2024 (12) TMI 1402 - AT - Central Excise

100% EOU - refund of unutilized CENVAT credit for High-Speed Diesel (HSD) used as fuel in their manufacturing activities - refund of the credit of Service Tax paid on Security Services utilized by the EOU. Refund of unutilized CENVAT credit for High-Speed Diesel (HSD) used as fuel in their manufacturing activities - HELD THAT - The issue regarding eligibility of the appellant in claiming refund of Rs. 25,80,768 paid by appellant while procuring HSD for their EOU is covered in favour of the appellant in their own case M/S. GEM GRANITES VERSUS COMMISSIONER OF CENTRAL EXCISE, BELGAUM 2016 (10) TMI 34 - CESTAT BANGALORE where it was held that ' the Revenue's contention that in terms of definition of input given in Rule 2(k) of CENVAT Credit Rules, 2004 the appellants are not entitled to claim CENVAT credit, cannot be accepted, when the Notification No.22/2003 dated 31.3.2003 makes an EOU entitled to claim CENVAT credit on the procurement of HSD used as fuel.' - refund allowed. Refund of the credit of Service Tax paid on Security Services utilized by the EOU - HELD THAT - As held in large number of cases including in the case of THE COMMISSIONER, CUSTOMS AND CENTRAL EXCISE, HYDERABAD-IV VERSUS M/S. QUALCOMM INDIA PVT. LTD. 2021 (11) TMI 72 - TELANGANA HIGH COURT , once it is admitted as eligible credit and if the respondent has reason to believe that, it is wrongly availed, Respondent could have proceeded against the appellant under Rule 14 Cenvat Credit Rules, 2004 for the recovery of irregular CENVAT credit and not to adjudicate the same while processing the refund claim - refund allowed. Conclusion - EOUs are entitled to claim CENVAT credit on HSD used as fuel and Service Tax on Security Services. Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the appellant, a 100% export-oriented unit (EOU), is eligible to claim a refund of unutilized CENVAT credit for High-Speed Diesel (HSD) used as fuel in their manufacturing activities.
Whether the appellant is entitled to a refund of the credit of Service Tax paid on Security Services utilized by the EOU.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Refund of CENVAT Credit on High-Speed Diesel (HSD)

Relevant Legal Framework and Precedents: The appellant relied on the C.B.E.C. Circular No. 799/32/2004-CX, dated 23-9-2004, and Notification No. 22/2003, dated 31-3-2003, which allow EOUs to claim CENVAT credit on HSD used as fuel. The Tribunal's previous decision in the appellant's own case and other precedents such as Hindustan Unilever Ltd. and Jagmini Micro Knit Pvt. Ltd. supported this claim.
Court's Interpretation and Reasoning: The Tribunal found that the definition of 'input' in Rule 2(k) of the Cenvat Credit Rules, 2004, does not restrict the entitlement of an EOU to claim CENVAT credit on HSD, especially when supported by relevant notifications and precedents.
Key Evidence and Findings: It was established that the appellant used HSD as fuel for manufacturing activities and had paid duty on it, thus qualifying for CENVAT credit under the applicable rules and notifications.
Application of Law to Facts: The Tribunal applied the law by recognizing the appellant's eligibility for a refund based on the established legal framework and past decisions in similar cases.
Treatment of Competing Arguments: The Revenue's contention that the definition of 'input' restricts the appellant's claim was rejected, as the Tribunal emphasized the specific provisions applicable to EOUs.
Conclusions: The Tribunal concluded that the appellant is entitled to the refund of CENVAT credit on HSD, setting aside the previous orders of denial.

Issue 2: Refund of Service Tax Credit on Security Services

Relevant Legal Framework and Precedents: The appellant argued that the credit for Security Services was validly availed and should not be questioned during the refund process. The decision in Qualcomm India Pvt. Ltd. and other similar cases supported this view.
Court's Interpretation and Reasoning: The Tribunal held that once credit is admitted as eligible, any challenge to its validity should be addressed through proceedings under Rule 14 of the Cenvat Credit Rules, 2004, not during the refund adjudication.
Key Evidence and Findings: The appellant had consistently availed credit for Security Services without dispute, and no proceedings were initiated to challenge its validity.
Application of Law to Facts: The Tribunal applied the principle that the validity of credit should be contested separately, not during the refund process, thereby supporting the appellant's claim.
Treatment of Competing Arguments: The Tribunal dismissed the Revenue's objections, emphasizing the procedural requirements for challenging credit validity.
Conclusions: The Tribunal concluded that the appellant is entitled to the refund of Service Tax credit on Security Services, as no valid proceedings were initiated to contest it.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "The definition of an input given in Rule 2(k) of Cenvat Credit Rules, 2004 cannot restrict the entitlement, when they are taking Cenvat credit in terms of Notification No. 22/2003, dated 31-3-2003."
Core Principles Established: EOUs are entitled to claim CENVAT credit on HSD used as fuel and Service Tax on Security Services, provided the credit is not contested through appropriate proceedings.
Final Determinations on Each Issue: The Tribunal allowed the appeal, granting the appellant the refund of CENVAT credit on both HSD and Service Tax for Security Services, with consequential relief as per law.

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