2024 (4) TMI 900 - AT - Central Excise

Refund of accumulated credit - appellant who pays service tax under reverse charge mechanism can also be called output service provider or not - manufacturer of goods having nil tariff rate of duty is eligible for Cenvat Credit at all. Refund claim - HELD THAT - The comprehensive coverage of MODVAT was achieved by 1996-97 by introduction of Central Value Added Tax (CENVAT).Later CENVAT scheme also allowed credit of services and the basket of inputs, capital goods and input services could be used for payment of both central excise duty and service tax. Thus, it does not stand to reason, for denying input tax credit and its refund in certain situations, on the ground that the legal provisions of such a refund is not applicable to such other persons, who have been made liable to pay service tax under Section 68(2) ibid. Further, it is also found that the above issue is no more open to dispute as in the appellants own case COMMISSIONER OF CE SERVICE TAX, KOLHAPUR VERSUS ROYAL FOODSTUFF PVT. LTD. 2018 (8) TMI 601 - CESTAT MUMBAI , the Tribunal has held that they are eligible to refund of CENVAT credit under Rule 5B ibid and distinguished the other cases where the Tribunal had ordered for dismissal of the appeals filed by the appellants. Eligibility to CENVAT credit to a manufacturer of goods having nil tariff rate of duty - HELD THAT - The provisions under Sub-rule (6)(v) to Rule 6 clearly provide that the restriction or denial for non-availability of Cenvat credit under various sub-rules of Rule 6 shall not be applicable for manufacture of exempted goods which are cleared for export. Thus, the findings of the learned Commissioner (Appeals) in denial of Cenvat credit on the ground that the appellants being manufacturer of Nil rated goods, would stand covered by the restriction under Rule 6(1) ibid is incorrect and is not legally sustainable. Furthermore, the above issue is no more res integra in view of the judgement delivered by the Hon ble High Court of Bombay in the case of UNION OF INDIA VERSUS SHARP MENTHOL INDIA LTD. 2011 (4) TMI 27 - BOMBAY HIGH COURT where it was held that since the exempted menthol crystals as well as dutiable peppermint oil manufactured out of duty paid menthol have been exported by the assessee, the provisions of Rule 6(1) to 6(4) of the 2004 Rules are not applicable and as per Rule 5 of 2004 Rules, the assessee was entitled to avail the Cenvat credit of duty paid on menthol used in the manufacture of exempted menthol crystals and utilize the said credit for payment of duty on clearance of peppermint oil either for home consumption or for export. In the present case, since the peppermint oil has been exported on payment of duty, the assessee was entitled to claim rebate of the duty paid on peppermint oil. Thus, it is found that there are no strong grounds to deny refund of CENVAT credit under Rule 5B of CENVAT Credit Rules, 2004. Consequently the impugned order dated 29.09.2015 is not legally sustainable. The appellants are eligible for total refund of CENVAT credit of Rs. 12,65,459/- in respect of the claims given - the impugned order is set aside - appeal is allowed in favour of the appellants.

Summary

Issues Involved:
1. Eligibility of the appellant to be considered as an 'output service provider' under reverse charge mechanism.
2. Eligibility for CENVAT credit for a manufacturer of goods with 'nil' tariff rate of duty.

Summary:

Issue 1: Eligibility as 'Output Service Provider' under Reverse Charge Mechanism

The appellants, M/s Royal Foodstuffs Private Limited, registered for service tax on taxable services received under the Reverse Charge Mechanism (RCM) as per Rule 2(d) of the Service Tax Rules, 1994, claimed refunds of accumulated Cenvat credit under Rule 5B of Cenvat Credit Rules (CCR), 2004 read with Notification No.12/2014-C.E. (N.T.) dated 03.03.2014. The Commissioner (Appeals) upheld the rejection of these claims, concluding that Section 68(2) of the Finance Act, 1994, merely shifts the liability to pay tax to the taxpayer and does not qualify the appellant as an 'output service provider'. However, the Tribunal found that the appellants, having discharged service tax liability under reverse charge mechanism, are entitled to refunds under Rule 5B, as supported by previous Tribunal decisions and legal provisions.

Issue 2: Eligibility for CENVAT Credit for Nil Tariff Rated Goods

The Commissioner (Appeals) denied Cenvat credit on the ground that the appellants, being manufacturers of goods with a 'nil' tariff rate of duty, were not eligible for credit. However, the Tribunal referenced Rule 6(6)(v) of the Cenvat Credit Rules, 2004, which allows Cenvat credit for goods cleared for export without payment of duty. The Tribunal also cited the Bombay High Court judgment in Union of India Vs. Sharp Menthol India Limited and the Supreme Court decision in Commissioner of Central Excise, Chandigarh Vs. Drish Shoes Ltd., confirming that manufacturers exporting goods under bond are eligible for Cenvat credit.

Conclusion:

The Tribunal concluded that the appellants are eligible for a total refund of CENVAT credit amounting to Rs. 12,65,459/-. The impugned order dated 29.09.2015 was set aside, and the appeal was allowed in favor of the appellants with consequential relief.

(Order pronounced in open court on 22.04.2024)