2023 (5) TMI 892 - AT - Service Tax

Refund claim on account of excess deposit of Service Tax on account of unutilized Cenvat Credit - Closure of business due to death of the proprietor - Intellectual Property Rights Service - Rule 5 / Rule 5B of Cenvat Credit Rules 2002 - order for refund even if there is no production and there is no clearance of finished goods - entitlement for refund even if it goes out of Movat Scheme or the Company is closed. HELD THAT - This Tribunal had an occasion to consider the two contrary viewpoints in the case of CCE, HYDERABAD VERSUS APEX DRUGS INTERMEDIATES LTD. 2010 (8) TMI 913 - CESTAT BANGALORE , after debating the same, it came to the conclusion that Rule 5 of the Cenvat Credit Rules did not prohibit the grant of such credit refund when for any reason accumulated credit was not utilizable. The assessee in the present case has ceased to be a manufacturer upon surrender of the licence and so the credit available remains unutilizable. Following the judgement of the Hon ble Karnataka High Court in UNION OF INDIA VERSUS SLOVAK INDIA TRADING CO. PVT. LTD. 2006 (7) TMI 9 - KARNATAKA HIGH COURT , the Tribunal had dismissed the appeal filed by the department and allowed the refund. To similar effect is the Tribunal s decision in the case of COMMR. OF C. EX. CUS. (APPEALS), TIRUPATI VERSUS KORES (INDIA) LTD. 2008 (8) TMI 588 - CESTAT, BANGALORE , allowing refund of Cenvat Credit lying with the assessee upon closure of the factory. In view of the fact that right to availment of Cenvat Credit is a vested right as held in EICHER MOTORS LTD. VERSUS UNION OF INDIA 1999 (1) TMI 34 - SUPREME COURT , which accrues to a manufacturer, the fact of closure of business leading to non-utilization thereof, cannot deprive the deceased of their accrued interests in law and following judicial discipline and precedent decisions, the appeal is allowed with consequential relief.

Summary

Issues Involved:
1. Eligibility for refund of unutilized Cenvat Credit.
2. Applicability of Rule 5B of the Cenvat Credit Rules, 2004.
3. Impact of the death of the service provider on the refund claim.
4. Judicial precedents supporting or opposing the refund claim.

Summary:

1. Eligibility for Refund of Unutilized Cenvat Credit:
The appellant, Smt. Rukmini Devi, filed a refund claim for Rs. 1,49,412/- on account of excess deposit of Service Tax due to unutilized Cenvat Credit for the period October 2015 to March 2016. The Assistant Commissioner rejected the claim stating no opening and closing balance of Cenvat Credit was reported in the ST-3 Return.

2. Applicability of Rule 5B of the Cenvat Credit Rules, 2004:
The Commissioner (Appeals) dismissed the refund claim on the grounds that the appellant was not eligible under Rule 5B read with Notification 12/2014 dated 3rd March 2014. The refund could only be claimed for Cenvat Credit taken on input and input services for specific services like renting of motor vehicles, supply of manpower, and execution of work contracts, which did not apply to the appellant's services.

3. Impact of the Death of the Service Provider on the Refund Claim:
The appellant argued that due to the death of Shri Lalit Kumar Arya, the service provider, the business ceased, and the Service Tax registration was surrendered. Therefore, the refund claim should be considered as an exceptional case. The Tribunal referenced several judicial precedents, including Union of India Vs. Slovak India Trading Co., which supported the refund when the business is closed or the assessee opts out of the Modvat Scheme.

4. Judicial Precedents Supporting or Opposing the Refund Claim:
The Tribunal cited multiple cases where refunds were allowed upon closure of business or non-utilization of credit, such as Shalu Synthetics (P) Ltd. Vs. CCE, Berger Paints India Ltd. Vs. CCE, and others. The Tribunal also noted the contrary viewpoint from Gauri Plasticulture P. Ltd. V. Commissioner of Central Excise, Indore, but distinguished it based on different contextual circumstances.

Conclusion:
The Tribunal concluded that the right to avail Cenvat Credit is a vested right, and the closure of business due to the death of the service provider should not deprive the legal heirs of their accrued interests. Therefore, the appeal was allowed with consequential relief to the appellant's legal heir as per law.

(Order pronounced in open court on 12.05.2023)