2023 (11) TMI 521 - AT - Central Excise

Refund of accumulated CENVAT Credit - denial of benefit of refund on the ground of limitation provided under Section 11B of the Central Excise Act, 1944 made applicable to the service tax matters under Section 83 of the Finance Act, 1994 - HELD THAT - In appeal, the learned Commissioner (Appeals) had negated the original order, holding that the relevant date for reckoning the limitation for filing refund application under Section 11B ibid, would be the date of receipt of payment in convertible foreign exchange by the exporter-appellants and in case where payment for the service had been received in advance, then the same would be the date of issue of invoice. Accordingly, he has partly allowed the refund benefit, except for the period January, 2014 to March, 2014, where the entire amount of refund claim was rejected on the ground that no details of Foreign Inward Remittance Certificates (FIRCs) were submitted by the appellants. However, on perusal of the case records, more particularly the refund application filed by the appellants on 23.12.2014, we find that the appellants had specifically stated therein that the consideration for provision of the services exported have been received by them in convertible foreign currency and that proof of such payments were also annexed to such application. Since, verification of the FIRC etc., has to be done at the original stage, the matter should be remanded back to the original authority for the limited purpose of verification of such documents and for sanction of the refund claim in favour of the appellants, if due, as per law. Therefore, the impugned order rejecting the refund claims filed for the period January, 2014 to March, 2014, is set aside and the appeal is allowed by way of remand to the original authority for verification of the FIRC and other documents and for consideration of the refund benefit thereafter. The impugned order upholding rejection of refund applications on the ground of non-establishment of nexus cannot stand for judicial scrutiny - appeals allowed in favour of the appellants on the ground that grant of refund benefit is not subjected to compliance of the provisions of Rule 2(l) ibid and denial on the ground of non-establishment of nexus between the input services and the output services under Rule 5 ibid, is not sustainable. Appeal disposed off.

Summary

Issues Involved:
The issues involved in the judgment are the denial of refund claims by the original authority, rejection of refund benefit for a specific period due to non-submission of Foreign Inward Remittance Certificates (FIRCs), and rejection of refund claims based on the establishment of nexus between input and output services.

Denial of Refund Claims by Original Authority:
The appellants, engaged in providing output services, filed refund applications under Rule 5 of the Cenvat Credit Rules, 2004, claiming refund of accumulated cenvat credit. The original authority partly sanctioned the refund claims and denied the benefit for certain input services. On appeal, the learned Commissioner (Appeals) allowed the refund benefit for some input services but denied it for a specific amount, citing non-submission of FIRC details and lack of nexus between input and output services. The appellants appealed to the Tribunal against the impugned orders.

Rejection of Refund Benefit for Specific Period:
The original authority denied the benefit of refund on the ground of limitation under Section 11B of the Central Excise Act, 1944. The learned Commissioner (Appeals) negated the original order, stating that the relevant date for limitation would be the date of receipt of payment in foreign exchange or the date of invoice issue. The Commissioner partly allowed the refund benefit but rejected it for a specific period due to non-submission of FIRCs. The Tribunal found that the appellants had submitted proof of payment in foreign currency and remanded the matter to the original authority for verification of documents.

Rejection of Refund Claims Based on Nexus Between Input and Output Services:
The Commissioner (Appeals) rejected refund claims on the ground that disputed services did not qualify as 'input service' and lacked nexus with output services. The Tribunal noted that the department did not question the cenvat credit availed by the appellants, and Rule 5 of the Cenvat Credit Rules, 2004, does not require the establishment of nexus for refund. Refund under Rule 5 is based on a prescribed formula, and denial on the grounds of nexus was deemed unsustainable. The Tribunal referred to a Circular clarifying the refund process and allowed the appeals in favor of the appellants, emphasizing that the grant of refund benefit is not subject to compliance with provisions related to nexus.

Separate Judgment:
The Tribunal, comprising Hon'ble Mr. S.K. Mohanty and Hon'ble Mr. M.M. Parthiban, pronounced the judgment on 09.11.2023. The appeals were disposed of in favor of the appellants based on the findings related to denial of refund claims by the original authority and rejection of refund claims based on the establishment of nexus between input and output services.