2023 (5) TMI 866 - AT - Service Tax

Refund claim - denial on the ground that input services had no nexus with the output services exported - deficiencies in the documents - modification of refund claims under rule 5 of CCR - HELD THAT - It is well settled position in law that refund claim filed under Rule 5 of Cenvat Credit Rules could not have been modified for the reason that certain Cenvat credits are inadmissible to the appellant, for which proper proceedings need to have been initiated under Rule 14 of Cenvat Credit Rules. Reference has been made in various decisions - reliance can be placed in the case of M/S. CROSS TAB MARKETING SERVICES P. LTD. VERSUS C.C.G.S.T., MUMBAI EAST 2021 (9) TMI 979 - CESTAT MUMBAI where it was held that Since the Commissioner (Appeals) has by the impugned order held the refund to be admissible, to the extent of CENVAT Credit held admissible by him subject to verification of the documents by the original authority I modify his order to this extent i.e. that entire credit as claimed by the Appellant for determining the refund amount is held admissible if not held admissible in proper proceedings initiated under Rule 14 of the CENVAT Credit Rules, 2004. In the case of M/S BNP PARIBAS INDIA SOLUTION PVT LTD VERSUS COMMISSIONER OF CGST, MUMBAI EAST 2021 (12) TMI 676 - CESTAT MUMBAI it was held that The rule only provides that the admissible refund will be proportional to the ratio of export turnover of goods and services to the total turnover, during the period under consideration and the net Cenvat credit taken during that period. Indisputably, in the refund proceedings under Rule 5 ibid as amended, any such attempt to deny or to vary the credit availed during the period under consideration is not permissible. If the quantum of the Cenvat credit is to be varied or to be denied on the ground that certain services do not qualify as input services or on the ground of no nexus , then the same could have been done only by taking recourse to Rule 14 ibid. The impugned order denying the refund claims made in terms of Rule 5, for the reason that input services had no nexus with the output services exported or for the reason that the credit cannot be held admissible for the reasons of deficiencies in the documents against which the same is claimed cannot be sustained. Appeal allowed.

Issues Involved:
1. Admissibility of CENVAT credit for various input services.
2. Modification of refund claims under Rule 5 of CENVAT Credit Rules, 2004.
3. Requirement of nexus between input services and output services for refund claims.
4. Procedural correctness in denying refund claims.

Detailed Analysis:

1. Admissibility of CENVAT Credit for Various Input Services:
The appellant filed refund claims for several periods under Rule 5 of the CENVAT Credit Rules, 2004. The original authority sanctioned partial refunds and rejected the remaining claims, citing inadmissibility of CENVAT credit for specific services such as business support services, cleaning services, CA/legal consultants, renting of immovable property, security services, telecommunication services, passenger air travel services, accommodation services, management, maintenance and repair services, courier services, banking and other financial services, business auxiliary services, works contract services, and online database access retrieval services. The Commissioner (Appeals) allowed credits for some services like air travel services, accommodation services, management services, etc., but the appellant contested further.

2. Modification of Refund Claims Under Rule 5 of CENVAT Credit Rules, 2004:
The Tribunal noted that the refund claims under Rule 5 should not be modified on the grounds of inadmissibility of certain CENVAT credits. It emphasized that any disallowance of CENVAT credit should be addressed through appropriate proceedings under Rule 14 of the CENVAT Credit Rules, 2004. The Tribunal referenced multiple decisions, including *Cross Tab Marketing Services Pvt. Ltd.*, *BNP Paribas India Solution Pvt. Ltd.*, and *Qualcomm India Pvt. Ltd.*, which consistently held that the refund claims should not be adjusted for inadmissible credits without proper proceedings.

3. Requirement of Nexus Between Input Services and Output Services for Refund Claims:
The Tribunal reiterated that the amended Rule 5 of the CENVAT Credit Rules does not require establishing a nexus between input services and output services for claiming refunds. The rule only mandates that the refund amount be proportional to the ratio of export turnover to total turnover. This position was supported by various judicial precedents, including *Accelya Kale Solutions Ltd.* and *TPG Capital India Pvt Ltd.*, which clarified that the nexus requirement is not applicable for determining refund eligibility under the amended Rule 5.

4. Procedural Correctness in Denying Refund Claims:
The Tribunal found that the original and appellate authorities erred in denying refund claims based on the inadmissibility of certain input services without initiating proper proceedings under Rule 14. The Tribunal highlighted that objections to the admissibility of CENVAT credit should be raised at the time of availing the credit, not during the refund process. The Tribunal's decision was influenced by precedents such as *Barclay Global Service Centre Pvt. Ltd.*, which held that objections to credit admissibility cannot be raised during refund adjudication if not previously contested.

Conclusion:
The Tribunal set aside the impugned orders to the extent they modified the refund claims based on inadmissibility of certain CENVAT credits. It directed that the entire credit claimed by the appellant should be considered for refund determination unless disallowed through proper proceedings under Rule 14. The appeals were allowed in favor of the appellant, with the Tribunal emphasizing the need for procedural correctness and adherence to established legal principles regarding the nexus requirement and modification of refund claims.

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