2009 (1) TMI 190 - AT - Service Tax

Refund of service tax paid on Input services - 100% EOU Refund has been rejected for a certain period on the ground that during the material period the Central Government had not issued Notification under Rule 5 of CCR 2004 specifying any safeguard, conditions and limitations subject to which the refund of credit relating to input service could be allowed While allowing the refund tribunal held that, there is no justification to deny refund relatable to input service used for production of goods exported during the same perio, a similar refund claim for credit of input service denied by the authorities was held to be admissible as Rule 5 of CCR, 2004 provided for such refund - impugned order is set aside and this appeal allowed.

Summary

Issues:
Claim for refund of service tax under Rule 5 of CENVAT Credit Rules, 2004 denied due to lack of specific Notification by the Central Government.

Analysis:
The case involved M/s. Elappa Granite, a 100% EOU, exporting finished products and claiming credit of input service under Rule 5 of CCR, 2004. The lower authorities denied the refund of service tax amounting to Rs. 55,023, stating that no Notification specifying conditions for refund was issued by the Central Government during the relevant period. It was noted that Notification No.11/02-C.E. (N.T.), dated 1-3-2002 under Rule 5 of CCR, 2002 was in force during the material time, setting conditions for refund related to inputs used in export goods.

The appellant's counsel argued that Rule 5 of CCR, 2004 allowed for the utilization of input service credit for duty payment on final products or service tax. Even though no specific Notification was issued after the transition from CCR, 2002 to CCR, 2004, the rule provided for a refund in case adjustment was not possible. Citing a precedent in CCE, Pondicherry v. Himalaya Granites Ltd., it was emphasized that similar refund claims for input services used in production of exported goods were found admissible by the Tribunal.

The JDR reiterated the lower appellate authority's grounds for rejecting the claim. However, upon reviewing the case records and submissions, the Member (T) found the impugned claim for refund to be admissible under Rule 5 of CCR, 2004. It was noted that refunds for duty related to inputs for exports made between 10-9-04 and 14-3-06 were allowed even without a specific Notification. Referring to the Himalaya Granites case, where a similar refund claim was upheld, the Member (T) concluded that the denial of the refund claim in the present case was unjustified. The Revenue had not appealed the Himalaya Granites decision, further supporting the admissibility of the appellant's claim. Consequently, the impugned order was set aside, and the appeal was allowed.

In conclusion, the judgment highlighted the importance of Rule 5 of CCR, 2004 in allowing refunds for input services used in the production of exported goods, even in the absence of a specific Notification by the Central Government. The decision underscored the consistent application of such refunds during the relevant period and upheld the appellant's eligibility for the refund claim.