2017 (3) TMI 471 - AT - Service Tax

100% EOU - Refund claim - rejection on the ground that no service is involved on import of hardware materials on which tax of that amount was paid up by appellant being the credit availed based on photocopy of invoices - Held that - the amount paid by appellant for import of hardware from Singapore, which did not involve any service as correctly observed by both original and lower appellate authority. The question of refund of this amount u/r 5 ibid will certainly not arise - appellant is advised that they can very well take back the credit of the difference between the amount claimed by them u/r 5 and the amount sanctioned - appeal dismissed - decided against appellant.

Summary

Issues: Refund claim under Rule 5 of the Cenvat Credit Rules, 2004 for service tax paid on imported hardware material; rejection of refund claim by the original authority and Commissioner (Appeals); violation of principles of natural justice; applicability of Notification No.27/2012-CE (NT) regarding recredit provision.

Analysis:
The appellants, a 100% EOU in Information & Technology Service exporting e-output service, filed a refund claim under Rule 5 of the Cenvat Credit Rules, 2004, seeking a refund of &8377; 28,02,400. The original authority sanctioned &8377; 24,80,801 but rejected &8377; 3,20,599 related to service tax paid on imported hardware material. The appellants appealed only the disputed amount of &8377; 3,10,992 paid for hardware imported from Singapore, which was rejected by the Commissioner (Appeals), leading to the current appeal before the forum.

During the hearing, the appellants claimed that the service tax of &8377; 3,10,992 was mistakenly paid on the imported hardware material. The appellants argued that the refund should be granted as it was paid by mistake of law, which the Commissioner (Appeals) acknowledged but insisted on following the regular refund route under Section 11B of the Central Excise Act, 1994. The appellants also contended that they were not given a fair chance to present their case during the original authority proceedings, citing a violation of natural justice.

On the other hand, the Ld. A.R supported the impugned order and highlighted that under Rule 5 of the Rules, the appellants could have taken back credit equal to the amount not sanctioned, as per Notification No.27/2012-CE (NT).

After considering both sides, the forum noted that the refund claim was made under Rule 5, which allows cenvat credit for service providers exporting taxable services without paying service tax. The rejection of the claim amount of &8377; 3,10,992 for hardware import from Singapore was upheld since it did not involve any service, as correctly observed by the authorities. The forum also pointed out the provision in Notification No.27/2012-CE (NT) allowing recredit of amounts not sanctioned before preferring the refund claim under Rule 5. The appeal was dismissed, advising the appellants to take back the credit of the difference between the claimed and sanctioned amounts under Rule 5.

In conclusion, the forum upheld the rejection of the refund claim for the amount paid on imported hardware material, citing the absence of service involvement. The appellants were advised to utilize the recredit provision under Notification No.27/2012-CE (NT) and Rule 5 for the unclaimed amount.