2024 (9) TMI 925 - AT - Service Tax

Cash refund claim of unutilized Cenvat credit - no correlation between input services utilized and the output services and invoices did not contain the proper description and classification - HELD THAT - The Department has denied the refund claim solely on the ground that the Appellants were not eligible for taking Cenvat credit for the input services used by them and in some cases there was no nexus between the input services and output services. In both the cases the issue is that of taking of Cenvat credit on ineligible services. It is also an admitted fact that no SCN was issued in terms of Rule 14 to recover Cenvat credit on account of such ineligible services. The refund under Rule 5 is filed for the Cenvat credit already taken on record by the Appellant. Only when the refund claim under Rule 5 was filed while scrutinizing the refund claim this point was raised and part of the refund claim was rejected solely on this ground. This issue is no more res integra. In the case of Qualcomm India Pvt Ltd 2019 (8) TMI 1645 - CESTAT HYDERABAD this Tribunal has held it can be said that taking of Cenvat credit on the disputed services by the appellant is in conformity with the Cenvat statute. Rule 5 ibid nowhere specifies that Cenvat credit can be denied on the ground of irregular availment or utilisation of the same. Thus in absence of specific provisions contained in the statute denial of the refund benefit provided under Rule 5 ibid in our considered opinion cannot stand for judicial scrutiny. The facts of the present case call for application of the ratio of the cited case law. Accordingly the Appellant is eligible for refund claims made by them which actually have been rejected by the lower authorities on the ground of ineligibility of Cenvat credit. Appeal allowed.

Summary

Issues:
1. Denial of refund claim under Rule 5 of Cenvat Credit Rules, 2004 due to lack of nexus between input and output services.
2. Non-issuance of Show Cause Notice (SCN) under Rule 14 for recovery of Cenvat credit on ineligible services.
3. Applicability of case law precedent and High Court rulings on the issue of Cenvat credit eligibility for refund claims.

Detailed Analysis:
1. The Appeals were filed by the Appellant challenging the denial of refund claims under Rule 5 of Cenvat Credit Rules, 2004. The Adjudicating Authority rejected the refund claims citing lack of correlation between input and output services, leading to disallowance of refunds totaling significant amounts. The Appellant contended that the Department should have issued a separate SCN under Rule 14 if questioning the nexus between input and output services. The Appellant relied on the Qualcomm India Pvt Ltd case law, affirmed by the High Court, to argue that denial of refund based on Cenvat credit eligibility without a proper SCN was not justified.

2. The Department maintained that the denial of refund was valid as the Appellant failed to establish the nexus between input and output services and did not address queries regarding Cenvat credit eligibility. However, it was noted that no SCN was issued under Rule 14 for recovery of Cenvat credit on allegedly ineligible services. The Department's stance was that the lower authorities rightfully denied the refund claims based on the lack of nexus between input and output services.

3. The Tribunal analyzed the issue and referred to the Qualcomm India Pvt Ltd case law, which emphasized that Rule 5 of Cenvat Credit Rules, 2004 allows for refund of accumulated Cenvat credit subject to compliance with specified procedures. The Tribunal highlighted that the Department did not invoke Rule 14 for recovery of alleged irregular Cenvat credit, indicating that the denial of refund solely based on Cenvat credit eligibility was not sustainable. The High Court's ruling further supported this interpretation, stating that denial of refund without invoking Rule 14 on the grounds of nexus between input and output services was not justified. The Tribunal concluded that the Appellant was eligible for the refund claims, which were wrongly rejected by the lower authorities based on Cenvat credit ineligibility.

In conclusion, the Tribunal allowed the Appeals, granting the Appellant the refund claims and any consequential relief as per law, based on the established legal principles and precedents regarding Cenvat credit eligibility for refund under Rule 5 of Cenvat Credit Rules, 2004.