2018 (5) TMI 400 - AT - Service Tax

Refund claim - relevant date - whether refund claim under Rule 5 of Cenvat Credit Rules, 2004 is barred by limitation should be reckoned from the date of receipt of foreign exchange as held by the Commissioner (Appeals) or it should be considered from the date of export of service or raising of invoices? - Held that - issue of limitation is no longer res integara as has been held in various judgements that in case of export of service relevant date for computing the limitation is date of receipt of convertible foreign exchange against the service exported and not from the date of invoice issued for providing the export service. Whether the Commissioner (Appeals) is right in holding that the eligible refund amount will not be reduced due to the assessee having utilized part of the cenvat credit balance for payment of service tax on domestic output services during the relevant period? - Held that - amount of refund claimed by the respondent shall not be more than the amount lying in balance at the end of the quarter or at the time of filing of the refund whichever is less - As per the fact narrated by the Ld. Counsel the refund claim amount is lesser, both the amount and cenvat credit balance at the end of the quarter as well as cenvat credit balance at the time of filing the refund and therefore the condition envisaged under clause (g) of para 2 of the notification is scrupulously complied with. The only amount which can be reduced is the amount which is reversed in terms of Sub-rule (5C) of Rule 3 during the relevant period. Therefore no amount which was utilized for payment of service tax in respect of domestic provision of service from cenvat amount is required to be reversed as per formula. Whether the Commissioner was right in allowing the cenvat credit on certain input services which were rejected, by the lower authorities on various grounds? - Held that - the issue of admissibility of input service was raised in disposal of the refund claim filed under Rule 5 of the Cenvat Credit Rules. There cannot be two yardsticks i.e. one for allowing the credit and other for deciding the refund and therefore the refund claim cannot be rejected on the ground of admissibility of the input service at the stage of processing of refund claim. Appeal dismissed - decided against Revenue.

Issues Involved:
1. Relevant date for determining the limitation period for refund claims under Rule 5 of Cenvat Credit Rules, 2004.
2. Reduction of eligible refund amount due to utilization of Cenvat credit for domestic service tax payments.
3. Eligibility of certain input services for Cenvat credit.

Detailed Analysis:

1. Relevant Date for Limitation Period:
The primary issue is whether the 'relevant date' for deciding if a refund claim under Rule 5 of Cenvat Credit Rules, 2004 is barred by limitation should be reckoned from the date of receipt of foreign exchange or from the date of export of service or raising of invoices. The Tribunal held that the computation of limitation should be from the date of receipt of foreign exchange, not from the date of invoices or the date of export of service. This decision is based on the precedent set in the respondent’s own group entities' case (Appeal No. ST/87435/2017) and is supported by the amendment to Rule 6A of the Service Tax Rules, 1994, which stipulates that the export of service is complete only upon receipt of payment in convertible foreign exchange. The Tribunal upheld the Commissioner (Appeals)’s decision, stating that the refund cannot be denied on the ground of limitation.

2. Reduction of Eligible Refund Amount:
The second issue concerns whether the eligible refund amount should be reduced due to the assessee utilizing part of the Cenvat credit balance for payment of service tax on domestic output services. The Tribunal found that the Assistant Commissioner’s denial of the refund claim, based on the reduction of Cenvat credit utilized for domestic service tax liability, was contrary to the provisions under Rule 5 and Notification No. 27/2012-CE(NT). The Tribunal emphasized that the refund amount should not exceed the Cenvat credit balance at the end of the quarter or at the time of filing the refund claim, whichever is less. The formula provided in Rule 5 explicitly defines ‘Net Cenvat credit’ and does not require deduction of amounts used for domestic service tax payments. Therefore, the Commissioner (Appeals)’s decision to allow the refund was upheld.

3. Eligibility of Certain Input Services:
The third issue is whether the Commissioner was right in allowing Cenvat credit on certain input services that were rejected by lower authorities. The Tribunal noted that the issue of inadmissibility of input services was raised during the processing of the refund claim without any prior adjudication or issuance of a show cause notice. Citing precedents, the Tribunal held that the refund claim cannot be rejected on the grounds of admissibility of input services at the refund processing stage. The adjudicating authority should first decide on the admissibility of input services through proper adjudication. Since this process was not followed, the rejection of the refund claim on this basis was deemed incorrect and illegal. Consequently, the Tribunal dismissed the Revenue’s appeal on this issue.

Conclusion:
The Tribunal dismissed the Revenue’s appeal, upholding the Commissioner (Appeals)’s decisions on all three issues. The relevant date for limitation is the date of receipt of foreign exchange, the eligible refund amount should not be reduced due to domestic service tax payments, and the admissibility of input services should be adjudicated separately before rejecting a refund claim. The stay petition was also disposed of.

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