
- The department did not contend that the alleged services were not actually received by the appellant.
- There was no allegation that invoices for input services were not submitted as required by para 3.4(a)(ii); the AC had accepted the declarations after verification (except for one service earlier rejected), and the AC granted the rebate after being satisfied.
- Omission to list every anticipated input service in monthly declarations is a technical lapse where the declarations otherwise disclosed "Other Services" and the rebate claims were supported by invoices. The Tribunal found such lapses could not justify denial of the entire rebate where there was substantial compliance and no suggestion of evasion.
- The Tribunal rejected the applicability of Cadila Laboratories (Supreme Court) in the particular facts because here there was substantial compliance and no likelihood of evasion or misuse.
Para 3.4(ii)(b) (proof of export via FIRCs): The Commissioner relied on the absence of export invoice numbers on FIRCs to conclude services could not be linked to remittances. The Tribunal observed:
- The appellant produced a co‑relation statement linking export invoices to FICRs, and the AC had explicitly found that requisite evidence as per para 3.4 was filed.
- Merely because FIRCs did not bear invoice numbers, it does not follow that they do not relate to the appellant’s export services. The Tribunal found the Commissioner’s rejection on this ground unsustainable in the absence of any discussion or negative finding by the AC on this correlation.
Eligibility of advertisement, chartered accountant and management consultancy services: The department accepted these services met the definition of input service for Cenvat purposes but argued they were not used in providing the exported customer‑care service. The Tribunal noted:
- Tribunal precedent in the appellant's own earlier case held that once credit is permitted for an input service, rebate eligibility cannot be separately denied on a different yardstick; the Tribunal followed that reasoning and concluded the Commissioner’s denial was not sustainable.
Imposition of penalty and invocation of extended‑period recovery: The Tribunal emphasised:
- The Commissioner invoked penal provision Section 78 alleging willful mis‑statement and suppression but did not point to any new evidence or collusion with the AC who earlier sanctioned the rebate after verification.
- Supreme Court authorities require careful adherence to evidentiary standards before extended‑period or penal provisions can be applied. The Tribunal found the Commissioner had not applied those standards or cited supporting evidence and therefore the penalty and extended‑period demand were unsustainable.
Credit to Consumer Welfare Fund on unjust enrichment grounds: The Tribunal held:
- Section 11B of the Central Excise Act, as made applicable to service tax by Section 83 of the Finance Act, 1994, precludes application of the unjust enrichment principle in the context of export rebate. Accordingly, the Commissioner’s order to credit the amount to the Consumer Welfare Fund was incorrect.
- Moreover, because the denial of rebate itself was found unsustainable, crediting the amount to Government accounts or the CWF was not justified.

Holding and Implications

The Tribunal set aside the impugned order of the Commissioner; the appellant's appeal was allowed and the revenue's appeal was dismissed. The appellant's cross‑objection was disposed of.

Direct consequences for the parties (as stated in the opinion):

The Commissioner's disallowance of the rebate claim of Rs. 2,50,54,831/-, the recovery order (under proviso to Section 73(1)) and the related interest were set aside.
The Commissioner's order to credit the amount to the Consumer Welfare Fund on the basis of unjust enrichment was held unsustainable.
The penalty of Rs. 2,50,54,831/- imposed under Section 78 of the Finance Act, 1994 was held to be without basis and therefore could not stand.

The Tribunal expressly relied on existing case law and did not purport to lay down a novel legal principle; it applied those authorities to the facts and concluded that the Commissioner’s action was erroneous for want of substantive evidence of evasion or suppression.

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M/S Convergys India Services Pvt. Limited v. Cst, New Delhi .

Honble Sh. Rakesh Kumar, Member (Technical) Order No._____ Per: Shri Rakesh Kumar: The facts leading to these appeals are in brief as under:- 1.1 M/s Convergys India Services Pvt. Limited, Gurgaon (hereinafter referred to as the appellant) are engaged in the business of providing call center (customer care) services under the taxable service category of business auxiliary services, as defined under Section 65(105)(zzb) read with Section 65(19) of the Finance Act, 1994. They had entered into service agreement with Convergys Customer Management Group Inc. (hereinafter referred to as CMG). The appellant are, thus providing the taxable services of business auxiliary services to their client abroad. Since the output services were being treated as export under the Export of Services Rules, 2005, no service tax was being paid on the call service provided by them to their client abroad. The appellant filed a claim under Rule 5 of the Export of Services Rules, 2005 for rebate of the service tax paid on input services used providing of their output service. Rule 5 of the Export of Services Rules, 2005 provides for grant of rebate of central excise duty paid on input services used in or in relation to providing of their output service. 1.2 Rule 5 of the Export of Services Rules, 2005 provides for grant of rebate of central excise duty paid on input and service tax paid on input services used in providing the export service out of India, subject to such conditions or limitations, if any, and fulfillment of such procedure, as may be specified, in the notification issued by the Government. The Government has issued Notification No. 12/2005-ST dated 19.04.1995 prescribing the condition and also the procedure be followed for claiming rebate under Rule 5 of the Export of Services Rules. In terms of para 3.1 of the notification, the provider of taxable service for the purpose of claiming of rebate on export of service shall, prior to the date of export of taxable service, file a declaration with the jurisdictional Assistant /Deputy Commissioner of Central Excise describing the taxable service intended to be exported alongwith the description, quantity, value, rate of duty and amount of duty payable on inputs actually required to be used in providing taxable service to be exported; and the value and amount of service tax and cess payable on input services actually required to be used in providing taxable service to be exported. Para 3.2 of the notification provides that the declaration so filed by the service exporter shall be verified for their corroboration by the Assistant Commissioner / Deputy Commissioner of Central Excise and he may, if necessary, call for any relevant information or samples of inputs and if after such verification, the Assistant/Deputy Commissioner of Central Excise is satisfied that there is no likelihood of evasion of duty/ service tax, he may accept the declaration. Para 3.4 of the notification prescribes the procedure for presentation of claim for rebate and in terms of para 3.4(ii), the application for rebate shall be accompanied by invoices for the inputs / input services, documentary evidence of receipt of payment against taxable service exported, evidence of payment of duty on inputs and service tax including cess on input services used for providing taxable service exported and also a declaration that the taxable services, in respect of which rebate has been claimed, have been exported in terms of Rule 3 of the Export of Services Rules, 2005. 1.3 In this case, the appellant filed nine rebate claims for the months from July 2005 to March 2006 with the jurisdictional Assistant Commissioner for total amount of Rs. 2,88,68,969/-. All these rebate claims have been filed within the limitation period prescribed under Section 11B of the Central Excise Act, 1944. The jurisdictional Assistant Commissioner scrutinized these rebate claims and vide order-in-original dated 23.10.2007 sanctioned the rebate claims of total amount of Rs.2,50,54,831/- and rejected the claim for Rs. 38,14,138/-. Out of Rs.38,14,138/- which was rejected, an amount of Rs. 18,25,612/- had been rejected on the ground that same was in respect of outdoor caterers service, which was not eligible and in respect of mandap keeper, real estate agents, erection, installation and commissioning services which have not been included in the declaration. The rebate claim for Rs. 19,88,526/- had been rejected for non submission of original invoices. In respect of the Assistant Commissioners order rejecting the claim of Rs. 38,14,138/-, the appellant filed an appeal before the Commissioner (Appeals) who vide order-in-appeal dated 30.09.2008 set aside the order of the Assistant Commissioner and allowed the claim in respect of that amount. In the present proceedings, there is no dispute about the amount of Rs.38,14,138/-. 1.4 As regards the rebate claim of Rs. 2,50,54,431/- which had been sanctioned by the Assistant Commissioner, this portion of the claim was examined by the Commissioner who was of the view that ACs order sanctioning the same was not correct and under the review powers vested under Section 84, show cause notice was issued for disallowing the rebate claim on the grounds that- (i) in respect of number of some services, the required declaration had not been filed as per para 3.1 and the words other Services in the declaration filed under para 3.1 of the Notification No. 12/2005-ST.(NT) would not cover the services used but not specifically mentioned in the declaration, (ii) the proof of export submitted is not satisfactory and (iii) services of Chartered Accountant Management Consultancy and advertisement are not the services which can be said to have been used for providing the output services which has been exported. Subsequently, the Commissioner vide order-in-review No. 45/RDN/2009 dated 22.10.2009 passed under section 84 of the Finance Act, 1994 disallowed the entire rebate claim of Rs. 2,50,54,831/-, ordered its recovery from the appellant under proviso to Section 73(1) of the Finance Act, 1994 alongwith interest on it. However, he at the same time, also ordered its credit to Consumer Welfare Fund on the ground that its sanction would amount to unjust enrichment, as the charges being received by the appellant from their client abroad are cost of operating call centre plus 10% of that cost, it indicates that they are recovering service tax from their client. He also imposed penalty of Rs. 2,50,54,831/- on the appellant under Section 78 of the Finance Act, 1994, but did not impose any penalty under section 77 of the Act. The present appeal No.ST/848/2009 has been filed against the order of the Commissioner disallowing the rebate claim of Rs. 2,50,54,831/- ordering its recovery alongwith interest and its credit to the Consumer Welfare Fund and imposing penalty of equal amount on them under Section 78 of the Finance Act, 1994. 1.5 The Commissioners order was examined by the Committee of Chief Commissioners, which dated 05.01.2010 observing that the Commissioners order ordering credit of rebate claim to Consumer Welfare Fund is not correct, and that in view of the apex Courts judgement in the case of CCE, Ahmedabad vs. Cadila Laboratories (P) Ltd. reported in 2002 (142) ELT 279 (SC) non-compliance of the procedure as laid down in the notification issued under Rule 5 of Export of Service Rules, 2005 shall result in denial of rebate claim to the appellant, directed the Commissioner to file an appeal to the Tribunal for correct determination of these points. The revenue wants to disallow rebate claim to be credited to the Government Account and also wants the penalty to be upheld. The appeal No. ST/106/2010 has been filed by the revenue in pursuance of the direction dated 05.01.2010 of the Committee of the Chief Commissioners and in respect of the appeal of the revenue, the appellant have filed Cross Objection No. ST/CO/115/2010.

2. Heard both the sides.

3. Shri J. P. Singh, Advocate, the ld. Counsel for the appellant, pleaded that Commissioners order ordering credit of the rebate claim to Consumer Welfare Fund is totally incorrect, and as per the provisions of section 11b, the principles of unjust enrichment not applicable in respect of export rebate, that same view has been taken by the Tribunal in case of CST, Ahmedabad vs. S. Mohanlal Services reported in 2010 (18) STR 173 (Tri. Ahmd.), that claiming the rebate, in question, the procedure as prescribed in the Notification No. 12/2005-ST dated 19.04.2005 had been followed, that the jurisdictional Assistant Commissioner had sanctioned the rebate of Rs. 2,50,54,831/- after satisfying himself in this regard, that Commissioners finding that the provisions of para 3.1 of the Notification No. 12/2005-ST dated 19.04.2005 have not been followed inasmuch as a number of services are not mentioned in the declarations filed, is not correct; that as regards the proof of export in form of details of the remittance received for export of services, the appellant had produced a detailed chart in this regard and the jurisdictional Assistant Commissioner had satisfied himself in this regard; that no condition prescribed for claiming rebate in Notification No. 12/2005-ST had been contravened; that in view of this, the Commissioners order denying the rebate claim, and ordering its recovery is without any basis; that in the appellants own case the Honble Punjab & Haryana High Court reported in 2010 (20) STR 166 (P&H) has held that even though for the period 19.4.2005 to 31.5.2005, there was no declaration, the rebate claim for this period cannot be denied; that ratio of Punjab & Haryana High Court is squarely applicable to this case and even if the Tribunal holds certain service had not been specifically declared, the rebate cannot be denied and that there is absolutely no justification for penalty of Rs. 2,50,54,831/- imposed under Section 78 on the appellant as no fraud, wilful mis-declaration, on suppression of facts etc. is involved. He, therefore, pleaded that the impugned order is not correct.

4. Shri Sonal Bajaj, Ld. SDR defended the impugned order of the Commissioner disallowing the rebate claim and ordering its recovery and pleaded that since the conditions as prescribed in the Notification No. 12/2005-ST for claiming rebate have not been fulfilled, the rebate claim has been correctly denied and its recovery from the appellant has been correctly ordered and penalty has been correctly imposed under Section 78 of the Finance Act, 1994.

5. We have carefully considered the submissions from both sides and perused the record. The rebate has been denied by the Commissioner on three grounds- (i) In the monthly declarations filed in terms of para 3.1 of the notification No. 12/2005-ST, the input services namely; Air Travel Agents Services, Architects Services, Business Auxiliary Services, Cargo Handling Services, Cleaning Services, Commercial Training or Coaching Services, Consulting Engineers Services, Customs House Agents Services, Event Management Services, Internet Services, Manpower Consultancy Services, Storage & Warehousing Services, Technical Inspection & Certification Services, Technical Testing & Analysis Services and tour Operators Services have not been mentioned and the appellants contention that these services are covered by Other Services in their declarations, is not acceptable; (ii) Condition of para 3.4 (ii)(b) of the Notification No. 12/2005-ST is not fulfilled inasmuch as FIRCs submitted by the appellant as an evidence of receipt of remittance against export of taxable services do not contain the invoice number etc. of the export invoices, and therefore it is not possible to establish that the FIRCs pertain to the export services; and (iii) Service of advertisement, Chartered Accountants and Management Consultancy cannot be treated as services used for providing output service which was exported and hence in respect of these services export rebate would not be admissible. 5.1 The contention of the appellant is that all the import services had been declared in the monthly declarations that the services in question are covered by other services in the declarations, that in the declarations filed under para 3.1 it is not possible to mention each and every input service expected to be availed during the month and that the Assistant Commissioner after checking had found only three services as not declared but the order of the Assistant Commissioner was set aside by the CCE (Appeals). As regards violation of condition of para 3.4 (ii) (b) of the notification, it has been pleaded by the appellant that co-relation statement had been submitted before the Assistant Commissioner and on that basis he was satisfied regarding the receipt of the payment from the overseas clients. As regards denial of rebate in respect of Advertisement Services, Chartered Accountant and management Consultancy Services, the appellants plea is that these services are input services within the meaning of this term, as defined in Rule 2(R) of Cenvat Credit Rules, 2006 and the question of rebate in respect of these services stands decided in the appellants favour by Tribunal decision in the appellants own case reported in 2009 (21) STT-67.

6. On perusal of the show cause notice issued by the Commissioner, it is seen that with regard to non-fulfilment of the condition of para 3.1 of the Notification No. 12/2005-ST the departments allegation is that 15 input services Air Travel Agents Services, Architects Services, Business Auxiliary Services, Cargo handling Services, Cleaning Services, Commercial Training or Coaching Services, Consulting Engineers Services, Customs House Agents Services, Event Management Services, Internet Services, Manpower Consultancy Services, Storage & Warehousing Services, Technical Inspection and Certification Services, Technical Testing & Analysis Services and Tour Operators Services have not been declared in the monthly declaration and the services cannot be treated as covered under Other Services in the declaration. 6.1 It is not the case of the department that the abovementioned services which are alleged to be not specifically mentioned in the declarations filed under para 3.1 of the notification, have not been received. There is also no allegation that as per the requirement of para 3.4(a) (ii) the invoices for all the input services had not been submitted. On the contrary, in the order-in-original passed by the Assistant Commissioner, he has given a clear finding that declarations filed were accepted by him on due verification of actual use of input services, except for one service viz outdoor caterer services. The Commissioner while concluding that the condition of para 3.1 of the notification has not been fulfilled, has not stated as to how the above finding of the Assistant Commissioner is incorrect, when as per para 3.4(a)(ii) of the Notification No. 12/2005-ST, the rebate application is accompanied by the invoices for inputs and input services as documentary evidence regarding the use of the input services, and there is no allegation of the department that rebate claims were not accompanied by such invoices. In view of this, even if the Commissioners observation that certain services were not mentioned in the declaration is accepted, it would be only a technical lapse and it would not be correct to deny the rebate claim just for the reason that certain input services were not specifically mentioned in the declarations. As held by the Honble Punjab and Haryana High Court in the appellants own case reported in 2010 (20) STR 166 (P&H) the rebate under Rule 5 of the Export of Services Rules cannot be disallowed for delay in filing of declaration under para 3.1 of the Notification No. 12/2005-ST. Moreover, when from the facts narrated in the show cause notice and the impugned order-in-original, it is clear that the declarations, as required under para 3.1 of the notification, were being filed and in those declarations, only some inputs services as mentioned above were not specifically declared, it is highly irrational on the part of the Commissioner to deny the entire rebate claim. Moreover as discussed above, even in respect of services not specifically declared, there is substantial compliance as in every declaration the appellant by mentioning Other Services, had clearly disclosed to the department that they intended to use some services other than those specifically mentioned in the declaration and subsequently while filing rebate claim had enclosed the invoices in respect of those services and therefore in respect of these services, the rebate cannot be denied. As mentioned in para 3.2 of the notification, the basic criteria for permitting the export rebate is the satisfaction of the sanctioning authority that there is no likelihood of evasion of excise duty and service tax i.e. claiming rebate for the inputs/ input services not actually received. In this case, there is not even a whisper of such allegation. The failure to specifically mention certain input services in the declarations required to be filed as per para 3.1 of the notification is, therefore, a purely technical mistake for which the rebate claim can not be denied. The judgement of Honble Supreme Court in the case of Collector of Central Excise, Ahmedabad vs. Cadila Laboratories (P) Ltd. reported in 2002 (142) ELT 279 (SC), relied upon by the department is not applicable to the facts of this case, when there is substantial compliance with the provisions of Notification No. 12/2005-ST regarding the procedure to be followed for claiming the rebate. Therefore, the Commissioners order disallowing the rebate and ordering its recovery is not sustainable and the same is liable to be set aside.

7. As regards the second ground for denial of rebate claim, we find that it is not disputed that the services, in question, have been exported, that is, the same have been provided to client outside India. The appellant have pleaded that they had produced a statement showing the co-relation between the export invoices and the FICRs, but there is no discussion regarding the same in the impugned order. On the contrary, the Assistant Commissioner in para 10 of the order-in-original sanctioning refund rebate claim has given a categorical finding that the appellant have filed the rebate claim alongwith requisite evidence as per para 3.4 of the notification and that they have fulfilled all the conditions of the Notification No. 12/2005-ST. Just because FICRs do not bear the export invoice numbers, it cannot be concluded that the same do not pertain to the service provided by the appellant to their client abroad.

8. As regards the rebate claim in respect of advertisement service, Chartered Accountant Services of Management Consultant Services, the department does not dispute that the same are covered by the definition of input service as given in Rule 2 ( l) of Cenvat Credit Rules, 2004. The departments objection is that these services are not used for providing the Customer Care Services which was exported. On this point the Tribunal in the appellants own case [Commissioner of Service Tax vs. Converges India (P) Ltd. reported in 2009 (21) STT-67] has held that there can not be two different yardsticks, one for permitting credit and the other for eligibility for granting rebate and that whenever credit has been permitted to be taken, the same are permitted to be utilized and when the same is not possible, there is provision for grant of rebate and that without questioning the eligibility for credit, the eligibility to rebate can not be questioned. Following this judgement of the Tribunal, we hold that Commissioners order disallowing rebate in respect of advertisement service, Chartered Accountant Services and Management Consultant service is not sustainable and is liable to be set aside.

9. We are therefore, of the view the grounds on which the rebate claim has been denied by the Commissioner are flimsy and as such the Commissioners order denying the rebate claim and ordering its recovery from the respondent is not sustainable. When the demand of service tax is not sustainable, there is no question of penalty under Section 78 of the Finance Act, 1994. However, we cannot help expressing our anguish at the casualness with which the Commissioner by making the allegation of wilful mis-statement and suppression of facts against the appellant has invoked penal provision of section 78, totally ignoring the fact that the appellant had submitted the rebate claims with all the relevant documents to the jurisdictional Assistant Commissioner who after rejecting the claim for Rs.38,14,138/- had sanctioned the remaining amount of Rs.2,50,54,831/- after being satisfied about is correctness and the rebate sanctioned by the Assistant Commissioner is sought to be recovered by reviewing the ACs order without discovery of any new document indicating mis-statement or suppression of some information by the appellant. In such a case, penal provision could be invoked only if there was evidence of collusion with the AC/DC sanctioning the rebate who inspite of the rebate not being admissible, sanctioned the same. But there is not a whisper of such allegation against the Assistant Commissioner. In case after care we find the provisions of extended period under proviso to Section 73(1) of the Finance Act, 1994 and proviso to Section 11A(1) of Central Excise Act, 1944, together with penal provisions of Section 11AC of Central Excise Act, 1944/ Section 78 of Finance Act, 1994 being invoked in a most casual manner by making the allegation of suppression of fact, wilful mis-statement etc. without examining as to whether there is evidence on record to invoke these provisions and totally ignoring the law laid down in this regard by the Apex Court in a series of judgements CCE vs. Champher Drugs reported in 1989 (40) ELT 276 (SC), Padmini Products vs. Collector of Central Excise, reported in 1989 (43) ELT 195 (SC); Pushpam Pharmaceuticals Company vs. CCE, Bombay reported in 1995 (78) ELT 401 (SC), Continental Foundation Jt. Venture vs. CCE, Chandigarh reported in 2007 (217) ELT 177 (SC), Anand Nishikawa Co. Ltd. vs. CCE, Meerut reported in 2005 (188) ELT 149 (SC) etc. The appellants plea in this regard were dismissed by the Commissioner in para 13F of the order as under:- The ntoicees contention that Interest under Section 75 and penalty under Section 77 & 78 of the Act are not leviable in the present case also does not hold merit because as discussed in para A & B above, this is a case of erroneous refund to the noticees which they availed by way of adopting the means of willful mis-statement and suppressing the facts with intent to claim undue rebate. There is absolutely no discussion in the impugned order about the evidence in this regard as to whether the criteria for invoking these provisions, as laid down in the above mentioned judgements of the Apex Court is satisfied. The only explanation for such type of adjudication is that either the Commissioner is totally ignorant of the judgements of the Apex Court on this issue or in order to error the side of the revenue he has chosen to defy the judgements of the Apex Court. But such adjudication orders are mockery of justice.

10. As regards the Commissioners order ordering the credit of the rebate amount to Consumer Welfare Fund, we are surprised as to how Commissioner, after disallowing the rebate claim of Rs. 2,50,54,831/- and ordering its recovery from the appellant alongwith interest, has ordered the credit of the same amount to the Consumer Welfare Fund. It is only the refund / rebate claim which has been held admissible, can be credited to Consumer Welfare Fund on the ground of unjust enrichment, if applicable. In any case, in terms of the provisions of Section 11B of the Central Excise Act, 1944, as made applicable to Service tax matters by Section 83 of the Finance Act, 1994, the principle of unjust enrichment is not applicable to export rebate. Therefore, the Commissioners order ordering credit of the rebate amount to Consumer Welfare Fund is not sustainable. At the same time, there is no merit in the Revenues plea for crediting this amount to Government Account as the Commissioner while disallowing the rebate claim is not sustainable.

11. In view of the above discussion, the impugned order is set aside. The appeal filed by the appellant is allowed and the appeal filed by the revenue is dismissed. The Cross-objection filed by the appellant also stands disposed of. (Operative portion of the order already pronounced in the Court) [Archana Wadhwa] Member (Judicial) [Rakesh Kumar] Member [Technical] /Pant/

M/S Convergys India Services Pvt. Limited v. Cst, New Delhi .

Structured Summary of the Tribunal Opinion (Per Shri Rakesh Kumar, Member (Technical))

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments

Revenue's Arguments (Respondent)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

M/S Convergys India Services Pvt. Limited v. Cst, New Delhi .

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