2010 (3) TMI 379 - AT - Service Tax

Refund of Cenvat Credit- the original authority has passed the impugned orders allowing the appellants to take refund of unutilized credit of duty in respect of input services used for providing output service, which was exported. The impugned revision orders have been passed by the jurisdictional Commissioner disallowing a part of the refund amount on the ground that the impugned amount of tax has not been paid to the Government by the service providers supplying the input services. Held that- rule providing for credit availment on payment of value and tax amount by recipient. Credit admissible and refund of accumulated credit in present case admissible.

Summary

Issues: Refund of unutilized credit of duty on input services used for exported output service.

The judgment involves a dispute where the original authority allowed the appellants to claim a refund of unutilized credit of duty on input services used for providing output services that were exported. However, the jurisdictional Commissioner disallowed a part of the refund amount, arguing that the tax amount had not been paid to the Government by the service providers of the input services. The appellant's advocate argued that the refund should not be denied as the appellants had paid the value and service tax for the services received, and it was the Department's responsibility to collect the service tax from the defaulters. The advocate also highlighted that the appellants had provided details of service tax payments and service providers to assist in the recovery process. Reference was made to a circular clarifying that action against the consignee need not be taken as long as the transaction's bona fides were not in dispute.

Upon hearing both sides, the Member (T) analyzed the Cenvat Credit Rules, 2004. While Rule 3 allowed credit of service tax paid on input services, Rule 4(7) specified that credit would be allowed after payment of the value of input service and service tax as indicated in the invoice. The judgment emphasized that the law did not intend for credit to await actual payment of excise duty or service tax, especially in the current liberalized regime where payment at the supplier's end was deferred. The absence of any mala fide arrangement between the input service providers and the appellants was noted, and the Department did not present arguments to the contrary. As the bona fides of the transactions were not in question and Rule 4(7) allowed credit after payment for input services, the appellants were deemed eligible for the credit and subsequent refund of accumulated credit upon exporting output services. Consequently, the impugned orders disallowing the refund were set aside, and all appeals were allowed in favor of the appellants. The operative part of the order was pronounced in open court on 11-3-2010.