2018 (8) TMI 553 - AT - Service Tax

CENAVT Credit - Reversal of 6 % in terms of Rule 6 - refund as per Section 102 of Finance Act, 2016 - scope of SCN - Held that - This is not a case of normal availment of CENVAT credit knowingly that the output service is exempted. The appellant have legally and correctly availed the CENVAT credit as their output service was taxable during the period April 2015 to February 2016. Thereafter as per the mandate given under Section 102 of Finance Act, 2016, they became entitled for the refund. In order to process the refund, they were supposed to reverse the CENVAT credit attributed to the output service. In this exceptional case, the Commissioner (Appeals) should not have brought into a new ground of Rule 6 for denying the refund. However, the adjudicating authority had no occasion to verify the correctness of the reversal of credit attributed to the exempted output service - the adjudicating authority needs to verify the facts - appeal allowed by way of remand.

Summary

Issues:
Refusal of refund on grounds of difference in CENVAT amount and non-reversal of credit for exempted services.

Analysis:
The appellant provided construction services to an educational institution and paid Service Tax for the period April 2015 to February 2016. However, these services were later exempted under notification no. 09/2016 dated 01.03.2016 with retrospective effect. The appellant filed for a refund, which was rejected by the adjudicating authority citing differences in CENVAT amount and non-reversal of credit for exempted services. The appellant appealed to the Commissioner (Appeals), who rejected the appeal adding a new ground that 6% of the value of exempted services should have been paid as per Rule 6 of CENVAT Credit Rules, 2004.

The appellant argued that they had reversed the entire credit on excessive services and had complied with the requirements for refund. The Commissioner (Appeals) was criticized for introducing a new ground beyond the scope of the original order. The appellant had correctly availed CENVAT credit when their output service was taxable, and the refund became due only after the exemption. The appellant had reversed the credit post the original order, which the Commissioner (Appeals) failed to consider.

The Tribunal found that the appellant had indeed reversed the credit for exempted services, fulfilling the conditions for refund. The Commissioner (Appeals) erred in introducing a new ground regarding Rule 6, which was not applicable in this case. The adjudicating authority was directed to verify the reversal of credit for exempted services and to reconsider the refund claim within three months, ensuring the appellant's right to be heard and submit relevant documents.

In conclusion, the Tribunal allowed the appeal by remanding the case to the adjudicating authority for a fresh decision on the refund claim, emphasizing the need for proper verification and adherence to the legal provisions without introducing new grounds beyond the original scope.