2019 (8) TMI 1645 - AT - Service Tax

Refund of service tax paid - nexus between the input services and the output service exported - Revenue s contention against the impugned order is that after amendment of the definition of input service w.e.f. 1-4-2011, the assessee-appellant has to specifically prove that the input services are confirming to the definition contained in Rule 2(l) of the Cenvat Credit Rules, 2004 - HELD THAT - Rule 14 of Central Excise Rules clearly mandates that in case of irregular availment of credit or its utilisation, such credit can be recovered from the assessee and for effecting the recoveries, the provisions of Section 11A of the Central Excise Act, 1944/Section 73 of the Finance Act, 1994 shall apply mutatis mutandis. It is an admitted fact on record that the department has not invoked the provisions of Rule 14 ibid for effecting recovery of the alleged irregular Cenvat credit availed by the assessee-appellant. Thus, under such circumstances, it can be said that taking of Cenvat credit on the disputed services by the appellant is in conformity with the Cenvat statute. Rule 5 ibid nowhere specifies that Cenvat credit can be denied on the ground of irregular availment or utilisation of the same. Thus, in absence of specific provisions contained in the statute, denial of the refund benefit provided under Rule 5 ibid, in our considered opinion, cannot stand for judicial scrutiny. Since the department has not specifically alleged regarding actual exportation of services by the assessee-appellant and use/utilization of disputed services for such activities, benefit of refund should be available in terms of the unambiguous provisions contained in Rule 5 ibid, subject only to adherence of the formula laid down thereunder. On perusal of the case records, more specifically the grounds of appeal annexed to the appeal memorandum, we find that the assessee-appellant has not raised any plea on the issue of payment of interest therein. Since such issue is not arising out of the appeal proceedings before the Tribunal, it will not be appropriate to consider such plea at this juncture for a decision as emphasized by the Learned Advocate for the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of refund benefit under Rule 5 of Cenvat Credit Rules, 2004 read with notification; Nexus between input services and exported output service; Burden of proof on assessee; Invocation of Rule 14 for recovery of irregular Cenvat credit; Entitlement to interest for delayed refund payment.

Analysis:

1. Denial of Refund Benefit under Rule 5:
The case involved a dispute regarding the denial of refund benefit under Rule 5 of the Cenvat Credit Rules, 2004. The appellant, engaged in providing taxable software services, exported the entire output service to foreign countries. The original authority partially allowed the refund, citing a lack of nexus between input and output services. The appellant contended that the denial was not in line with statutory provisions, as the nexus was established. The Tribunal observed that Rule 5 allows for refund of accumulated Cenvat credit for exported output services, subject to compliance with specified procedures. It was noted that denial of refund solely based on a lack of nexus was not justified, especially when the department did not prove the non-utilization of disputed services for exportation.

2. Burden of Proof and Invocation of Rule 14:
The burden of proof regarding the use of disputed input services for exportation rested with the appellant. The Tribunal highlighted that Rule 14 of the Cenvat Credit Rules allows for recovery of irregularly availed credit, but the department did not invoke this provision in the present case. As a result, the Tribunal concluded that the denial of refund on the grounds of irregular availment was not supported by specific statutory provisions. The Tribunal emphasized that denial of refund benefits should be based on clear statutory grounds, which were not met in this case.

3. Entitlement to Interest for Delayed Payment:
The appellant also claimed entitlement to interest for delayed refund payment. However, the Tribunal noted that the appellant did not raise this issue in the appeal proceedings. As the plea for interest was not part of the appeal, the Tribunal deemed it inappropriate to consider it at that stage. Therefore, the Tribunal did not address the issue of interest for delayed refund payment in its decision.

Conclusion:
In conclusion, the Tribunal set aside the impugned order and allowed the appeal in favor of the assessee-appellant. The appeal filed by the Revenue was dismissed. The judgment highlighted the importance of adherence to statutory provisions and the burden of proof in claiming refund benefits under the Cenvat Credit Rules.