2023 (5) TMI 865 - AT - Service Tax

Rejection of Refund claim - denial of refund without issuing a notice under Rule 14 of the Cenvat Credit Rules - export of output services without payment of service tax during the period from January 2016 to March 2016 - HELD THAT - The issue involved in the present case in respect of denial without issuing a notice under Rule 14 of the Cenvat Credit Rules is no longer res integra and has been decided in the decisions referred to by the learned counsel in the case of M/S BNP PARIBAS INDIA SOLUTION PVT LTD VERSUS COMMISSIONER OF CGST, MUMBAI EAST 2021 (12) TMI 676 - CESTAT MUMBAI wherein the Tribunal has held that It is well settled legal position that denial of Cenvat Credit can be done only by issuing notice under Rule 14 ibid. Having allowed the Cenvat Credit or by not denying the same, the department cannot reject refund of Cenvat Credit under Rule 5. It is well settled principle that availment of Cenvat Credit, its utilisation and refund are different aspects dealt with under CCR, 2004. Rule 5 provides for any refund of Cenvat Credit and nowhere in this Rule there is a provision to determine the correctness about the availment of Cenvat Credit. Its only Rule 14 ibid which provides for recovery of irregularly availed Cenvat Credit. Thus modifying the refund claim to the extent of Rs.29,53,467/- by the lower authorities cannot be upheld. In respect of amount of Rs.3,09,347/-, appellant agrees that the refund claim is not admissible to them - there are force in the submissions made by the appellant that this amount which is not allowed as a refund should be allowed to be taken as credit as Cenvat account - this amount should be credited back in the Cenvat account if possible. Appellant has claimed cash refund of the said amount by quoting Section 142(6)(a) of the CGST Act. In my view, it is for the appellant to deal such a claim before the concerned authorities and seek a proper order from them under CGST Act. This Tribunal is not a competent authority to decide on the admissibility of cash refund as per the CGST Act. Appeal allowed.

Summary

Issues Involved:
1. Rejection of refund claim under Rule 5 of the Cenvat Credit Rules.
2. Requirement of service tax registration for refund claims.
3. Eligibility of input services for Cenvat credit.
4. Denial of refund without issuing a notice under Rule 14 of the Cenvat Credit Rules.
5. Refund claim adjustments and cash refund entitlement under Section 142(6)(a) of the CGST Act.

Issue-wise Detailed Analysis:

1. Rejection of Refund Claim under Rule 5 of the Cenvat Credit Rules:
The appellant filed a refund claim under Notification No. 27/2012-CE(NT) dated 18.06.2012, citing export of output services without payment of service tax from January 2016 to March 2016. The Assistant Commissioner allowed a partial refund but rejected Rs. 32,72,814/-. The Commissioner (Appeals) upheld this rejection, leading to the current appeal.

2. Requirement of Service Tax Registration for Refund Claims:
The refund claim was partly denied because the appellant obtained Service Tax registration on 01.04.2016, after the period for which the refund was claimed. The Commissioner (Appeals) held that proper registration is necessary for claiming refund under Rule 5 of CCR, 2004, referencing the judgment in Commissioner of Central Excise, Coimbatore v. Sutham Nylocots.

3. Eligibility of Input Services for Cenvat Credit:
The Commissioner (Appeals) examined various input services:
- Office Address Not in ST-2 (Rs. 937,532/-): Denied due to lack of correlation between the address on invoices and the registered address.
- Mediclaim Policy for Parents and Group Accident Policy (Rs. 20,22,005/-): Denied as the policies were for personal use of employees, referencing Rule 2(1)(C) of CCR, 2004.
- Club Services (Rs. 3,931/-): Not contested by the appellant as it pertained to personal consumption of employees.

4. Denial of Refund Without Issuing a Notice under Rule 14 of the Cenvat Credit Rules:
The appellant argued that the refund claim was denied without issuing a notice under Rule 14 of the Cenvat Credit Rules. The Tribunal has consistently held that refund claims under Rule 5 cannot be modified without initiating show cause proceedings under Rule 14. The Tribunal referenced multiple decisions, including BNP Paribas India Solutions Pvt. Ltd., which clarified that denial of Cenvat credit requires a notice under Rule 14.

5. Refund Claim Adjustments and Cash Refund Entitlement under Section 142(6)(a) of the CGST Act:
The appellant acknowledged that Rs. 3,09,347/- was not admissible due to computational errors but argued that this amount should be credited back to the Cenvat account as per Notification No. 27/2012-CE(NT). The Tribunal agreed that the amount should be credited back if possible. Regarding the cash refund claim under Section 142(6)(a) of the CGST Act, the Tribunal stated that it is for the appellant to seek a proper order from the concerned authorities under the CGST Act.

Conclusion:
The Tribunal allowed the appeal in part, stating that the modification of the refund claim to the extent of Rs. 29,53,467/- by the lower authorities cannot be upheld without issuing a notice under Rule 14. The Tribunal also directed that the amount of Rs. 3,09,347/- should be credited back to the Cenvat account if possible. The issue of cash refund under the CGST Act was left to be resolved by the concerned authorities.