2015 (3) TMI 1230 - AT - Service Tax

Rejection of Refund claim - in respect of certain claims, credit could not have been taken at all - in respect of certain refund claims, input services were received earlier and used for exported services and credit was taken much later i.e. after the export was over. Therefore there is no nexus between the input services and exporter output service - Held that - during the relevant time, there was no time prescribed for taking the credit. Once credit was admissible and unless there was no nexus between the output service exported and input services were used when credit was taken, the refund of the same also could not have been denied since the substantive ground of taking CENVAT credit in the first place being correct would lead to the obvious conclusion that ultimately if it gets accumulated the refund has to be sanctioned. Notification No.5/2006-CE(NT) is issued to provide safeguards and conditions to implement the sanction of refund envisaged under Rule 5 and not to defeat the purpose of whole CENVAT credit scheme. Therefore once credit is admissible and taken and not held to be inadmissible and if it gets accumulated, the conditions in Rule 5 can be said to have been fulfilled. There is also a Boards instruction saying that the CENVAT credit taken forms a pool and can be used for any purpose once credit is admissible. Appeal allowed - matters are remanded to the original adjudicating authority to decide the admissibility of the refunds claimed.

Summary

Issues:
Challenging common OIA No.26-38/2010 for refund claims from April 2009 to March 2010; Appeal No.ST/1108/2012 for refund claim from April 2009 to September 2010 against OIA No.5/2012 dt.25/1/2012. Refund claims based on accumulated CENVAT credit under Notification No.5/2006-CE(NT) and Rule 5 of CENVAT Credit Rules 2004. Grounds for rejection: credit not taken at all; no nexus between input services and exported output service due to delayed credit utilization.

Analysis:
The appeals challenged a common order rejecting refund claims based on accumulated CENVAT credit under relevant rules. The primary issue was the nexus between input services and exported output service, especially when credit utilization was delayed. The appellants argued for consideration based on previous Tribunal decisions, emphasizing the need for a nexus. The Tribunal agreed that if credit was admissible and utilized, the refund should also be sanctioned, as per Notification No.5/2006-CE(NT) safeguards. The absence of a time limit for credit utilization during the relevant period supported this view.

The second issue addressed was the timing of credit utilization concerning input services used for exported services. The Tribunal disagreed with the view that delayed credit utilization rendered the credit inadmissible. They highlighted that once credit was admissible and used, the refund should follow. The Tribunal referenced Tribunal decisions and Circulars to support the admissibility of both credit and refunds. The amendments in Notification No.7/2010 further supported the appellant's claim for admissible credit and refund.

In conclusion, the Tribunal allowed the appeals, remanding the matters to the original authority for reconsideration based on the Tribunal's decision and other relevant citations. The Tribunal emphasized the admissibility of both credit and refunds when the nexus between input services and exported output services was established, irrespective of the timing of credit utilization. The decision highlighted the importance of following the CENVAT credit scheme's purpose and safeguards for refund claims.