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2021 (4) TMI 783 - HC - Service TaxRefund of unutilized CENVAT Credit - denial on the ground of intervening changes in view of the intervening events with the implementation of GST with effect from 01.07.2017 - eligibility of refund on legitimate export incentives - HELD THAT - The refund of CENVAT credit under Rule 5 of the CENVAT Rules 2004 read with Notification No.27/2012- CE(NT) dated 18.06.2012 is a legitimate export incentives given to an exporter of service and goods. Therefore, such legitimate export incentives given to exporters of goods or service cannot be denied merely because of intervening changes. Considering the fact that the petitioner has also not been able to utilize the credit of duty under the provisions of GST which came to be effected from 01.07.2017, legitimate export incentives cannot be denied to the petitioner - there are no merits in denying the benefit of refund claim filed by the petitioner under Rule 5 of the CENVAT Rules, 2004 - petition allowed.
Issues Involved:
1. Rejection of refund claims under Rule 5 of CENVAT Credit Rules, 2004. 2. Compliance with Rule 2(h) of Notification No.27/2012-CE(NT) dated 18.06.2012. 3. Impact of GST implementation on refund claims. 4. Legitimacy of export incentives and procedural compliance. Issue-wise Detailed Analysis: 1. Rejection of refund claims under Rule 5 of CENVAT Credit Rules, 2004: The petitioner filed three refund claims for the periods October 2016 to December 2016, January 2017 to March 2017, and April 2017 to June 2017. The respondent allowed the refund claim for the period April 2017 to June 2017 but rejected the claims for the other two periods. The rejection was based on the petitioner’s failure to debit the claimed refund amount from the CENVAT credit account at the time of making the claim, as required by Rule 2(h) of Notification No.27/2012-CE(NT). 2. Compliance with Rule 2(h) of Notification No.27/2012-CE(NT) dated 18.06.2012: The respondent observed that the petitioner did not debit the refund amounts in the CENVAT credit account, which is mandatory under Rule 2(h). The petitioner argued that they reversed the amount in their internal accounting documents, but the respondent found this insufficient as it was not a statutory document. The respondent also dismissed the petitioner’s defense that the ST-3 return format did not allow for such debits, stating that the return captures all necessary data, including arrear payments and CENVAT credit reversals. 3. Impact of GST implementation on refund claims: The petitioner contended that the refund claims were filed in time but after the implementation of GST, which affected their ability to comply with the debiting requirement. The respondent argued that the petitioner had until 15.09.2017 to file a revised return and debit the amount, which they did not. The court noted that the implementation of GST created an extraordinary situation where compliance with both conditions 2(g) and 2(h) of the Notification was not possible. The court found that the petitioner did not carry forward the balance to the GST regime, which could be construed as a debit. 4. Legitimacy of export incentives and procedural compliance: The court emphasized that legitimate export incentives cannot be denied due to procedural changes brought by GST implementation. The court referenced the respondent’s own observations in allowing the refund for April 2017 to June 2017, which recognized the petitioner’s compliance with the spirit of the law despite procedural challenges. The court concluded that the reasoning for allowing the refund claim for April 2017 to June 2017 should apply to the other two claims as well. Conclusion: The court allowed the writ petitions, directing the respondent to refund the amounts claimed by the petitioner within six weeks. The court found no merit in denying the refund claims based on procedural grounds, given the extraordinary circumstances of GST implementation and the petitioner’s compliance with the substantive requirements of the law. The court’s decision underscores the importance of ensuring that legitimate export incentives are not unduly denied due to procedural technicalities.
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