CESTAT Allows SPI Technologies' ₹2.47 Crore Refund On Export Services Despite CENVAT Reversal

On 8 June, the Chennai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) held that refund of service tax paid on input services used for export of services cannot be denied merely because CENVAT credit was initially availed and later reversed, or due to procedural lapses such as delayed filing of declarations.

Technical Member M. Ajit Kumar and Judicial Member Ajayan T.V. allowed the appeal filed by SPI Technologies India Pvt. Ltd., a Software Technology Park of India (STPI) unit engaged in exporting IT-enabled services. The Bench held:

“It is seen that the Adjudicating Authority in his Order in Original has recorded that the appellant has also reversed their cenvat credit already taken and the same was reflected in the ST 3 half yearly return filed for the period from October 2009 to March 2010 and that the facts were indeed conveyed to the Department vide their letter dated 24.04.2010. But for having availed the credit, despite reversing the same, it was chosen to treat it as noncompliance of the said condition…”

The company filed nine refund claims aggregating to Rs. 2.47 crore under Notification No. 12/2005-ST, seeking refund of service tax paid on input services used for export of services.

The Department issued a show-cause notice proposing rejection of the refund claims on two grounds: non-filing of declarations prior to export of services as required under the notification, and alleged violation of conditions on the ground that the company had availed CENVAT credit on the same input services for which refund was claimed.

The company contended that it initially availed CENVAT credit in its records but later reversed it, and it intimated the reversal to the department. It also submitted that its statutory tax audit reports reflected nil availment of CENVAT credit during the relevant period and argued that denial of refund for procedural lapses such as delayed declarations could not stand.

The Tribunal noted that the adjudicating authority itself had accepted that the company reversed the CENVAT credit and that it reflected in statutory returns and communications to the department. Relying on settled precedents, it held that reversal of CENVAT credit places the taxpayer in the same position as if it had never availed the credit, thereby satisfying the relevant condition under the notification.

On declarations, the Bench held that procedural or technical lapses cannot defeat substantive export benefits where the fact of export and use of input services remains undisputed. It reiterated that procedural requirements cannot override substantive entitlement.

The Tribunal also reiterated the principle that taxes should not be exported, and held that the declaration requirement only seeks details of inputs and input services used for export services, which the company's records already contained. It set aside the impugned order after holding that denial of refund lacked legal basis and directed processing of the refund claims.

Accordingly, the CESTAT allowed the appeal with consequential relief.

For Appellant: Ms. Radhika Chandrashekar, Advocate

For Respondent: Ms. O.M. Reena, Authorized Representative