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2021 (9) TMI 1274 - HC - Service TaxRefund of CENVAT Credit - cenvat credit on common input services used for providing both taxable service and exempt service - rejection on the ground that there was no identity of input services as far as direct trading and incentive trading were concerned - non-adherence to the procedure laid down under the Rules for payment/reversal - burden of prove - HELD THAT - Since the impugned communication is a show cause notice the burden lies heavy upon the petitioner to establish that the same is bereft of jurisdiction as the scope of interference under Article 226 in such case is limited. The scope of examination is restricted to the question as to whether the impugned show cause notice stretches beyond the scope of remand by the CESTAT. Entitlement to credit - HELD THAT - The issue stands decided at the level of the first Appellate Authority and hence the show cause notice purporting to re-open the question of entitlement to credit is bad in law. It is only on the aspect of quantification that the matter has been remanded by the Tribunal and the respondent ought to have restricted himself to a verification of this aspect alone. There are two opportunities that present to the respondent. The first is the filing of an appeal in terms of Section 86(1) of the Finance Act 1994 which provides for an appeal to be filed by a person aggrieved by an order of the first appellate authority within three months from the date of receipt of the order. The second is in terms of Section 86(4) where either the Department or an assessee who has not filed an appeal against the order of the first appellate authority may within 45 days of receipt of notice of an appeal filed by the other party file a memorandum of cross-objection which shall be disposed by the Appellate Tribunal as though it were an appeal presented within the time stipulated for filing of an appeal. The identity of input services stands settled and it is only on the quantification thereof that the petitioner can be called upon to respond. Thus the respondent will issue a fresh show cause notice limiting the scope of examination to the quantification of input service alones call upon the petitioner to file a response and conclude the matter within a period of eight (8) weeks from the date of uploading of this order. Petition disposed off.
Issues Involved:
1. Entitlement to Cenvat Credit. 2. Quantification of Cenvat Credit. Detailed Analysis: Entitlement to Cenvat Credit: The petitioner entered into a Business Solutions Agreement with Amazon Seller Services Pvt. Ltd. for listing and selling products on Amazon's portal. Amazon provided various services, including storage, shipping, and processing of sales returns, for which it was compensated by the petitioner. The petitioner also participated in the Amazon Marketing Programme, receiving compensation from Amazon for promotional incentives. The petitioner paid service tax on this compensation. The petitioner claimed that the fulfillment services provided by Amazon were 'input services' under Rule 2(l) of the Cenvat Credit Rules, 2004, used for both taxable and exempt services. Consequently, Rule 6 of the Cenvat Credit Rules, which deals with the methodology for computing proportionate credit for common input services used for both taxable and exempt activities, was invoked. The Assessing Authority initially rejected the petitioner's refund claim, stating that the input services were used for trading, which falls under the negative list of services under Section 66D(e) of the Finance Act, 1994, and hence, the petitioner was not eligible for Cenvat credit. Upon appeal, the first appellate authority partially allowed the petitioner's claim, acknowledging the commonality of input services used for both taxable and exempt services. The appellate authority directed the petitioner to remit 7% of the value of exempt services as per Rule 6(3)(i) read with Rule 6(3D)(c) of the Rules and computed the excess paid at Rs. 4,31,586/-. The petitioner further appealed to the Customs, Central Excise, and Service Tax Appellate Tribunal (CESTAT), which upheld the petitioner's entitlement to credit and directed the authority to quantify the amount for refund by applying Rule 6(3)(ii). The High Court concluded that the issue of entitlement to credit was settled at the level of the first appellate authority, and the show cause notice attempting to reopen this question was deemed bad in law. The court emphasized that the respondent should have restricted itself to verifying the quantification aspect alone. Quantification of Cenvat Credit: The Tribunal remanded the matter to the adjudicating authority for quantification of the refund amount. The petitioner provided its computation of the refund, but the respondent issued a show cause notice challenging the entitlement to credit again, which the court found to be beyond the scope of the remand by the CESTAT. The High Court directed the respondent to issue a fresh show cause notice limited to the quantification of input services alone and to conclude the matter within eight weeks. Conclusion: The High Court disposed of the writ petition, directing the respondent to focus solely on the quantification of input services for the purpose of refund and to issue a fresh show cause notice accordingly. The court reiterated that the entitlement to credit had already been settled and should not be reopened.
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