2019 (3) TMI 1184 - AT - Service Tax

Refund of unutilised CENVAT credit - amount paid under Voluntary Compliance Encouragement Scheme (VCES) - Held that - A conjoint reading of Section 107 and 109 of Finance Act relating to Service Tax payment under VCES, 2013 would clearly reveal that if any amount paid in pursuance of such declaration made under Section 107, the same shall not be refundable under any circumstances which would indicate that if any amount is paid in excess during such voluntary disclose, the same would not be refunded and it has never debarred the assessee from claiming refund if it is otherwise entitled to. Except that payment of tax dues under VCES cannot be made through CENVAT credit available to the assessee, rest of CENVAT Credit Rules, 2004 is applicable, even though duty liability is discharged through voluntary disclosure scheme. Therefore, the order of the Commissioner (Appeals) rejecting refund of unutilised CENVAT credit to the appellant, that to without providing it an opportunity of being heard, is an erroneous order and the same is required to be set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Refund of unutilised CENVAT credit under Voluntary Compliance Encouragement Scheme (VCES), 2013.

Analysis:
The case involved the rejection of a refund claim for unutilised CENVAT credit under the VCES, 2013 by the Commissioner (Appeals) based on Section 109 of the Finance Act, 2013, which stated that amounts paid under the VCES shall not be refundable under any circumstances. The appellant, engaged in providing various services to clients outside India, sought a refund for the unutilised credit. The appellant argued that the rejection was erroneous as the Board's clarificatory Circular allowed the admissibility of CENVAT credits except for the payment of tax dues under the scheme. The appellant cited relevant case laws and circulars to support their claim and contended that principles of natural justice were not followed in rejecting the refund without issuing a show-cause notice.

The Authorized Representative for the respondent-department supported the Commissioner (Appeals)'s decision, emphasizing that Section 109 had an overriding effect over the CENVAT Credit Rules and the clarificatory Circular could not aid the appellant. However, after hearing both sides and examining the relevant provisions of the law and circular, the Tribunal found that Section 109 did not debar the appellant from claiming a refund if otherwise entitled. The Tribunal noted that the Circular clarified the admissibility of CENVAT credit on inputs and input services used for output services declared under VCES, 2013, and that the CENVAT Credit Rules, 2004 were applicable except for the payment of tax dues under the scheme. Therefore, the Commissioner (Appeals)'s rejection of the refund without providing an opportunity for the appellant to be heard was deemed erroneous.

Consequently, the Tribunal allowed both appeals, setting aside the Commissioner of CGST & CX (Audit-II), Mumbai's order and directing the respondent to refund the unutilised CENVAT credit accrued by the appellant under VCES, 2013, along with applicable interest within three months of the order communication.