2021 (6) TMI 673 - AT - Service Tax

Refund of service tax paid by utilizing the Cenvat credit denied - denial on the ground that the output service was exempt under section 102 of Finance Act, 1994 - refund of interest - HELD THAT - The learned Commissioner (Appeals) held that reversal of Cenvat credit under Rule 6 of Cenvat Credit Rules, 2004 would not arise. Despite this clear finding the learned commissioner (Appeals) denied the refund on the ground that it will lead to double benefit once through availment of Cenvat credit and another through refund of service tax which is not permissible at all. With the above finding it is settled that Rule 6 shall not apply in the present case. The revenue also not challenged this finding therefore, it attains the finality. Now the issue remains to be decided that when the output services has been exempted retrospectively with a rider that whatever duty was paid to be refunded to the assessee, whether the service tax paid through utilization of Cenvat credit should be refunded or otherwise. During the relevant period i.e. 01.04.2015 to 29.02.2016 the output services were very much taxable - The appellant was legally entitled for the Cenvat Credit on the input service received from the sub- contractors and used in providing the output service. As per the plain reading of section 102 legislature knowing well that service tax on the construction service obviously paid not only on cash but also by utilizing the Cenvat credit on input service. With this clear understanding provision of refund of service tax paid on output service was also provided in section 102. There is no provision to given a different treatment of service tax paid on output service that whether the entire service tax was paid from cash or partly paid from cash and partly from Cenvat credit. Therefore, in whatever manner the service tax paid irrespective partly from cash and partly from Cenvat credit, total tax paid by the assessee was mandated to be refunded to the service provider. Also, the provision of Rule 11 of the Cenvat Credit Rules, 2004, is applicable only in the case where the assessee has taken the Cenvat Credit on Input Service and the said credit is lying unutilized and the output service became exempted - In the present case while taking the Cenvat credit the output service were not exempted and the Cenvat credit was utilized for the payment of service tax therefore, neither any Cenvat credit was lying accumulated nor the service at the relevant time was provided under exemption particularly issued under section 93 of the Finance Act, 1994. In the present case during the relevant period the services were very much taxable therefore, the availment of Cenvat credit and utilization thereof and also payment of service tax on the output service was correct. Hence, the of sub- rule (4) of Rule 11 of the Cenvat Credit Rules is not at all applicable in the facts of the present case. Thus, in the present case there is no dispute in availment of Cenvat credit at the time of receipt of input service. Therefore, subsequent exemption by virtue of section 102 of Finance Act, 1994 will not make disentitle the appellant from the said Cenvat credit. Refund of interest - HELD THAT - The said interest was paid on the service tax which is refundable under Section 102. When there is no levy of service tax the government cannot retain the interest paid on such non levy therefore, even though it is not specifically provided under Section 102. The interest paid on the service tax which is to be refundable is nothing but a piggy back of refundable service tax. Hence, the same is eligible for the refund to the appellant. The appellant is entitled for the refund of service tax paid through Cenvat credit and also the interest paid for delay in payment of service tax - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Eligibility for refund of service tax paid using Cenvat credit.
2. Applicability of Rule 6 of the Cenvat Credit Rules, 2004.
3. Date of contract determination for eligibility under Section 102 of the Finance Act, 1994.
4. Refund eligibility for interest paid on delayed service tax.

Issue-wise Detailed Analysis:

1. Eligibility for Refund of Service Tax Paid Using Cenvat Credit:
The appellants provided works contract services to various Government Departments and paid service tax using both cash and Cenvat credit. Section 102 of the Finance Act, 1994, granted retrospective exemption and provided for the refund of service tax paid during the period from 01.04.2015 to 29.02.2016. The appellants filed for a refund of ?2,78,07,833/-, which included ?1,82,16,059/- paid using Cenvat credit. The Deputy Commissioner rejected the refund, stating that the appellants did not follow Rule 6 of the Cenvat Credit Rules, 2004, and the refund claim was hit by unjust enrichment. The Commissioner (Appeals) partially allowed the refund but denied the portion paid using Cenvat credit, reasoning it would result in a double benefit.

The Tribunal found that Section 102 did not differentiate between service tax paid in cash or through Cenvat credit. The Cenvat credit utilized had taken the color of service tax paid, making it refundable under Section 102. The Tribunal cited the case of M/s Alembic Ltd., where it was held that eligibility for Cenvat credit is determined at the time of receipt of input services, not by subsequent events. Therefore, the denial of refund for service tax paid using Cenvat credit was without statutory basis.

2. Applicability of Rule 6 of the Cenvat Credit Rules, 2004:
The Tribunal observed that the Commissioner (Appeals) had already concluded that Rule 6 was inapplicable as the appellants maintained separate accounts and availed Cenvat credit only for taxable output services. This finding was not challenged by the revenue and thus attained finality. The Tribunal reiterated that Rule 6 was not applicable as the services were taxable during the relevant period, and the subsequent exemption did not affect the legitimacy of the Cenvat credit availed.

3. Date of Contract Determination for Eligibility Under Section 102 of the Finance Act, 1994:
The Tribunal addressed the issue of refund for ?38,11,497/- related to project B-2/12/2014-15. The Commissioner (Appeals) denied this refund, considering the work order date (16.03.2015) as the contract date, which was post-01.03.2015. The Tribunal disagreed, stating that the tender opening date (28.01.2015) should be considered the contract date since no separate contract/agreement was entered into after the tender acceptance. The Tribunal held that the appellants were eligible for the refund as the contract was effectively entered into before 01.03.2015.

4. Refund Eligibility for Interest Paid on Delayed Service Tax:
The appellants sought a refund of ?3,77,629/- paid as interest on delayed service tax. The lower authorities rejected this claim, stating Section 102 provided for the refund of service tax but not interest. The Tribunal held that since the service tax itself was not payable, the interest paid on such non-levy should also be refundable. The interest was considered an adjunct to the refundable service tax, thus eligible for refund.

Conclusion:
The Tribunal concluded that the appellants were entitled to the refund of service tax paid through Cenvat credit and the interest paid on delayed service tax. The impugned order was modified accordingly, and the appeal was allowed with consequential relief as per law.

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