2015 (9) TMI 472 - AT - Service Tax

Denial of refund claim - unutilized cenvat credit - refund in terms of notification No. 5/2006-CE(N.T.) dated 14.3.2006 - Held that - credit of service tax taken by them was admissible. It is also a fact that the appellants were not in a position to utilize the credit against the goods exporting during the quarter to which the claim relates. Seen in this light there is no doubt that the refund claim was not in violation of the said para 4 of the said Notification. Thus the commissioner (Appeals) while rejecting the refund claim seems to have imported his own condition to the effect that the credit taken must pertain to the quarter during which the goods were exported and for which the refund was claimed - refund claim for a particular quarter need not be in respect of input services consumed in that quarter. The appellants had no domestic sales - impugned order is not sustainable and the same is therefore set aside and it is held that the appellants are entitled to obtain the refund - Decided in favour of assessee.

Summary

Issues:
- Rejection of refund claim under notification No. 5/2006-CE(N.T.)
- Interpretation of Para 4 of the notification regarding refund eligibility

Analysis:
The appeal was filed against the rejection of a refund claim amounting to Rs. 9,87,555 under notification No. 5/2006-CE(N.T.). The appellants, a 100% export-oriented unit, claimed the refund for the quarter 4/2011 to 6/2011. The claim was rejected as the credit sought pertained to input services received from June 2008 to June 2010, not matching the quarter of export. The appellants received "renting of removal property service," and due to confusion, the service tax was not paid by the landlord during that period. However, once clarified, the service provider paid the entire service tax in May 2011, and the appellants took Cenvat credit only for the service tax portion thereafter.

The interpretation of Para 4 of the notification was crucial in this case. The appellate authority had initially understood that refund could only be allowed for input services consumed during the quarter of export. However, a careful analysis revealed that the credit taken was admissible, and the appellants were unable to utilize it against the goods exported during the relevant quarter. The circular by CBEC clarified that there was no bar on allowing refund of credit from past periods in subsequent quarters. It emphasized that exporters not making claims in certain quarters due to no exports should be permitted refunds in later quarters based on the credit availed earlier.

Considering the CBEC clarification and the absence of domestic sales by the appellants, it was concluded that the rejection of the refund claim was not justified. The impugned order was set aside, and the appellants were held entitled to receive the refund of Rs. 9,87,555. The primary adjudicating authority was directed to grant the refund accordingly. The judgment was pronounced on 27.3.2015.