2017 (7) TMI 412 - AT - Service Tax

Rejection of refund claim - denial of CENVAT credit on the services received in respect of training of the crews - the instant case instead of testing the eligibility of Cenvat already availed by the appellant for refund under Rule 5 of the Cenvat Credit Rules the lower authorities have gone into the question of eligibility to the Cenvat credit itself - Held that - the eligibility to Cenvat Credit cannot be challenged without issue of show-cause notice under Cenvat Credit Rules - no show-cause notice has been issued under Cenvat Credit Rules and in these circumstances it is not permissible to deny Cenvat Credit already availed - In the instant case the appellant had claimed refund claim and the same needs to be examined in terms of Rule 5 of Cenvat Credit Rules read with notification issued there under. It is seen that the lower authorities has not deal with this issue. It is not open to Revenue to examine the admissibility of Cenvat Credit while adjudicating the admissibility of refund under Rule 5 read with Notification issued there under. The matter is remanded to the original adjudicating authority to decide the issue solely on the basis of Rule 5 of Cenvat Credit Rules read with notification issued there under - appeal allowed by way of remand.

Summary

Issues:
Refund claim rejection under Rule 5 of Cenvat Credit Rules for ship management services.

Analysis:
1. The appellant, engaged in ship management services, filed a refund claim under Rule 5 of Cenvat Credit Rules, which was rejected by lower authorities. The appellant appealed to the Tribunal, arguing that training services for crews are integral to their operations and should be eligible for credit.

2. The impugned order questioned the nexus between the services received and the exported ship management service, citing precedents like Maruti Suzuki Ltd. and Manikgarh Cement. The department held that the credit for management, training, and coaching services was not admissible, leading to the rejection of the refund claim.

3. The Tribunal noted that the lower authorities erred by examining the eligibility of Cenvat credit itself instead of focusing on the refund claim under Rule 5. It emphasized that the admissibility of credit should be determined separately under Rule 14 of Cenvat Credit Rules, and not while adjudicating refund claims.

4. The Tribunal set aside the impugned orders and remanded the matter to the original authority for a decision based solely on Rule 5 of Cenvat Credit Rules and the relevant notification. It stressed that the admissibility of refund should be assessed in accordance with the specific provisions of the rule and notification, without conflating it with the broader issue of credit eligibility.

By clarifying the procedural errors in the lower authorities' approach and emphasizing the need to adhere to the specific provisions of Rule 5 and the related notification, the Tribunal provided guidance for a more accurate and legally sound assessment of the refund claim for ship management services under the Cenvat Credit Rules.