2008 (6) TMI 16 - AT - Service Tax

Notification no. 5/2006 - Use of input services for manufacturing the goods for export unutilized credit - whether refund (of input service credit) in cash has to be allowed in terms of Rule 5 or not - whether manufacturers were eligible for refund prior to 14.3.2006 or not Held, yes - matter remanded to the original Adjudicating Authority to take a decision in terms of the notification after examining all aspects

Summary

Issues:
1. Eligibility for cash refund under Rule 5 of Cenvat Credit Rules, 2004 prior to 14.3.2006.
2. Interpretation of Notification No. 5/2006-CE (NT) in relation to refund claims.
3. Validity of the decision to credit refund to cenvat account instead of granting cash refund.

Analysis:
Issue 1: The main issue in this case is whether manufacturers were eligible for cash refund under Rule 5 of the Cenvat Credit Rules, 2004 before 14.3.2006. The appellant argued that prior to the amendment on 14.3.2006, manufacturers could claim a refund if they could not utilize the credit for payment of duty on their domestic clearances. The appellant, being a 100% EOU with no clearance to DTA, contended that they were eligible for cash refund. The Adjudicating Authority had granted the refund but credited it to the cenvat account. The Tribunal observed that the amendment on 14.3.2006 only added the "provider of output service" as eligible for refund, without changing the eligibility of manufacturers. Therefore, the original decision to grant refund in cash was deemed correct.

Issue 2: The interpretation of Notification No. 5/2006-CE (NT) was crucial in determining the eligibility for refund claims. The Commissioner (Appeals) had held that the appellants were not eligible for refund as the notification was not in existence during the period for which refund claims were filed. However, the Tribunal noted that the amendment on 14.3.2006 did not alter the eligibility of manufacturers for cash refund but expanded it to include output service providers. The Tribunal emphasized that the conditions specified in the notification needed to be fulfilled for cash refund to be granted.

Issue 3: The validity of the decision to credit the refund to the cenvat account instead of granting cash refund was also examined. The Tribunal pointed out that the original Adjudicating Authority had issued the order without a show cause notice since the refund claim was being sanctioned. However, it was unclear whether the conditions for granting cash refund specified in the notification had been met. Therefore, the matter was remanded to the original Adjudicating Authority for a detailed examination to determine the appellants' eligibility for cash refund in accordance with the notification.

In conclusion, the Tribunal upheld the eligibility of manufacturers for cash refund under Rule 5 before 14.3.2006 and emphasized the need to fulfill the conditions specified in the notification for granting cash refund. The case was remanded for further examination to ensure compliance with the notification requirements before deciding on the mode of refund.