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2020 (4) TMI 203 - AT - Service TaxRefund of CENVAT Credit - input services - Rent-a-Cab Operator services, Outdoor Catering services, Pest Control services, Custom House Agents services, Gym/Health Club services, Business or Management Consultants services, Tour Operator services and Cleaning services - nexus with the exported service or not - HELD THAT - It is now a well settled legal position that denial of Cenvat credit must be done, if necessary, only by issuing notice under Rule 14 of CCR, 2004. Having allowed the Cenvat credit or having not denied the Cenvat credit, they cannot reject refund of Cenvat credit. In fact, there is no one to one correlation between the input/ input services on which Cenvat credit has been taken and the exported services. The refund is allowed only as per the formula given under Rule 5 of CCR, 2004 read with Notification No. 5/2006, on a proportionate basis. The rejection of refund is not sustainable - appeal allowed - decided in favor of appellant.
Issues:
1. Denial of refund of Cenvat credit under Rule 5 of CCR, 2004 due to alleged lack of nexus between output and input services. Analysis: The appellant, engaged in providing Information Technology Software services, filed a refund claim under Rule 5 of Cenvat Credit Rules, 2004 for the period July 2009 to September 2009. The claim sought refund of Cenvat credit not utilized due to the export of services. The original authority partially sanctioned the claim but rejected a portion, citing lack of nexus with exported services for specific service categories. On appeal, the first appellate authority upheld the rejection of a significant amount of the refund. The appellant contended that the refund calculation should be based on a specific formula without the need to establish nexus, as per Rule 5 of CCR, 2004. They argued that the denial of refund without issuing a notice under Rule 14 of CCR, 2004 was unsustainable. The appellant highlighted that they had received Cenvat credit for the disputed services in previous and subsequent periods, indicating inconsistency in the denial of refund. The appellant presented favorable orders from the Tribunal in their own cases for various services, including Rent-a-Cab Operator, Outdoor Catering, Cleaning, Custom House Agents, Gym/Health Club, Business or Management Consultants, and Travel and Stay of Employees services. These orders demonstrated that refund on similar services had been allowed in the past, reinforcing the appellant's argument for consistency in refund approvals. The appellant emphasized that the refund calculation should be solely based on the ratio of export turnover to total turnover multiplied by the total Cenvat credit utilized, without the requirement of establishing a direct nexus between individual services and exported services. The Tribunal analyzed the legal position and clarified that denial of Cenvat credit should only occur through a notice under Rule 14 of CCR, 2004. The Tribunal emphasized that once Cenvat credit had been allowed or not denied, the refund could not be rejected based on a lack of nexus between input and output services. The refund approval was to be determined proportionately as per the specified formula. Consequently, the Tribunal found the rejection of the refund claim to be unsustainable and set aside the impugned order, allowing the appeal with consequential relief. The judgment highlighted the necessity of adhering to legal procedures and formulaic calculations in refund determinations under Rule 5 of CCR, 2004.
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