2018 (12) TMI 859 - AT - Service Tax

Refund claim - export of services - disallowance of such refund claim under various heads on the ground of lack of nexus/co-relation between the input service and the out-put service - Rule 5 of the Cenvat Rules read with the provisions of Notification No. 27/2012- CE(NT) dated 18-06-2012 - Held that - In the present case, some of the input services do not qualify the definition of input services in terms of Rule 2 (e) of the Cenvat Credit Rules, 2004. Tribunal in various decisions has consistently held that there cannot be two different yardsticks, one for permitting credit and the other for eligibility for granting rebate. Whatever credit has been permitted to be taken, the same are permitted to be utilized and when the same is not possible, there is provision for grant of refund or rebate. Without questioning the credit taken, the eligibility to rebate cannot be questioned. In some cases, the Cenvat Credit has been disallowed on the ground that the invoices are un-signed, but it is not in dispute that the payments have been made through Bank Account and this fact is subject to verification. Appeal allowed by way of remand.

Issues Involved:
1. Disallowance of Cenvat Credit due to lack of relationship or nexus.
2. Disallowance of Cenvat Credit due to procedural issues (e.g., unsigned invoices, proforma invoices).
3. Denial of refund without granting a personal hearing.
4. Principles of natural justice and procedural fairness.

Issue-wise Detailed Analysis:

1. Disallowance of Cenvat Credit due to lack of relationship or nexus:
The appellants, engaged in exporting 'Information Technology Software Service', availed various input services and filed a refund claim under Rule 5 of the Cenvat Credit Rules, 2004. The refund claims were disallowed on grounds such as lack of relationship or nexus between the input and output services. For instance, Chartered Accountants Service, Courier Service, and Renting of Immovable Property were disallowed due to perceived lack of nexus. However, it was argued that these services are integral to the business operations and should qualify for Cenvat Credit. The Tribunal in various decisions has consistently held that there cannot be different yardsticks for permitting credit and eligibility for granting rebate. Hence, the disallowance based on lack of nexus was challenged, citing previous favorable orders and Tribunal decisions.

2. Disallowance of Cenvat Credit due to procedural issues:
Several credits were disallowed due to procedural issues such as unsigned invoices, proforma invoices, and invoices issued for other business premises. For example, credit taken on proforma invoices was disallowed, but it was argued that once service tax has been paid, the form of the invoice should not be a ground for denial. Similarly, unsigned invoices were disallowed despite payments being made through bank accounts. The Tribunal held that procedural lapses should not be the sole reason for denying Cenvat Credit if the substantive conditions are met and payments are verifiable.

3. Denial of refund without granting a personal hearing:
The appellants contended that the adjudicating authority denied the credit without granting an opportunity for a personal hearing, contravening principles of natural justice. Reliance was placed on decisions such as Serco Global Services Pvt. Ltd. vs. CCE, Delhi-III, which emphasized the necessity of a quasi-judicial process involving issuance of a show-cause notice followed by a speaking order. The Tribunal underscored that denying refund without a personal hearing is procedurally unfair and violates natural justice principles.

4. Principles of natural justice and procedural fairness:
The Tribunal found that the adjudicating authority failed to observe principles of natural justice by not providing a reasonable opportunity of hearing. It was emphasized that any adverse order requires a fair hearing and the opportunity for the appellants to present their case. The Tribunal directed the adjudicating authority to provide a reasonable opportunity of hearing, consider the submissions of the assessee, and allow both sides to produce evidence in support of their claims.

Conclusion:
The Tribunal concluded that the appeals filed by the appellants are allowed by way of remand. The adjudicating authority is directed to observe principles of natural justice, provide a reasonable opportunity of hearing, and reconsider the refund claims in light of the Tribunal's observations. The Tribunal emphasized that procedural lapses should not be the sole ground for denying Cenvat Credit if substantive conditions are met and payments are verifiable. The decision underscores the importance of procedural fairness and adherence to natural justice principles in adjudicating refund claims.

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