2018 (8) TMI 620 - AT - Service Tax

Refund of CENVAT Credit - rejection on the ground that the input services have no nexus with the output service exported by the appellant - Held that - In view of the fact that the authorities below have denied the refund benefit mostly on the ground that there is no nexus between input services and output service provided by the appellant, the matter should go back to the original authority for consideration of the provisions of the amended Rule 5 read with TRU letter dated 16.03.2012 and thereafter, to determine whether the appellant is eligible for the benefit of refund as per the prescribed formula - appeal allowed by way of remand.

Summary

Issues Involved: Denial of refund claim under Rule 5 of the Cenvat Credit Rules, 2004.

Analysis:
The judgment by the Appellate Tribunal CESTAT MUMBAI pertains to the denial of a refund claim filed under Rule 5 of the Cenvat Credit Rules, 2004. The authorities had rejected the refund claim on the basis that the input services did not have a nexus with the output service exported by the appellant. The Tribunal noted that Rule 5 of the Cenvat Credit Rules, 2004 was substituted by Notification No. 15/2012 dated 17.03.2012, which introduced a simplified scheme for refunds. The new scheme did not require a specific correlation between exports and input services used in such exports. The Tax Research Unit (TRU) of CBEC had issued a clarification on 16.03.2012 stating that the establishment of nexus between input service and output service should not be insisted upon for refund processing. The Tribunal emphasized that for the consideration of the refund application, it only needed to be ensured that the claim was in line with the prescribed formula, and the nexus between the services could not be insisted upon by the refund sanctioning authority.

The Tribunal found that the authorities had denied the refund benefit primarily on the grounds of the lack of nexus between input services and output service. Therefore, the Tribunal decided to remand the matter back to the original authority for a fresh consideration of the provisions of the amended Rule 5 along with the TRU letter dated 16.03.2012. The adjudicating authority was directed to determine whether the appellant was eligible for the refund benefit as per the prescribed formula and to consider other aspects such as the availment of excess benefit before deciding the issue afresh. The appeals were allowed by way of remand, with the condition that the appellant should be given an opportunity of hearing before a fresh decision was made by the original authority.