2020 (2) TMI 224 - AT - Service Tax

100% EOU - refund of CENVAT Credit - export of services - Rule 5 of the Cenvat Credit Rules, 2004 - denial of benefit of refund in case of some of the input services on the ground that there were no nexus between such disputed input services and the output service exported by the appellant and that the disputed services are not conforming to the definition of the input service as per Rule 2(l) of the Cenvat Credit Rules, 2004 - HELD THAT - Rule 5 of the Cenvat Credit Rules was substituted by Notification No.18/2012-C.E.(N.T.), dated 17.03.2012 (w.e.f. 01.04.2012). Under the said substituted rule, it has been provided that the manufacturer or the service provider has to claim the refund as per the formula prescribed therein. Considering such amendment of Rule 5, the Tax Research Unit of Department of Revenue vide circular dated 16/03/2012 has clarified that the new scheme under Rule 5 does not require the kind of correlation that is needed at present between exports and input services used in such exports. Since the amended rule w.e.f. 01.04.2012 does not provide for establishment of nexus between the input and the output services and the benefit of refund is to be extended only on compliance of the formula prescribed therein, the denial of refund benefit on the ground of non-establishment of nexus cannot be sustained. Tribunal in the case of M/S MAERSK GLOBAL SERVICES CENTRES (INDIA) PVT. LTD. VERSUS COMMISSIONER OF C.G. ST-NAVI MUMBAI 2019 (10) TMI 959 - CESTAT MUMBAI has extended the refund benefit on the ground that establishment of nexus between the input and the output services cannot be insisted upon. Since, correlation between the relevant invoices and the refund application is required to be scrutinized in a proper manner, the matter should be remanded to the original authority for verification of the relevant invoices and other documents for a proper fact finding whether, the refund benefit has been claimed once or twice - the matter is remanded for a limited purpose of verification of the relevant invoices with regard to the allegation of availment of double credit by the appellant. Appeal allowed by way of remand.

Summary

Issues:
Refund denial based on nexus between input and output services.
Claiming refund twice on the same invoice.

Analysis:
1. Refund Denial based on Nexus:
The case involved an appeal by a 100% EOU providing IT software services seeking refund under Rule 5 of the Cenvat Credit Rules, 2004 for exported services. The appellant's refund applications were partially denied by the original authority and the Commissioner (Appeals) due to a lack of nexus between certain input services and the exported output services. The appellant argued that the nexus was not questioned during credit availment, emphasizing compliance with Rule 5 for refund eligibility. Citing precedents like Maersk Global Services Centres (India) Pvt. Ltd., the appellant contended that nexus establishment was not a prerequisite post-amendment of Rule 5 in 2012. The Tribunal concurred, noting the amended rule's emphasis on compliance with the prescribed formula for refunds, not nexus proof. Relying on TRU circulars, the Tribunal held that nexus establishment was unnecessary for refund consideration, overturning the denial based on nexus absence.

2. Claiming Refund Twice:
Regarding the allegation of claiming refund twice on the same invoice, the appellant asserted that they had not done so and had records to prove single refund claims. The Revenue reiterated the impugned order's findings, contending that if disputed services did not align with 'input service' definition, refund benefits should be withheld. The Tribunal, unable to verify the claim independently due to unavailability of original records, remanded the matter to the original authority for thorough verification of invoices and documents. The Tribunal emphasized the need for proper scrutiny to determine if double credit was indeed availed, allowing the appellant to participate in the verification process for a fair assessment. The matter was remanded for a limited purpose to ensure accurate fact-finding.

In conclusion, the Tribunal set aside the denial of refund benefit based on nexus absence, emphasizing compliance with the amended Rule 5 formula for refunds. The issue of claiming refund twice was remanded for detailed verification, underscoring the importance of proper scrutiny and the appellant's participation in the process. The appeals were disposed of accordingly, ensuring a fair and thorough examination of the refund claims.