P.G. Chacko, Member (Judicial)

In Appeal No. ST/1178/2010, the department is aggrieved by an order of the Commissioner(Appeals) sanctioning refund of Rs. 83,423/- to the respondent. The refund claim was filed by the respondent on 22/8/2008 under Rule-5 of the CENVAT Credit Rules 2004 read with Notification No. 5/06 CE(NT) dated 14/3/2006 and the same was of unutilized CENVAT credit taken on nine services which were claimed to be input services and were also claimed to have been used for export of output services viz. consulting engineer’s service and maintenance or repair service during the period from April to June 2008. The original authority found no nexus between the output services and any of the so-called input services and accordingly rejected the refund claim, and also raised a jurisdictional objection apart from disputing the very payment of service tax on the so-called input services. When the matter ultimately came up before the Commissioner(Appeals), he recorded a finding of nexus between the output services on the one hand and the input services on the other in view of Circular No. 120/1/2010 dated 19/1/2010 issued by the Board. As against this decision of the appellate authority, the department submits inter alia that the party was not able to establish that the amount claimed as refund was relatable to the credit of duty taken on input services used in providing taxable output services which were exported. It is submitted that the party had not even attempted to explain how exactly such services were used in providing output services which were exported. It is further submitted that the Board’s Circular purported to explain how to determine that sufficient nexus existed between an input service and an output service. The learned Superintendent (A.R.) submits that the Circular per se does not lay down any nexus between input service and output service and that such nexus needs to be examined as per the guidelines laid down in the Circular. It is submitted that, without adverting to these aspects, the learned Commissioner (Appeals) ordered refund of Rs. 83,423/-. For these reasons, it is urged that the decision of the Commissioner (Appeals) be set aside.

2. Per contra, the submission of the Authorized Representative of the respondent is that the learned Commissioner (Appeals) considered their written submissions regarding nexus between input services and output services and arrived at the right conclusion in accordance with the Board’s guidelines. Therefore his order is not liable to be interfered with.

3. After giving careful consideration to the submissions, I have found substance in the objections raised by the appellant vis--vis the relevant findings of the Commissioner (Appeals). The relevant observations/findings of the Commissioner (Appeals) read thus:-

'As to correlation of input/output services, all the 7 input services, qualify for availment of credit as per Board’s circular No. 120/1/2010 ST dated 19/1/2010. The findings of the original adjudicating authority relating to input services for the output services maintenance or repair is not convincing as this maintenance or repair is for updating and upgrading of software services which is of a regular and recurring nature’.'

On the question whether nexus exists between consulting engineer’s service (output service exported) and input services, the learned Commissioner (Appeals) recorded a fairly clear finding and, therefore, the refund ordered to that extent is not amenable to challenge on the grounds stated by the appellant. However, on the question whether a nexus was established by the party between maintenance or repair service (output service exported) and input services, the impugned order has offered no clear and intelligible finding, apart from an observation to the effect that the input services would ‘qualify for availment of credit as per Board’s Circular No. This part of the appellate Commissioner’s order cannot be sustained inasmuch as it is not a speaking order on the issue. The order seems to have treated the Board’s Circular as a conclusive answer to the nexus issue. In the result, the refund ordered by the Commissioner (Appeals) to the extent of the amount of unutilized CENVAT credit on input services claimed to have been used for export of consulting engineer’s service requires to be set aside and it is ordered accordingly.

4. The impugned order was passed on 8/3/2010 when the Board’s Circular was in force. This circular was not available to the original authority and hence that authority did not have occasion to follow the Board’s guidelines. In the fitness of things, that authority should reexamine the question whether the refund claimant has been able to establish a nexus between consulting engineer’s service (exported) and each of the input services. Needless to say that, in this regard, the Board’s guidelines shall be followed. The appeal No. ST/1178/2010 is allowed by way of remand to this limited extent. It is once again made clear that the respondent is entitled to refund of unutilized CENVAT credit on the input services which were used for export of maintenance or repair service during April to June 2008.

5. Appeal No. ST/2757/2010 filed by the department is directed against the appellate Commissioner’s order on the respondent’s refund claim of Rs. 1,80,763/-, which is the claim for refund of unutilized CENVAT credit taken on input services which were claimed to have been used for export of consulting engineer’s service and maintenance or repair service during the period July to September 2008. The impugned findings of the Commissioner (Appeals) read as follows:

'As to correlation of input/output services, Guidelines as prescribed in the Board’s Circular No. 120/1/2010 dated 19/01/2010 needs to be followed in the subject issue. Nexus between the input services which were not considered for sanctioning refund, and the output service exported needs to be established by the certificate of a Chartered Accountant on the declaration made by the appellant in terms of the said Board’s Circular and the same be furnished to the Department. The findings of the original adjudicating authority relating to input services for the output services are not convincing.'

It is the case of the appellant that the question whether any nexus was established by the party between each of the output services and each of the input services has not been properly addressed by the appellate authority. The learned Superintendent (A.R.) submits that the above findings of the Commissioner (Appeals) proceed on the wrong premise that the said question needs to be examined in view of the Board’s Circular. It is submitted that the party should make a declaration in terms of the Circular and the authority dealing with their refund claim should examine whether such declaration is factually correct. There is nothing to indicate that this exercise was made in the instant case. The learned Superintendent (A.R.) therefore prays for setting aside the impugned order.

6. According to the learned authorized representative of the respondent- company, the appellate Commissioner’s decision discloses proper consideration of the nexus issue and hence it is not liable to be interfered with.

7. After considering the submissions, I find that the Board’s Circular dated 19/1/2010 requires a declaration to be filed by the party disclosing the relevant facts to establish a nexus between the output service and each of the input service. For a claim of refund of Rs 1,80,763/-, there is no requirement of Chartered Accountant’s certificate to be produced by the claimant. However, it is incumbent on the authority to meticulously consider the party’s declaration and decide whether the facts declared by them are correct and whether these facts would go to establish a nexus between the output service and each of the input services. As rightly pointed out by the learned Superintendent (A.R.), the learned appellate Commissioner has not done this exercise. Mere observation to the effect that the findings of the original authority relating to ‘input services for output services’ are not convincing is itself unconvincing. The impugned order does not disclose proper application

of mind to the nexus issue. The appellate authority appears to have proceeded on the premise that the Board’s Circular is the panacea for everything. For all these reasons, I am inclined to set aside the aforesaid findings of the Commissioner (Appeals) and it is ordered accordingly. However, I shall not remand the matter to the lower appellate authority but shall remand it to the original authority (which did not have occasion to consider the Board’s circular) who shall reexamine the nexus issue following the procedure laid down in the Board’s Circular. The original authority shall give reasonable opportunity to the party to file a declaration in terms of the Board Circular and, after giving them a reasonable opportunity of being heard, decide on the question whether nexus was established between each output service and each input service. Accordingly, this appeal is allowed by way of remand to the original authority.