2010 (11) TMI 123 - AT - Service Tax

Refund claims for the unutilized Cenvat credit The assessee appellant herein is a 100 per cent EOU engaged in the manufacture and export of ready made garments - The assessee appellant filed ten refund claims for the refund of unutilized Cenvat credit in respect of Service Tax paid on input services used in the manufacture of finished goods exported by them - Adjudicating authority had rejected the refund claims filed by the assessee on the ground that the input services were not used in the manufacture of the final products as required under the conditions prescribed in Notification No. 5/2006-CE(NT) - As per the amended provisions of Notification 5/2006, the words in or in relation to were brought , which would indicate that any input or input services, which are used in or in relation to the manufacturing of final product, which is cleared for export, the refund claim can be filed for the Service Tax element paid on such input services - The amendment brought to Notification No. 5/2006 is with retrospective effect Hence, the appeals filed by the assessee allowed with consequential relief, and reject the appeals filed by the revenue

Issues:
1. Rejection of refund claims by the adjudicating authority.
2. Appeal before the Commissioner (Appeals) and subsequent rejection of refund claims.
3. Dispute regarding eligibility for refund of Service Tax on input services.
4. Interpretation of Notification No. 5/2006-CE(NT) and retrospective amendment.
5. Arguments presented by both parties regarding the nexus between input services and manufacturing activities.
6. Analysis of relevant case laws and judgments.
7. Final decision and relief granted.

Detailed Analysis:

1. The case involved the rejection of refund claims by the adjudicating authority for unutilized Cenvat credit on input services used in the manufacture of finished goods exported by a 100% EOU engaged in the garment industry. The rejection was based on non-compliance with the conditions prescribed in Notification No. 5/2006-CE(NT) and Cenvat Credit Rules, 2004.

2. The appellant appealed before the Commissioner (Appeals), who upheld the rejection of refund claims on certain input services while setting aside the rejection on others. Both the appellant and the revenue were dissatisfied with the Commissioner's decision and filed appeals.

3. The main dispute revolved around the eligibility for refund of Service Tax on various input services like rent charges and vehicle maintenance. The appellant argued that these services were directly related to the manufacturing activity of ready-made garments and should not be denied credit.

4. The appellant highlighted a retrospective amendment to Notification No. 5/2006-CE(NT) through the Finance Act, 2010, which included the words "used in or in relation to" for the manufacturing of final products cleared for export. This retrospective change impacted the eligibility criteria for claiming refunds on input services.

5. Arguments were presented by both parties regarding the nexus between the input services and the manufacturing activities. The revenue contested the eligibility for credit, emphasizing the need for evidence establishing a direct or indirect relationship between the services and the production process.

6. The Tribunal analyzed various case laws, including judgments by the Hon'ble Supreme Court and previous Tribunal decisions, to interpret the expression "in relation to" in the context of input services used in manufacturing activities. The Tribunal differentiated between cases involving output services and input services for manufacturing final products.

7. After considering the submissions and perusing the records, the Tribunal upheld the findings of the Commissioner (Appeals) on certain input services, stating that they were indeed related to the manufacturing process. The Tribunal also emphasized the importance of the retrospective amendment to Notification No. 5/2006-CE(NT) and granted relief to the appellant by allowing the appeals and rejecting those filed by the revenue.

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