2019 (10) TMI 1148 - AT - Service Tax

Refund of service tax remaining unutilized - rejection of refund only on the ground that the appellant has not availed cenvat credit amounting to ₹ 35,41,988/- in their ST-3 returns - can the non-disclosure or delay in disclosure in ST-3 returns, the assessee looses his right to claim cenvat credit or not? - HELD THAT - After going through the various conditions set out in the appendix to the N/N. 5/2006 issued under Rule 5 of Cenvat Credit Rules, 2004 and Rule 4 and Rule 9 of Cenvat Credit Rules, the appellant has filed all the necessary documents for claiming the cenvat credit viz. invoices, books of accounts, cenvat credit register which are required as per the various Rules and the Notification to claim cenvat credit but inadvertently he has failed to disclose the same in the ST-3 return which is only a procedural infraction. Under the Notification as well as under the Rule, it has not been categorically provided that non-disclosure of cenvat credit in the ST-3 return will disentitle the assessee from claiming the cenvat credit if he is otherwise entitled to. Further, the cenvat credit is a beneficial legislation and it should be construed liberally so as to upheld the letter and spirit of such beneficial piece of legislation and a narrow interpretation would read down the benefit given by the legislature and defeat the very purpose of enacting of such beneficial legislation. Therefore, the denial of the refund only on the basis of non-disclosure of the cenvat credit in ST-3 return is not legally sustainable and therefore, the rejection of refund on this ground is set aside. The Commissioner (Appeals) in the impugned order has observed that the appellants have not submitted any documents to prove their contention that they have rightly availed the cenvat credit. It appears that both the authorities have not examined all the documents which have been filed by the appellant in support of their refund claim - Matter requires re-examination - appeal allowed by way of remand.

Summary

Issues:
- Rejection of refund claim based on non-disclosure of cenvat credit in ST-3 returns
- Interpretation of Cenvat Credit Rules and Notification 5/2006
- Legal sustainability of denial of refund
- Examination of documents supporting refund claim

Analysis:

The judgment involves two appeals against a common impugned order where the Commissioner (Appeals) rejected the appellant's appeal concerning the refund claim. The issue in both appeals was identical, leading to them being discussed and disposed of together. The appellant, a private limited company engaged in export services, filed a refund claim for unutilized service tax amounting to Rs. 1,62,09,668 under Notification 5/2006. The Department issued a show-cause notice proposing to reject the claim, which was initially rejected by the original authority. The Commissioner (Appeals) later remanded the matter for fresh adjudication, resulting in a partial rejection of the refund claim by the original authority. The Commissioner (Appeals) further rejected the refund to the extent of Rs. 35,41,988 and Rs. 20,28,897 in the two appeals, respectively.

During the hearing, the appellant's consultant argued that the impugned order lacked legal sustainability as it did not consider all facts and evidence. The primary ground for rejection was the non-disclosure of cenvat credit in ST-3 returns. The consultant contended that subsequent disclosure of the credit in later returns should be seen as a procedural lapse, not a substantive issue. Referring to Cenvat Credit Rules and Notification 5/2006, the consultant argued that all conditions for claiming the credit had been met. The consultant cited previous decisions to support the argument that the rules should be construed liberally to benefit the assessee. Additionally, interest for delay in refund was demanded.

On the other hand, the Department's representative defended the impugned order, emphasizing the importance of ST-3 returns and considering non-disclosure as material suppression. After reviewing both parties' submissions and the record, the Judicial Member found that the denial of refund solely based on non-disclosure in ST-3 returns was not legally sustainable. The Member highlighted that the appellant had provided necessary documents for claiming the credit as per rules but failed to disclose it in ST-3 returns, which was considered a procedural infraction. The Member emphasized the beneficial nature of cenvat credit rules and ruled in favor of the appellant, setting aside the rejection and remanding the matter for further examination of supporting documents by the original authority.

In conclusion, the judgment allowed both appeals by way of remand to the original authority, providing the appellant with an opportunity to present all relevant documents supporting the refund claim. The decision was based on the interpretation of Cenvat Credit Rules, Notification 5/2006, and the legal sustainability of denying the refund solely on the grounds of non-disclosure in ST-3 returns.