2009 (2) TMI 110 - AT - Service Tax

Refund of unutilized input service credit on export of final product - with effect from 10.09.2004, Rule 5 of Cenvat Credit Rules, provided refund of Cenvat Credit on input or input service - Even though the rule allows it, Notification no. 11/2002 dated 01.03.2002 did not provide the refund - But, that notification was superseded by another Notification 5/2006 dated 14.03.2006 providing refund of input credit also, which has been not utilized - there is indeed a provision u/r 5 for such refund w.e.f. 10.9.04, just because the notification has not been issued at that time, we cannot deny the benefit provided in the Rule Not. no. 5/06 to be taken as effective from 10.9.04 - refunds pertain prior to 14.03.2006 so this is admissible

Summary

Issues:
Refund of Cenvat credit on input services for exporters prior to the introduction of Notification No. 5/2006-CE (NT) dated 14.03.2006.

Analysis:
1. The appeals were filed against the Order-in-Appeal No. 142/2007-Cus. (B) dated 22.11.2007 passed by the Commissioner of Customs (Appeals), Bangalore, involving a common question of law and fact. The appellants, being 100% Export Oriented Units (EOU) who exported all their items, applied for a refund of Cenvat credit on input services, which was rejected citing Notification 11/2002-CE (NT) dated 01.03.2002. However, another Notification No. 5/2006-CE (NT) dated 14.03.2006 allowed refund of input and input services credit.

2. The contention of the Revenue was that since the refund claims pertained to a period before 14.03.2006, the benefit of refund was not applicable. The appellants argued that Rule 16 of the Cenvat Credit Rules, 2004 mandated the extension of the benefit of refund even before the introduction of Notification No. 5/2006. They also highlighted a previous remand order by the Commissioner (Appeals) supporting their claim.

3. The Tribunal analyzed various precedents, including CESTAT decisions, to establish that the refund of unutilized service tax credit was eligible under Rule 5 even before the issuance of Notification No. 5/2006. The Tribunal emphasized that the rule itself provided for the utilization of input credit and input service credit, allowing for refunds when such credits could not be utilized.

4. The Departmental Representative argued that as per the Rule position on 10.09.2004, refund of input or input services was permissible only from 14.03.2006 onwards. However, the Tribunal noted that Rule 5 of the Cenvat Credit Rules, effective from 10.09.2004, allowed for such refunds irrespective of the absence of a specific notification at that time.

5. After careful consideration, the Tribunal held that the appellants were entitled to the refund of Cenvat credit on input services even for the period before 14.03.2006. They found no merit in the impugned order, especially since the Commissioner had previously taken a different view in an order that had attained finality. Consequently, the Tribunal set aside the impugned order and allowed the appeals with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellants, establishing their right to claim a refund of Cenvat credit on input services for the period preceding the introduction of Notification No. 5/2006-CE (NT) dated 14.03.2006, based on the provisions of Rule 5 of the Cenvat Credit Rules and relevant legal precedents.