2020 (1) TMI 844 - AT - Service Tax

Refund of unutilized CENVAT Credit - Violation of Condition 2(h) of the Notification No. 27/2012-CE dated 18.06.2012 - denial of refund on the ground that proof of debit of the amount was not submitted - HELD THAT - It is not open to the Department to examine the eligibility of CENVAT credit while adjudicating the refund claim application, since in such matters of admissibility, the Department has mandated to take recourse under Rule 14 of the CCR. Further, the rejection of entire refund claims only on the ground of violation of Condition 2H of Notification No. 27/2012 is also not sustainable in law. Since, the appellants have debited the CENVAT account but only after filing the refund claim. Debiting the CENVAT account subsequent to the filing of the refund claim is only a procedural violation which cannot defeat the substantive right of the appellant to claim refund under Rule 5 of CCR, 2004. Refund allowed along with interest on delayed refund - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Refund claim rejection based on eligibility of CENVAT credit and non-submission of proof of debit of refund amount.

Analysis:
The appellant, a private limited company engaged in IT services and exporting taxable services, filed a refund claim of unutilized CENVAT credit. The Department issued a show cause notice (SCN) alleging non-submission of proof of debit, missing invoices, and other discrepancies. The Deputy Commissioner rejected the refund claim, stating the appellant was not eligible for credits and lacked proof of debit. The Commissioner (A) upheld the rejection. The appellant contended that eligibility of credit cannot be questioned at the time of refund, citing the case of K Line Ship Management. The appellant argued that subsequent debits to the CENVAT account should be considered valid, relying on decisions like Kony Labs IT Services Pvt. Ltd. and Ingersoll Rand Technologies and Services Pvt. Ltd. The AR supported the impugned order.

Upon review, the Tribunal found the rejection of the refund on the grounds of ineligibility and non-compliance with Condition 2(h) of the Notification unsustainable. The Tribunal cited the principle that eligibility of CENVAT credit cannot be questioned during refund adjudication, as per the K Line Ship Management case. It held that debiting the CENVAT account post filing the refund claim was a procedural violation, not affecting the appellant's substantive right to claim a refund under Rule 5 of CCR, 2004. The Tribunal referenced the decision in Kony Labs IT Services Pvt. Ltd., emphasizing that subsequent debiting of the CENVAT account does not negate the refund entitlement. Consequently, the impugned order was set aside, and the appeal allowed, granting the appellant interest under Section 11BB of the Central Excise Act, 1944, in line with legal precedents like Ranbaxy Laboratories Ltd. Vs UOI and UOI Vs Hamdard (Waqf) Laboratories. The authorities were directed to process the refund with interest as per the statutory provisions.