2017 (11) TMI 416 - AT - Service Tax

Refund of unutilized CENVAT credit - claim was made on the ground that they have used various input services in providing the output service of works contract service which was exported out of India - Held that - even though the illustration regarding the maximum refund permissible stands deleted vide Finance Act, 2010, the restriction of refund to the extent of the ratio of export turn over to the total turnover still remains in the condition. It is an admitted fact on record that the appellant has rendered output services which are exported as well as exempted services for which no service tax is payable. Consequently, in terms of the above condition 5 of the said notification, the restriction applied on the refund claim is justified. Imposition of restriction - claim of appellant is that cannot be imposed on the refund claim for the reason that the appellant is already maintaining separate books of account for taxable and exempted services and, therefore, Cenvat credit taken by them as per Rule 6(2) pertains to export of services only - Held that - As per the provisions of Rule 6 ibid, the appellants exercised their option of maintaining separate accounts for taxable and exempted services. The right of the appellants to exercise this option has not been challenged by the adjudicating authority. But the said rule is independent of the applicability of the conditions of both of Rule 5 of CCR, 2004 and of N/N. 5/2006-CE(NT) dated 14.3.2006. Appeal dismissed - decided against appellant.

Summary

Issues:
Refund claim of unutilized Cenvat credit for works contract service exported out of India; Interpretation of Notification No.5/2006-CE(NT) dated 14.3.2006; Restriction on refund claim based on the ratio of export turnover to total turnover; Applicability of Rule 5 of Cenvat Credit Rules, 2004; Maintaining separate accounts for taxable and exempted services.

Analysis:
The appeal pertains to a refund claim filed by the appellant seeking the refund of unutilized Cenvat credit for input services used in providing works contract service exported out of India. The claim was partially allowed by the adjudicating authority, and the appellant challenged the rejection part before the Commissioner (Appeals), who upheld the original order. The main contention was regarding the restriction imposed on the refund claim based on the ratio of export turnover to total turnover as per Condition No. 5 of Notification No.5/2006-CE(NT) dated 14.3.2006.

The appellant argued that they are entitled to the refund of the entire unutilized Cenvat credit as they maintained separate accounts for taxable and exempted services, and the credit availed pertained only to the input services used in the export of services. However, the Department justified the restriction imposed on the refund claim, stating that even though the illustration under clause 5 was deleted, the requirement of the export turnover to total turnover ratio still applies as per the notification.

Upon consideration of submissions, the Tribunal observed that the restriction on refund claim based on the export turnover to total turnover ratio remains valid despite the deletion of the illustration under clause 5. It was noted that the appellant provided both exported and exempted services, justifying the restriction on the refund claim. The Tribunal agreed with the lower authority's findings that maintaining separate accounts for taxable and exempted services does not exclude the applicability of the conditions set out in the notification.

Therefore, the Tribunal upheld the impugned order, dismissing the appeal and finding no grounds to interfere with the decision. The judgment reaffirmed the importance of complying with the conditions and limitations specified in the relevant notifications and rules governing the refund of unutilized Cenvat credit.