2016 (3) TMI 901 - AT - Service Tax

Eligibility for refund of accumulated CENVAT credit - Rule 5 of the CENVAT Credit Rules, 2004 prior to their registration - Whether in absence of any condition in CENVAT Credit Rules, 2004 to the effect that registration under law is mandatory, credit accumulated is refundable or not - Held that - there was no taxability of any service provided by respondent prior to registration. Accordingly, input credit was not possible to be utilized for which that was accumulated. Also credits were accumulated prior to registration. Therefore, respondents are not eligible for refund of accumulated Cenvat credit. - Decided in favour of department

Summary

Issues:
1. Whether the appellant is eligible for a refund of accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 prior to their registration.

Analysis:
The Revenue appealed against the Commissioner (Appeals) reasoning that the Adjudicating authority must sanction the refund if admissible as per law. The Revenue contended that the respondent, not being registered under the law, is not entitled to the accumulated credit for set off or refund in the future. The Revenue challenged the decision and appealed.

The respondent argued that the Commissioner (Appeals) correctly examined the admissibility of the refund of the accumulated CENVAT credit, stating that registration is not an impediment by law for the refund. The respondent cited a decision of the Hon'ble High Court of Karnataka which held that registration is not mandatory to receive a refund of accumulated credit. The respondent supported their claim for the refund.

After hearing both sides and examining the records, the issue framed by the Commissioner (Appeals) was whether the appellant is eligible for a refund of accumulated CENVAT credit prior to their registration. The Commissioner allowed the appeal based on the judgment of the Hon'ble High Court of Karnataka, which stated that registration is not a mandatory requirement for claiming CENVAT credit. The Commissioner set aside the finding of the lower authorities and allowed the refund.

The main controversy in the appeal centered around whether, in the absence of any condition in the CENVAT Credit Rules, 2004 mandating registration under the law, the accumulated credit is not refundable. Since there was no taxability of any service provided by the respondent before registration, the input credit could not be utilized, leading to its accumulation. The credits were accumulated before registration, and following the decision of the Hon'ble High Court of Karnataka, the respondent should not be disadvantaged. Consequently, the appeal was allowed, and the decision was in favor of the respondent.

In conclusion, the judgment favored the respondent's claim for a refund of the accumulated CENVAT credit prior to their registration, based on the absence of a statutory provision mandating registration for claiming the credit.