2017 (3) TMI 306 - AT - Service Tax

Refund claim - refund denied without even serving a notice - natural justice - Held that - The absence of such notice precludes me from examining the aspects that have been elaborated in the impugned order - The interests of justice can be served only by restoring the claim for refund and placing the appellant on notice for the proposed reasons to reject a part of the claim - appeal allowed by way of refund.

Summary

Issues:
Refund claim under rule 5 of CENVAT Credit Rules, 2004 for exported services. Disallowance of CENVAT credit availed during the period for which claim was preferred. Denial of refund due to claim for rebate of tax paid on exported services. Applicability of previous tribunal decisions in similar cases. Lack of notice to appellant for disallowance of refund.

Analysis:
The appellant, a unit under the STP scheme, sought a refund of CENVAT credit amounting to &8377; 60,69,760 for the period April-June 2012 for providing 'scientific and technical consultancy service' exported under Export of Service Rules, 2005. The original authority limited the refund to &8377; 40,06,313 based on the credit availed on exported services as per ST-3 returns. The appellant contested the disallowance of &8377; 20,46,823, which was the balance credit on the first day of the relevant quarter, before the Commissioner of Central Excise (Appeals), Pune -III. The Commissioner overruled the disallowance of one input service, increasing the refund to &8377; 40,10,639. However, the disallowance of &8377; 20,46,823 was upheld due to the proviso disallowing refund if the output service provider avails drawback or rebate of service tax under Export Service Rules, 2005.

The original authority disallowed the disputed amount on the grounds that it did not represent CENVAT credit availed during the claim period, while the appellate authority found the appellant ineligible due to claiming rebate on tax paid for services exported in March 2012. The appellant cited tribunal decisions in similar cases to support their claim, but the Authorized Representative contested their applicability as the refund was for the previous quarter. The appellate authority noted that the original authority's decision was based solely on the credit balance at the beginning of the relevant quarter, without considering other aspects. The absence of a notice to the appellant regarding the disallowance of &8377; 20,63,447 was highlighted, leading to the conclusion that the denial was without the necessary pre-requisite.

In the interest of justice, the appellate tribunal set aside the impugned order and remanded the matter to the original authority, emphasizing the need to provide the appellant with a notice for rejecting a part of the claim. The decision to allow the appeal was made to restore the refund claim and ensure due process for the appellant.