Tax Refund Must Be Determined By Nature of Service, Not Registration Mistake: CESTAT Ahmedabad

The Ahmedabad Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) on 23 January, set aside the rejection of a service tax refund claim filed by Dubond Infotech Private Limited, ruling that a clerical error in service tax registration cannot, by itself, defeat a refund claim for exported software development services.

A Bench comprising Judicial Member Ajaya Krishna Vishvesha and Technical Member Satendra Vikram Singh noted that the company had mistakenly obtained registration under "Online Information and Database Access or Retrieval" (OIDAR) services instead of "Information Technology Software Services". The Tribunal observed:

“The department has rejected refund claims of the appellant solely on the ground that the appellant had obtained registration under OIDAR services. In the entire order, no efforts seem to have been made to analyze the agreement between the appellant and its client for deciding classification of service rendered.”

Dubond Infotech had entered into an agreement with a New York-based client to provide software development services, including design, website development and maintenance, user manuals, and other ancillary documentation. The company filed multiple refund claims between March and September 2014, treating these services as exports. However, the clerical error in registration led the department to reject the claims without examining the actual agreement or the nature of the services.

The Department argued that the export of services under Rule 6A of the Service Tax Rules, 1994, and that the place of provision under Rule 9 of the Place of Provision of Services Rules, 2012 was not established correctly. Rule 6A sets out eligibility for claiming refunds for exported services, while Rule 9 determines the “place of provision” of a service—which for IT/software exports depends on whether the recipient is located outside India.

Dubond Infotech contended that the nature of the service, as defined in the contract, should determine classification, not the category under which registration was obtained. The company cited prior rulings, including mPortal India, E-Care India, SPL Developers, Mednautix Outsourcing, and Innodata, to support the argument that registration is not a pre-requisite for claiming a refund.

The Tribunal also referred to a 2017 adjudication in which the authorities had dropped OIDAR-related demands against Dubond Infotech. It emphasised that the place of provision of these exported software services was outside India, satisfying Rule 9 conditions for export, and that the clerical registration error could not override the contractual and factual reality.

Accordingly, CESTAT remanded the matter to the Department for re-examination of the refund claim based on the actual services provided, partially allowing the appeal and enabling Dubond Infotech to have its refund claim reconsidered on the merits.

For Appellant: Chartered Accountant Gunjan Shah

For Respondent: Mr. M P Solanki (Authorized Representative)