2022 (12) TMI 137 - AT - Service Tax

Rejection of refund claim - non-availability of balance in cenvat credit - non-compliance with condition of debit of amount equivalent to refund claim in CENVAT credit account - rule 5 of CENVAT Credit Rules, 2004 - HELD THAT - There is no doubt that the remand order takes note of the evidence furnished by the appellant to substantiate the claim of having complied with condition of debit of the CENVAT credit account by directing the original authority to scrutinise this submission once again. There is also no doubt that the lower authorities, in proceedings pursuant to the remand order, have come to the conclusion that not carrying forward the balance of credit in the returns pertaining to the said period is not sufficient for accepting the claim of the appellant that procedural requirements had been complied with. The provisions in the notification for operationalizing of rule 5 of CENVAT Credit Rules, 2004 include debiting of the claim amount before submission of application for the same. There is a purpose behind this mandate that the claimed amount would be erased from the credit account and, thus, not utilised even temporarily once monetization has been sought. Ideally, credit should be reversed as and when export takes place; however, with eligibility for refund arising only upon receipt of proceeds of export and the scheme having provided for filing of claim within a year thereafter, the dilution of ideal by shift to the quarter in which the claim is preferred is acceptable approximation. Therefore, the submission of the appellant would meet the test of sufficiency only by evincing continuous availability of such balance from the date of filing of the claim for refund till the date on which the opening balance reflected write-off of the entire credit as claimed by them - the appellant is, squarely and singularly, responsible for failure to furnish proof of the required availability of credit till the date of write off and, in the absence of any such evidence even at this stage of appeal or even assurance of being ready and willing to do so, there is no scope for further ascertainment. The decision of the Tribunal in SILICON IMAGE INDIA RESEARCH DEVELOPMENT PVT. LTD. AND ORS. VERSUS CCE ST, HYDERABAD-IV AND ORS. 2017 (8) TMI 1686 - CESTAT HYDERABAD and in BA CONTINUUM INDIA PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX-II, MUMBAI 2018 (6) TMI 1011 - CESTAT MUMBAI have, no doubt, enumerated the principle that a rectifiable lapse in procedure should not lead to denial of refund but the outcome therein has been decided on the fact of post-claim rectification. While concurring with the principle, we find that, on the facts made known in this appeal, material presented before us does not support extending that outcome in this dispute. There are no reason to hold the impugned order as contrary to the terms of the remand ordered in the first round of appeal - appeal dismissed.

Summary

Issues Involved:
1. Non-compliance with the condition of debit of amount equivalent to refund claim in the CENVAT credit account.
2. Rejection of refund claims for export of services.
3. Procedural lapses and submission of documentary evidence.
4. Compliance with conditions under Notification No. 27/2012/CE (NT) dated 18th June 2012.

Detailed Analysis:

1. Non-compliance with the Condition of Debit of Amount Equivalent to Refund Claim in the CENVAT Credit Account:
The appellant's primary contention was that the rejection of their refund claims was based on the non-compliance with the requirement to debit the amount equivalent to the refund claim in the CENVAT credit account. The appellant argued that they had written off the entire balance of credit as on 1st April 2016, which they claimed to be substantive compliance. However, the sanctioning authority and the first appellate authority found this insufficient, emphasizing the necessity of debiting the claimed amount before submitting the application to prevent undue benefit. The Tribunal upheld this view, noting that the appellant failed to provide continuous evidence of the credit balance from the date of filing the claim to the date of write-off.

2. Rejection of Refund Claims for Export of Services:
The appellant's refund claims were initially rejected by the adjudicating authority, leading to a remand by the first appellate authority for re-computation. The remand order required the original authority to re-examine the claim, particularly the compliance with Rule 6A of the Service Tax Rules, 1994. The Tribunal noted that the appellant combined claims for export of goods and services in a single refund application, which was not in line with the prescribed procedure. The Tribunal found that the original authority did not fully re-adjudicate the claims as per the remand order, but the appellant's failure to provide necessary evidence rendered further remand unnecessary.

3. Procedural Lapses and Submission of Documentary Evidence:
The appellant criticized the first appellate authority for not appreciating the limited remit of the dispute and for relying on insufficient submissions. The Tribunal, however, focused on the primary proposition of the appellant and the sufficiency of documentary evidence for sanctioning the refund. The Tribunal found that the appellant did not provide adequate proof of compliance with the condition of debit in the CENVAT credit account, as required by the notification. The Tribunal emphasized that the appellant's assertion of compliance through write-off in subsequent returns did not meet the mandated procedural requirements.

4. Compliance with Conditions under Notification No. 27/2012/CE (NT) dated 18th June 2012:
The notification under Rule 5 of the CENVAT Credit Rules, 2004, outlines specific conditions for refund claims, including the requirement to debit the claimed amount in the CENVAT credit account. The Tribunal noted that the appellant failed to demonstrate continuous availability of the credit balance from the date of filing the refund claim to the date of write-off. The Tribunal concurred with the principle that procedural lapses should not lead to denial of refund if rectified, but found that the appellant did not provide sufficient evidence to support their claim. Consequently, the Tribunal dismissed the appeal, upholding the impugned order.

Conclusion:
The Tribunal dismissed the appeal, affirming the rejection of the refund claims due to non-compliance with the procedural requirement of debiting the claimed amount in the CENVAT credit account and the appellant's failure to provide continuous evidence of the credit balance. The Tribunal emphasized the importance of adhering to the conditions outlined in the relevant notification and the necessity of providing adequate documentary evidence to substantiate refund claims.