2019 (6) TMI 861 - AT - Service Tax

Refund of CENVAT Credit - whether the opening balance of Cenvat credit, at the beginning of the relevant period, can be claimed as refund as per Rule 5 of the Rules, as prevalent during the relevant period and as to whether Cenvat can be denied on alleged technical defects, in the invoices? - Rule 5 of CCR - Interpretation of statute - N/N. 27/2012 dated 18.06.2012. HELD THAT - The definition of net Cenvat credit uses only one , before the word relevant period . Therefore, the word relevant period should necessarily apply to both net Cenvat credit as well as the rebate refers to in Rule 3 (5C). Moreover, the Revenue could successfully demonstrate that the appellants did not adhere to the time frame given in the amended Rule 5. Therefore, we find that the refund claims are not in order. The appellants have argued on the basis of various decisions cited by them and said that when substantial compliance is evident refunds should not be denied to the appellants, more so when 100% of the services were exported. The quasi-judicial authorities are not expected to traverse beyond the scope of established law and therefore, calculation of Net Cenvat Credit and thus eligible refund was in order. We find that the appellants have submitted that while deciding the refund claims, the lower authority has dis-allowed certain credits without issuing a proper SCN and without hearing the contentions of the appellants and some credits were not allowed on procedural issues. We find that such a denial is incorrect. It is not free for the authorities to deny Cenvat credit without giving an opportunity of being heard to appellants. Therefore, for this purpose, the issue requires to go back to the original authority for deciding the issue separately by following the principles of natural justice. The appeals allowed by way of remand, to the extent of re-determination of inadmissible Cenvat credit.

Summary

Issues Involved:
1. Eligibility of opening balance of Cenvat credit for refund under Rule 5 of the Cenvat Credit Rules (CCR), 2004.
2. Denial of Cenvat credit on technical grounds without issuing a Show Cause Notice (SCN).

Detailed Analysis:

1. Eligibility of Opening Balance of Cenvat Credit for Refund:
The appellants, M/s John Deere India Private Limited, claimed refunds of accumulated Cenvat credit under Rule 5 of the CCR, 2004 for services exported. The Assistant Commissioner rejected a significant portion of the refund claims, which was upheld by the Commissioner (Appeals). The appellants argued that the definition of "Net Cenvat credit" in Rule 5 includes the opening balance of Cenvat credit and that the relevant period should apply only to the second part of the definition concerning the amount reversed under Rule 3(5C). They contended that no one-to-one correlation is required for availing Cenvat credit and that the refund should not be denied based on procedural aspects.

The Revenue countered that the term "relevant period" applies to both parts of the definition of "Net Cenvat credit" and that the refund claims were not filed within the statutory time frame. The Tribunal found the Revenue's interpretation correct, stating that the words "during the relevant period" apply to both components of the Net Cenvat Credit. The Tribunal upheld the denial of refund claims filed beyond the stipulated time and ruled that the opening balance of Cenvat credit could not be claimed as a refund under the amended Rule 5.

2. Denial of Cenvat Credit on Technical Grounds Without SCN:
The appellants also argued that certain credits were denied on technical grounds without issuing a proper SCN or providing an opportunity for a hearing. They cited various case laws emphasizing that substantive benefits should not be denied due to procedural lapses and that a liberal approach should be adopted when granting refunds to exporters.

The Tribunal agreed with the appellants on this point, stating that denying Cenvat credit without issuing an SCN and without following the principles of natural justice is incorrect. The Tribunal remanded the issue back to the original authority for re-determination, ensuring that the appellants are given an opportunity to be heard.

Conclusion:
The Tribunal upheld the part-sanction and part-rejection of the refund claims by the lower authorities, agreeing with the Revenue's interpretation of "Net Cenvat Credit" and the relevant period. However, it remanded the issue of inadmissible Cenvat credit back to the original authority for re-determination, ensuring compliance with the principles of natural justice. The appeals were thus partly rejected and partly allowed by way of remand.