Assessee Entitled To Refund Of Unutilized CENVAT Credit On Account Of Export Of Legal Services: Delhi High Court

The division bench of Justice Rajiv Shakdher and Justice Tara Vitasta Ganju observed that, as per Rule 5, as long as the service provider provides an output service which is exported without payment of service tax, such a service provider will be eligible for a refund of CENVAT credit.

The respondent/assessee is a firm of legal practitioners, which renders legal services to its clients both in India and outside India. The assessee specialises in rendering services in the field of intellectual property rights and, as per a finding of fact returned by the Tribunal, 75-80% of its receipts are from the export of legal services. The assessee has sought a refund of unutilized CENVAT credit on account of the export of legal services under Rule 5.

The department contended that since the assessee is in the business of exporting legal services and hence did not pay service tax, it was not eligible for a grant of CENVAT credit.

The assessee contended that Rule 2(p) and Rule 5 stated that what was excluded from the definition of "output services" was that part where the service provider was located within the taxable territory and the service tax was paid by the recipient (on a reverse charge basis), who, like the service provider, was also located within the taxable territory.

The assessee relied on Section 68(2) of the Central Excise Act, 1944 and notification dated 20.06.2012 and Rule 2(1)(d)(i)(D)(II) of the 1994 Rules. It states that as far as an individual or a firm of advocates is concerned, who provides legal services to any business entity located in the taxable territory, the burden of tax is to be borne by the recipient of the service.

The court noted that if Rule 2(p) is read in the manner in which the revenue seeks to read it, it would lead to Rule 5 of the 2004 Rules being rendered redundant.

The court answered the questions of law in favour of the assessee and against the department.

Case Title: Commissioner of CGST Delhi East Versus Anand and Anand

Citation: 2022 LiveLaw (Del) 805

Citation: SERTA 9/2022

Dated: 01.08.2022

Counsel For Appellant: Advocate Akshay Amritanshu

Counsel For Respondent: Advocates J K Mittal

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