2008 (1) TMI 94 - AT - Service Tax

Business auxiliary services & export of said services - availing benefit of credit in respect of input services used in export of auxiliary services filed refund claim for unutilized credit rule 5 which not provide for refund of unutilized credit to the producer of output services got substituted during relevant time - Once the refunds are under the amended rules & notification issued thereunder, the same can t be denied merely because they relate to exports made prior to date of amendment

Issues Involved:
1. Interpretation of Rule 5 of the Cenvat Credit Rules, 2004.
2. Applicability of Notification No. 4/2006 dated 14-3-2006.
3. Retrospective effect of the amendment made by Notification No. 4/2006.
4. Validity of refund claims filed after the amendment.

Issue-wise Detailed Analysis:

1. Interpretation of Rule 5 of the Cenvat Credit Rules, 2004:
The core issue revolves around the interpretation of Rule 5 of the Cenvat Credit Rules, 2004, as it existed during the period April 2005 to March 2006, and the changes introduced by Notification No. 4/2006 dated 14-3-2006. The appellants argued that the intention of the government was always to allow refunds of unutilized Cenvat credit to the providers of output services, and the pre-amendment rule should be read as having included service providers due to an obvious drafting error. However, the tribunal noted that the pre-amendment Rule 5 explicitly allowed refunds only to manufacturers and not to service providers, indicating a clear legislative intent.

2. Applicability of Notification No. 4/2006 dated 14-3-2006:
The appellants contended that the amendment made by Notification No. 4/2006 was clarificatory and should be applied retrospectively to cover the period before its issuance. They argued that the five words "or provider of output services" in the proviso to Rule 5 were misplaced and should be transposed to the main rule to correct an obvious drafting error. The tribunal, however, found that the amendment was substantive and introduced new provisions, including safeguards and conditions for claiming refunds by service providers, which were not present in the pre-amendment rule.

3. Retrospective effect of the amendment made by Notification No. 4/2006:
The appellants cited various Supreme Court decisions to support their claim that the amendment should be considered retrospective. They argued that the amendment was intended to clarify the original intent of the legislation and correct an omission. The tribunal, however, held that the amendment was not merely clarificatory but substantive, as it introduced new procedures and safeguards for service providers. Therefore, it could not be given retrospective effect. The tribunal emphasized that the pre-amendment rule clearly did not provide for refunds to service providers, and the amendment could not be construed to have been intended to apply retrospectively.

4. Validity of refund claims filed after the amendment:
The tribunal agreed with the appellants' last plea that refund claims filed after the amendment (i.e., after 14-3-2006) should be governed by the amended rules. The tribunal noted that the substituted Rule 5 did not specify that it would apply only to exports made after 14-3-2006. Therefore, any refund claim filed after this date, which satisfied the requirements of the amended rules and notifications, could not be denied on the ground that it related to exports made before the amendment. The tribunal referenced the principle that a statute conferring prospective benefits based on antecedent facts does not necessarily make the provision retrospective.

Conclusion:
The tribunal allowed the appeals, setting aside the orders of the Commissioner (Appeals). It held that refund claims filed after the amendment should be processed under the amended rules, regardless of whether they pertained to exports made before the amendment. The tribunal emphasized that the amendment introduced by Notification No. 4/2006 was substantive and not merely clarificatory, thereby not warranting retrospective application.

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