2022 (11) TMI 1190 - AT - Service Tax

Refund of accumulated/unutilized Cenvat Credit of Service tax - input services - Business Travel Service - Membership of club or Association service - Event Management Service - Business Support Services - nexus with the output services or not - October, 2016 to June, 2017 - HELD THAT - There is no doubt that Rule 5 ibid provides for refund of accumulated Cenvat credit subject to compliance of the procedure/ guideline laid down in the notifications issued thereunder. The refund of Cenvat credit on the services in issue was mainly denied to the Appellant on the ground of no nexus between the input services and the export services. But the question herein is whether the department can deny refund of Cenvat credit under Rule 5 ibid alleging that there was no nexus between the output and input services. It is settled legal position that denial of Cenvat credit can be done only by issuing notice under Rule 14 ibid and the department cannot reject refund of Cenvat credit solely under Rule 5. It is well settled principle that availment of Cenvat credit, its utilization and refund are different aspects dealt with under CCR, 2004 - Admittedly since the availment of credit has not been questioned by the department herein by issuing show cause notice in terms of Rule 14 ibid, the refund benefit cannot be denied on the ground of non-establishment of nexus between input and the output services. In the matter of M/S BNP PARIBAS INDIA SOLUTION PVT LTD VERSUS COMMISSIONER OF CGST, MUMBAI EAST 2021 (12) TMI 676 - CESTAT MUMBAI this Tribunal while allowing the appeal of the assessee therein allowed the refund claim u/s. 5 ibid by holding that since the provisions of Rule 14 ibid have not been invoked, the refund of Cenvat credit as claimed by the Appellant under Rule 5 ibid cannot be denied. Although, as submitted by learned counsel, the mails and sample copy of invoices were produced by them before the learned commissioner in support of their submissions but simply the claim has been rejected by merely recording that no tangible evidence has been produced. The aforesaid mails and invoices, which have been produced here also, are sufficient to establish the nexus. Law does not require one to one correlation unless the availment of Cenvat credit itself - the appellants are entitle for the refund as claimed by them and the authority below is not justified in rejecting the same. Appeal allowed.

Issues Involved:

1. Denial of refund of accumulated/unutilized Cenvat Credit of Service tax under Rule 5 of Cenvat Credit Rules, 2004.
2. Requirement of establishing nexus between input services and output services for claiming refund.
3. Non-issuance of show cause notice before rejecting refund claims.

Issue-wise Detailed Analysis:

1. Denial of Refund of Accumulated/Unutilized Cenvat Credit:
The appellant challenged the order dated 27.6.2019 by the Commissioner (Appeals)-II, CGST & Central Excise, Mumbai, which partly modified the Adjudicating Authority's decision and rejected refund claims on Business Travel Service, Membership of club or Association, Event Management Service, and Business Support Services. The period in dispute was from October 2016 to June 2017, with a refund claim amounting to Rs. 21,18,014/-. The appellant provided taxable output services like banking and financial services and claimed Cenvat Credit on various input services. The refund claims were filed under Rule 5 of Cenvat Credit Rules, 2004, read with Notification No. 27/2012-CE (NT) dated 18.6.2012, for accumulated Cenvat Credit due to the export of services during the disputed periods.

2. Requirement of Establishing Nexus Between Input and Output Services:
The core issue was whether there was a need to establish a nexus between input services and output services to claim a refund. The appellant argued that post the amendment in Rule 5 on 1.4.2012, there was no requirement to establish such a nexus. The appellant contended that Business Travel Service, Club Membership, Event Management Service, and Business Support Services were integral to their business operations and had a direct nexus with the output services. The appellant supported their claims with emails and invoices showing the business purpose of these services.

3. Non-Issuance of Show Cause Notice:
The appellant also raised the issue of non-issuance of a show cause notice before rejecting the refund claims. It was argued that the denial of Cenvat credit could only be done by issuing a notice under Rule 14 of the Cenvat Credit Rules, 2004, and not solely under Rule 5. The Tribunal observed that Rule 5 provides for the refund of accumulated Cenvat credit without requiring the establishment of a nexus between input and output services. The denial of refund based on the non-establishment of nexus was deemed incorrect, as the availment of Cenvat credit had not been questioned through a show cause notice under Rule 14.

Tribunal's Findings:
The Tribunal referred to its previous decisions, including BNP Paribas India Solution Pvt. Ltd. vs. Commr. CGST, Mumbai East, and Maersk Global Services Centres (I) Pvt. Ltd., which established that post the amendment of Rule 5, the refund of input service credit did not require establishing a nexus between input and output services. The Tribunal reiterated that the denial of refund benefits on the ground of non-establishment of nexus could not be sustained and that any such denial should be addressed through Rule 14.

Conclusion:
The Tribunal concluded that since the provisions of Rule 14 had not been invoked, the refund of Cenvat credit as claimed by the appellant under Rule 5 could not be denied. The appeals filed by the appellant were allowed with consequential relief, if any, in accordance with the law. The Tribunal emphasized that the mails and invoices provided by the appellant were sufficient to establish the nexus and that the rejection of the refund claims by the lower authorities was unjustified.

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