2010 (3) TMI 327 - AT - Service Tax

Refund Cenvat Credit Eligible input services Services consumed versus all input services Notification No. 5/06-C.E. (N.T.) dated 14-3-2006 - CBEC circular no. 120/01/2010-S.T., dated 19-1-2010 Held that We do not find any power under Section 94 of the Finance Act, 1994, for making rules for refund of cenvat credit. Only in Section 37(2)(xxiii) of the Central Excise Act, 1944, there is a reference to form and manner in which application for refund shall be made under Section 11B of the Central Excise Act, 1944. Yet, Cenvat Credit Rules, 2004, contains Rule 5 which specifically deals with refund of Cenvat credit. Rule 5 provides for refund of unutilized credit of service tax in respect of input service used in providing output service which is exported. - that different expressions have been used in the Act and the Rules - Language employed in subordinate legislation alone most often is not decisive, but regard must be had to the extent, subject-matter and object of the statutory provision in question, in determining whether the same is in consonance with legislative mandate - Rule cannot be interpreted de hors the legislation and particularly in fiscal jurisprudence if Rule departs from legislative intent that may cause peril to public revenue. - no refund can be granted under the rules and the notifications in respect of services other than the services consumed for providing output service in view of the express language used in the statute

Issues Involved:
1. Eligibility of refund claims for unutilized service tax credit.
2. Interpretation of relevant statutory provisions and rules.
3. Procedural requirements for claiming refunds.
4. Applicability of judicial precedents and circulars.

Detailed Analysis:

1. Eligibility of Refund Claims for Unutilized Service Tax Credit
The appeals involve seven service tax assessees who exported various output services and claimed refunds for unutilized service tax credit on input services. The original authority allowed some refund claims, while rejecting others. The lower appellate authority allowed additional refunds, leading to appeals by both the department and the assessees.

2. Interpretation of Relevant Statutory Provisions and Rules
The Cenvat Credit Rules, 2004, made under Section 37 of the Central Excise Act, 1944, and Section 94 of the Finance Act, 1994, govern the field of service tax. These rules allow credit of service tax paid on input services used for providing output services. Section 94 of the Finance Act, 1994, specifically refers to "services consumed for providing a taxable service," indicating that only those input services directly consumed for providing output services are eligible for credit and refund.

3. Procedural Requirements for Claiming Refunds
The procedure for claiming refunds is governed by Notification No. 5/06-C.E. (N.T.) dated 14-3-2006, which has been amended to include services "in relation to" providing output services. The notification also restricts refunds to the proportionate amount of export turnover. The Circular No. 120/01/2010-S.T., dated 19-1-2010, provides further clarification, emphasizing the need for a harmonious interpretation of the rules and the importance of expeditious processing of refund claims.

4. Applicability of Judicial Precedents and Circulars
The appellants cited various judicial precedents supporting their claims for refund, including cases like Mahindra Sona Ltd. v. CCE, Nasik, and CST, Delhi v. Convergys India Pvt. Ltd. These cases highlight that input services used indirectly in relation to the provision of output services should be eligible for credit and refund. The department, however, argued that the lower appellate authority did not properly consider the restrictive nature of the relevant notifications and rules.

Conclusion and Order
The Tribunal concluded that the rules and notifications must be interpreted in line with the statutory provisions, which only allow credit and refund for services consumed directly in providing output services. The Tribunal remanded the cases to the original authority for fresh decisions, requiring the appellants to furnish detailed declarations and certifications as per the Circular dated 19-1-10. The original authority is directed to examine the claims in light of the statutory provisions, rules, and notifications, and to apply the tests laid down by the Supreme Court in Maruti Suzuki Ltd. v. CCE, Delhi-III.

Final Directions:
1. The impugned orders are set aside, and all appeals are remanded for fresh decisions.
2. Assessees must furnish detailed declarations and certifications.
3. The original authority must examine the claims afresh, considering statutory provisions and retrospective changes.
4. Refunds should be limited to amounts proportionate to export turnover.
5. Reasonable opportunity of hearing must be provided to the assessees before passing fresh orders.

(Order pronounced in the open Court on 19-3-2010)

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