2018 (7) TMI 1052 - AT - Central Excise

100% EOU - Refund of accumulated/unutilized CENVAT credit - Scope of SCN - Held that - In the present case, the issue was whether the appellant is eligible for the refund of unutilized input service credit under Rule 5 of CENVAT Credit Rules 2004 but the Department has gone beyond the SCN and has examined the eligibility and recovery of the credit which can only be done by issuing a SCN for recovery of irregular credit as held in the case of Grasim Industries Ltd. 2011 (8) TMI 689 - SUPREME COURT OF INDIA . In the present case, the appellants have availed the credit on the basis of invoices issued by their Head Office which is also registered as ISD and as per Rule 9 of the CENVAT Credit Rules, the CENVAT credit can be availed on the basis of an invoice, a bill or challan issued by an ISD under Rule 4A of the Service Tax Rules, 1994 and in the present case, the appellant has availed the credit on the basis of the invoices issued by the ISD which satisfied the requirement of Rule 9 of CENVAT Credit Rules - Further the eligibility to CENVAT credit can only be questioned by the tax authorities under whose jurisdiction, the ISD is registered and not by the tax authorities where the appellant is registered. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeals against common impugned order for recovery of credit amounts.

Analysis:
The appellants, a 100% EOU, filed refund claims for accumulated CENVAT credit of service tax paid on input services. The Assistant Commissioner partly sanctioned the refund and allowed recrediting of amounts. The Department appealed, and the Commissioner (Appeals) allowed the appeals directing recovery of credit amounts. The issue was whether the appellants were eligible for the refund under Rule 5 of CENVAT Credit Rules. The appellant argued that the impugned order didn't consider all points raised, making it non-speaking and liable to be set aside. They contended that recovery of credit should be done through a show-cause notice for irregular credit under Section 11A. The eligibility of credit was questioned, citing relevant case laws. They also argued that the credit was distributed by the Head Office as an ISD, making it eligible under Rule 9.

The Department defended the order, stating that credit availed without proper documentation is ineligible. They argued that allowing recredit amounts to sanctioning the claim and recovering credit is appropriate. The Tribunal found that the Department went beyond the show-cause notice by examining eligibility and recovery of credit without issuing a separate notice for irregular credit recovery. The Tribunal cited a case where admissibility of credit wasn't raised in the notice, emphasizing that only accumulation and utilization of credit should be examined. The Tribunal also noted that credit availed based on ISD invoices satisfied Rule 9 requirements and that eligibility questions should be raised by the tax authorities where the ISD is registered. Despite Range Officer verification and recommendation, the original authority partially sanctioned refunds. The Tribunal concluded that the impugned order was unsustainable in law, setting it aside and allowing the appeals with consequential relief.

Conclusion:
The Tribunal ruled in favor of the appellants, setting aside the impugned order and allowing the appeals. The decision highlighted the importance of proper documentation for availing credit, the necessity of issuing show-cause notices for recovery of irregular credit, and the jurisdiction for questioning credit eligibility based on ISD invoices. The judgment emphasized adherence to procedural requirements and relevant legal principles in determining refund eligibility and credit recovery.