2018 (12) TMI 341 - AT - Service Tax

Refund of cenvat credit taken on the inputs services - inputs services used in the manufacture of the finished goods which were subsequently exported - appellant is denied eligibility to avail cenvat credit on input services due to being exclusively used for exempted goods as per Rule 6(1) of CCR, 2004 and refund is also denied - refund also denied on the ground of non-registration of manufacture and also on the ground of non-distribution of credit - Held that - Any manufacturer who clears a final product or an intermediary product for export is entitled for credit subject to above conditions. The appellant in the present case admittedly is engaged in clearing excisable goods however the controversy is whether the goods i.e. gems and jewellery were fully exempted or not. Under Central Excise, exemption means exemption by Notification No. under Section 5A of Central Excise Act, 1944 thus goods exported under bonds are not exempted from duty. A conjoint reading of this Circular with the above requirements of Rule 5 makes it clear that a manufacturer who clears a final product or an intermediate product for export without payment of duty under bond or letter of undertaking which is exported without payment of service tax shall not be an exempted goods and as such shall be allowed refund of cenvat credit in view of Rule 5 of Cenvat Credit Rules - Notification No. 12 of 17.03.2012 is therefore not applicable in the case of export of excisable goods. Non-registration of appellant for manufacture of excisable goods - Held that - Rule 3 of Cenvat Credit Rules, 2004 prescribes that cenvat credit can be taken by a manufacturer or a provider of due to service and that there is no requirement of the registration at all - The finding of the Commissioner(Appeals) mandating the registration are therefore not sustainable. Non distribution of the credit - Held that - The goods of the appellant are excluded from the scope of exempted goods - Rule 7(b) of CCR, 2004 to reject the refund is not applicable. Refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim under Rule 5 of Cenvat Credit Rules, 2004 rejected due to goods being exempted; Appellant's eligibility to avail cenvat credit on input services disputed; Allegation of appellant not being registered as manufacturer of excisable goods challenged.

Analysis:
The appellant, engaged in manufacturing and export of gems and jewellery, filed a refund claim under Rule 5 of Cenvat Credit Rules, 2004 and Notification No. 27/2012-CE. The Department rejected the claim, citing the goods as excisable but exempted under Notification No. 12/2012. The appellant argued that the goods should not be considered exempted, thus eligible for refund. The Department applied Rule 6(1) and Rule 7 of CCR, 2004 to reject the claim, which the appellant contested, citing CBEC Circular No. 278/112/96-CK. The appellant contended that the goods did not fall under exempted categories per Rule 2(d) of CCR, 2004, seeking to set aside the order and allow the appeal.

The Tribunal observed that the appellant's refund claim was based on fulfilling conditions under Rule 5 of CCR, 2004, requiring clearance of final products for export under bond or letter of undertaking. The appellant's eligibility for credit was disputed due to the goods being excisable but exempted. The Tribunal referred to legal advice and circulars to establish that goods exported under bond are not exempted, supporting the appellant's claim for refund. Referring to past tribunal decisions, the Tribunal held that Notification No. 12/2012 did not apply to the export of excisable goods, supporting the appellant's position.

Regarding the allegation of the appellant not being registered as a manufacturer of excisable goods, the Tribunal noted that Rule 3 of Cenvat Credit Rules, 2004 does not mandate registration for credit. Citing precedent, the Tribunal held that registration was not a requirement for claiming refund on exported services. The Tribunal also found the Commissioner(Appeals)'s finding on registration not sustainable, noting the appellant's centralized service tax registration for its units.

Lastly, concerning the non-distribution of credit, the Tribunal reiterated that the goods were not exempted, rendering Rule 7(b) of CCR, 2004 inapplicable. Consequently, the Tribunal set aside the order rejecting the refund claims and allowed the appeals, pronouncing the decision on 04.12.2018.