2019 (2) TMI 595 - AT - Service Tax

Refund of service tax paid - accommodation services - air travel agency service - denial on the ground of nexus - Rule 5 of CENVAT Credit Rules, 2004 - Held that - In fact, there has been no show cause notice issued by the department alleging that the appellants are not eligible for credit of these services. When the department has not raised any allegation by issuing show cause notice that the appellant is not eligible for credit, they cannot go into the admissibility of the credit during the process of refund claim - Further, as per amended provisions of Rule 5, it is not necessary to establish the nexus with the output service - The Board circular also clarifies the same. The rejection of refund claim is without any basis and unjustified - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Rejection of refund claim for short-term accommodation service and air travel agency service.

Analysis:
The appellants filed refund claims for the period April to June 2016 and July to September 2016, which were denied by the original authority and upheld by the Commissioner (Appeals) regarding accommodation services and air travel agency service. The main contention was the lack of nexus between input services and output services, as well as the value addition of these services to the output services provided. The appellant argued that Rule 5 of CENVAT Credit Rules, 2004, as amended, does not require establishing a nexus and that the department cannot reject the refund claim without issuing a show cause notice on credit eligibility. They cited relevant case laws and circulars to support their claim, emphasizing that the department should process the refund claim without delving into credit admissibility. The Tribunal's previous decision in the appellant's case was also highlighted, where a similar issue was decided in favor of the appellant.

The issue revolved around the rejection of the refund claim for short-term accommodation service and air travel agency service. The appellant contended that these services were utilized for accommodating employees during business travel, making them eligible for a refund. The Commissioner (Appeals) rejected the claim citing lack of nexus between input and output services and the absence of value addition. However, the appellant argued that the department did not issue a show cause notice challenging credit eligibility, and as per the amended Rule 5, establishing a nexus was not mandatory. The Tribunal referenced a case to support the appellant's stance, emphasizing that the admissibility of credit should not be questioned during a refund claim process. Ultimately, the Tribunal found the rejection of the refund claim unjustified and without a valid basis, setting aside the impugned order and allowing the appeals with any consequential relief.