2016 (8) TMI 130 - AT - Service Tax

Refund - Rule 5 of the Cenvat Credit Rules, 2004 - eligible input services - proof / evidence that the services were used in respect of exports - Held that - It can be seen that Notification No.5/2006 provided for refund of Cenvat credit availed in respect of inputs or input services used in or in relation to manufacture of final products which is cleared for export under bond or letter of undertaking. However, prior to 14/03/2006 Notification No.11/2002-CE (NT) dated 01/03/2002 provided for such refunds under Rule 5 of the Cenvat Credit Rules, 2002. The said notification provided for refund of Cenvat credit of specified duty allowed in respect of inputs used in or in relation to manufacture of final products which are cleared for export under bond. It can be seen that prior to 14/03/2006 the refund of credit of Cenvat in respect of 'input services' was not permitted under Rule 5 of the Cenvat Credit Rules or the notification issued thereunder. It can be seen that most of the credit claimed by the appellant pertains to the period prior to 1/03/2006, during which period credit of service tax paid on services used for manufacture of goods exported was not permissible at all. Refund denied - Decided against the assessee.

Summary

Issues Involved:

1. Denial of Refund Claim.
2. Classification of Services.
3. Nexus Between Input Services and Exported Goods.
4. Documentary Evidence and Verification.
5. Compliance with Rule 5 of Cenvat Credit Rules.
6. Timeliness of Refund Claim.
7. Applicability of Circulars and Notifications.

Detailed Analysis:

1. Denial of Refund Claim:
The appellant filed a refund claim under Rule 5 of the Cenvat Credit Rules, 2004, which was initially denied by the Deputy Commissioner on grounds of insufficient evidence linking the services to exports. The Commissioner (Appeals) remanded the case for re-evaluation, but the Assistant Commissioner’s subsequent order sanctioning the refund was again challenged by the Revenue, leading to the current appeal.

2. Classification of Services:
The Commissioner (Appeals) directed the Assistant Commissioner to identify the correct classification of services on which Service Tax credit was availed. The Assistant Commissioner complied with this directive and concluded that input credit, except for club and association services, was admissible under the Cenvat Credit Rules.

3. Nexus Between Input Services and Exported Goods:
The core issue was whether the accumulated credit pertained to inputs used in the production of goods exported during the same quarter. The Assistant Commissioner did not provide specific findings on this point, instead relying on Circular No.120/01/2010-ST, which states that there is no need for one-to-one co-relation between input services and exported goods. However, the Tribunal noted that services availed in 2004-2006 could not be linked to exports made in January-March 2007, as services are consumed immediately and cannot be stored.

4. Documentary Evidence and Verification:
The Commissioner (Appeals) required the Assistant Commissioner to verify documents and provide proper reasoning for the admissibility of input services. The Assistant Commissioner failed to examine the necessary documents and did not provide findings on observations (iv) and (viii) regarding the inclusion of service costs in the assessable value and the nature of catering services.

5. Compliance with Rule 5 of Cenvat Credit Rules:
The Tribunal emphasized that the Assistant Commissioner did not properly address whether the conditions of Notification No.05/2006-CE (NT) were satisfied, specifically the nexus between input services and exported goods. The Tribunal highlighted that the CBEC Circular’s provision for self-certification does not address the nexus issue.

6. Timeliness of Refund Claim:
The Revenue argued that the refund claim was barred by limitation, as services were availed in 2004-2006, but the refund was filed in 2007. The Tribunal noted that prior to 14/03/2006, refunds of service tax credit were not permissible under Rule 5 of the Cenvat Credit Rules, making most of the appellant’s credit claims inadmissible.

7. Applicability of Circulars and Notifications:
The appellant relied on Circular No.120/01/2010-ST and case law to argue against the need for one-to-one co-relation. However, the Tribunal clarified that while one-to-one co-relation is not necessary for availing credit, the nexus between inputs/services and exported goods is crucial. The Tribunal found that the appellant did not demonstrate that the services availed in 2004-2006 were used for exports in 2007, and thus, the conditions of the relevant notifications were not met.

Conclusion:
The Tribunal dismissed the appeal, concluding that the appellant failed to establish the necessary nexus between the input services and the exported goods, and most of the credit claims pertained to a period when such refunds were not permissible. The appeal was deemed not maintainable.