2016 (9) TMI 686 - AT - Service Tax

Refund of Cenvat Credit - 100% EOU - nexus of input services with output services - Held that - the ineligible credit has been disallowed twice, first by reducing the credit as such and second by applying the formula - Thus, there has been in a way application of the formula twice over. Identical issue was considered by the Tribunal in the case of CST; Mumbai-I Vs Global Market Center Private Ltd., 2015 (2) TMI 271 - CESTAT MUMBAI . The Tribunal observed that the formula in the notification used the word total CENVAT credit taken on input services . Therefore the inadmissible part of input services cannot be deducted before applying the formula. - Decided in favor of assessee.

Summary

Issues Involved: Refund claim rejection based on lack of nexus between input and output services, reduction in refund amount due to DTA services, eligibility of various input services for refund, incorrect application of formula for refund calculation.

Analysis:

1. Refund Rejection Based on Nexus: The appellant filed a refund claim for service tax paid on input services used for providing output services. The adjudicating authority granted a partial refund, rejecting an amount of &8377; 4,14,592/- due to a perceived lack of nexus between the input services and the exported output services. This rejection was upheld by the Commissioner (Appeals), leading the appellant to appeal before the Tribunal.

2. Eligibility of Input Services for Refund: The Tribunal analyzed the details of the services for which the refund was rejected. It was argued that services like air travel agent services, management, maintenance, repair services, chartered accountant services, and commercial training or coaching services were essential for business operations and thus eligible for refund. The Tribunal found merit in these arguments, overturning the rejection of the refund for these services.

3. Incorrect Application of Formula for Refund Calculation: The Tribunal addressed the issue of the incorrect application of the formula for calculating the refund amount. The original authority had reduced the refund by &8377; 1,08,417/- based on a misapplication of the formula provided in a notification. The Tribunal referred to a similar case and concluded that the inadmissible part of input services cannot be deducted before applying the formula. Consequently, the reduction in the refund amount was deemed unjustified, and the impugned order upholding the reduction was set aside.

4. Final Decision: Considering the unjustified rejection of the refund amount and the incorrect application of the refund calculation formula, the Tribunal allowed the appeal, stating that the appellant is eligible for a refund of &8377; 3,06,175/-. The impugned order rejecting the refund was set aside, and the appellant was granted relief accordingly.

In conclusion, the Tribunal's judgment in this case addressed various issues related to the rejection of a refund claim, the eligibility of input services for refund, and the correct application of the formula for calculating the refund amount. The detailed analysis and reasoning provided by the Tribunal resulted in a favorable outcome for the appellant, allowing the appeal and granting the requested refund.