2018 (11) TMI 918 - AT - Service Tax

Refund of unutilized CENVAT Credit - export of services - denial of refund on the ground that the appellant has exported exempted services, but failed to observe the requirements specified in Rule 6 of the Cenvat Credit Rules - Held that - Neither in Rule 5 nor in Notification No.5/2006 ibid, there is any condition which prescribes that the refund will be allowable only in cases where the output services exported is liable for payment of service tax. In any case the interpretation that any service which is exported is an exempted service, is without any basis. Refund also rejected on the ground that the appellant has failed to file such refund claims on quarterly basis - Held that - The claims are allowed to be filed on a quarterly/monthly basis but this condition cannot be read to mean that refund will be payable only if the claims are filed on a quarterly/monthly basis. It is clearly in the nature of an option given to the assessee to file refund claims on a quarterly or monthly basis and failure to do so cannot be a ground for rejection of the refund claim. Refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Rejection of refund claims under Rule 5 of Cenvat Credit Rules, 2004
- Failure to maintain separate accounts of cenvat credit
- Failure to file refund claims on quarterly basis

Analysis:

Rejection of Refund Claims under Rule 5 of Cenvat Credit Rules, 2004:
The appellant filed refund claims for unutilized cenvat credit availed on input services due to the export of services. The revenue rejected the claims citing non-maintenance of separate accounts for cenvat credit availed and utilized for taxable and exempted services. The appellant argued that the exported services did not fall under exempted services, as per Notification No. 13/2006-ST. The Tribunal concurred, stating that there is no condition in Rule 5 or the notification requiring the exported services to be liable for service tax. The interpretation that exported services are exempted without basis was dismissed.

Failure to Maintain Separate Accounts of Cenvat Credit:
The revenue also alleged that the appellant failed to comply with Rule 6 of Cenvat Credit Rules by not maintaining separate accounts for cenvat credit. However, the Tribunal noted that the rules do not mandate refund eligibility only if the exported output services are taxable. The Tribunal emphasized that any service exported is not automatically considered exempted, thus rejecting the revenue's stance.

Failure to File Refund Claims on Quarterly Basis:
Another ground for rejection was the appellant's failure to file refund claims on a quarterly basis as per Notification No. 5/2006. The revenue argued that non-compliance with this procedural aspect justified rejection. However, the Tribunal disagreed, stating that the notification allows flexibility in filing claims on a quarterly or monthly basis. Citing a precedent, the Tribunal emphasized that failure to adhere to the quarterly/monthly filing requirement cannot be a valid reason for rejecting refund claims. Consequently, the Tribunal set aside the impugned order and allowed the appeal, emphasizing the optional nature of the filing frequency specified in the notification.

This comprehensive analysis highlights the key issues of rejection of refund claims under Rule 5 of Cenvat Credit Rules, failure to maintain separate accounts of cenvat credit, and failure to file refund claims on a quarterly basis. The Tribunal's detailed examination and interpretation of relevant rules and notifications demonstrate a balanced and legally sound decision in favor of the appellant.