2014 (3) TMI 1032 - AT - Service Tax

Refund claim - Reversal of cenvat credit at the time of getting the refund claim - Whether reversal of cenvat credit at the time of getting the refund claim amounts to non-availment of cenvat credit if the appellant is 100% Export Oriented Unit exporting the goods manufactured and not clearing it in Domestic Tariff Area- Held that The appellant is 100% EOU and not clearing any goods in DTA and therefore there is no possibility for them to avail the cenvat credit. Further they have reversed the cenvat credit before the refund was actually granted to them. Therefore, in view of the decision of the Hon ble Allahabad High Court in the case of Hello Minerals Water (P) Ltd. vs. UOI reported in 2004 (7) TMI 98 - ALLAHABAD HIGH COURT and Mumbai Tribunal s decision in the case of Sagar Twisters vs. CCE Mumbai reported in 2005 (5) TMI 144 - CESTAT MUMBAI the appeal is allowed. - Decided in favour of appellant

Summary

Issues:
1. Availment of service tax credit on inputs by a 100% Export Oriented Unit.
2. Refund claim under Notification No.17/2009-ST dated 7.7.2009.
3. Challenge by the department regarding the reversal of cenvat credit.
4. Interpretation of whether reversal of cenvat credit amounts to non-availment.

Analysis:
1. The appellant, a 100% Export Oriented Unit, exported goods and availed service tax credit on inputs. However, as they did not clear any goods in the Domestic Tariff Area (DTA), they could not utilize the credit. Subsequently, they applied for a refund under Notification No.17/2009-ST dated 7.7.2009, which was initially allowed subject to the condition of reversing the cenvat credit taken. The department contested this refund on the basis that availing the credit initially did not satisfy the conditions of the notification.

2. The Commissioner (Appeals) upheld the department's appeal, leading the appellant to challenge this decision before the Tribunal. The central issue revolved around whether the reversal of cenvat credit at the time of claiming the refund equated to non-availment of the credit. Given the appellant's status as a 100% EOU not clearing goods in the DTA and the fact that they had reversed the credit before the refund was granted, the Tribunal analyzed relevant legal precedents.

3. Citing the decision of the Hon'ble Allahabad High Court in the case of Hello Minerals Water (P) Ltd. vs. UOI and the Tribunal's own ruling in Sagar Twisters vs. CCE, Mumbai, the Tribunal found in favor of the appellant. The precedent cases supported the view that the reversal of cenvat credit before the refund was received demonstrated compliance with the conditions, as the appellant had no opportunity to avail the credit due to their operational circumstances.

4. Consequently, the Tribunal allowed the appeal of the appellant, emphasizing that the reversal of cenvat credit in this context did not amount to the availment of credit, considering the unique circumstances of the appellant being a 100% EOU not involved in DTA clearances. The decision highlighted the importance of practical application and compliance with specific regulatory conditions in such cases, ensuring fairness and adherence to legal provisions.

Conclusion:
The judgment by the Tribunal in this case clarified the interpretation of the conditions for refund claims under Notification No.17/2009-ST for 100% Export Oriented Units, emphasizing the significance of compliance with regulatory requirements and the practical implications of credit reversal in specific operational contexts.