2019 (2) TMI 685 - AT - Service Tax

Refund of accumulated CENVAT Credit - surrender of service tax registration - export of services - Rule 5 of Cenvat Credit Rules, 2004 read with Section 11B of Central Excise Act, 1944 - Held that - The term Total turnover used in the above formula includes the sum total value of all excisable goods cleared during the relevant period. It doesn t restrict the inclusion of value of the excisable goods exported, per se. Sub-rule (2) deals with a situation where duty drawback is allowed and further lays down that in such a situation, credit could not be refunded. Therefore, it is clear from the above that Rule 5 facilitates the refund of Cenvat credit not merely of the excisable goods exported and therefore to say that Rule 5 provides for refund of un-utilized Cenvat only in the cases of export of service is incorrect. Accepting this interpretation of the Commissioner (Appeals) would lead to serious anomaly, which cannot be the intention of the legislation. Admittedly, the appellant has a huge credit which is now lying with the Revenue; the appellant has surrendered its Service Tax Registration and they have also paid the service tax liability as on the last date of their business. The law cannot, therefore, lead to a situation where a bonafide tax payer s amount could be denied and withheld, for no fault of his. Further, in such a situation a bonafide assessee cannot be left remediless with his/its money in the form of credit struck with the Government. Refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Claim for refund of unutilized cenvat credit due to closure of business operations.

Analysis:
The appellants, engaged in consultancy and commission agencies, filed a refund claim for service tax for a specific period. The department rejected the claim, stating that refund of unutilized cenvat credit is allowed only when related to services used for export. A show cause notice was issued proposing rejection of the claim. The appellants argued that they had wound up their business, surrendered their service tax registration, and paid the service tax liability. They relied on judicial decisions supporting their claim. The Asst. Commissioner rejected the claim based on a Tribunal decision, holding that cash refund goes against Cenvat Scheme principles. The Commissioner (Appeals) upheld this decision.

On appeal, the appellant's counsel argued that similar refund claims had been allowed in judicial pronouncements. They contended that the authorities misinterpreted the claim as a refund of cash tax debit, while it was for unutilized cenvat credit due to business closure. The Tribunal examined Rule 5 of Cenvat Credit Rules, 2004, which allows refund subject to specified conditions. The Tribunal noted that Rule 5 facilitates credit refund beyond goods exported, rejecting the notion that it applies only to export of services. The Tribunal found anomalies in the authorities' interpretation and cited the High Court decision supporting refund claims in such cases.

The Tribunal emphasized that a genuine taxpayer should not be deprived of rightful credit due to business closure. It highlighted the constitutional mandate against unjust tax collection and retention. The Tribunal found no unjust enrichment allegation and criticized the authorities for rejecting the claim without depositing the amount into the Consumer Welfare Fund. Consequently, the Tribunal set aside the impugned order, allowing the appeal with any consequential benefits as per law.

In conclusion, the Tribunal's detailed analysis of Rule 5 of Cenvat Credit Rules, 2004, and consideration of judicial precedents supported the appellant's claim for refund of unutilized cenvat credit following business closure. The Tribunal emphasized the importance of upholding taxpayer rights and criticized the authorities for unjustly rejecting the claim without proper legal justification.