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2019 (7) TMI 7 - AT - Service Tax100% EOU - Refund of unutilized CENVAT Credit - export of output service - Rule 5 of Cenvat Credit Rules 2004 - Section 11B of Central Excise Act, 1944 - HELD THAT - It is clear that the refund claim was of input service credit taken on input or input services, in providing input services, i.e., export without payment of Service Tax, meaning no refund of duty was ever claimed. Clearly, therefore, there is no dispute as to the applicability of Rule 5 and hence, the authorities have no choice but to go by the formula prescribed thereunder and workout a refund. Once both assessee and the Revenue agree that a case under Rule 5 ibid is made out, then, the denial of refund claim of the assessee should only be as per the said Rule alone and as provided in the proviso below Rule 5. We have Notification No.5/2006-CE (NT) dated 14.03.2006 and Notification No. 27/2012-CE (NT) dated 18.06.2012 laying down procedures, safeguards, conditions and limitations for the guidance of the officers working out such refund - Considering the period involved, there is no doubt that it is Notification No. 27/2012-CE (NT) which applies and therefore, the above notification should be applied in full by the authorities while working out the refund - In the case on hand, the authorities have rejected the refund claim holding that the claims for refund were time barred which is one of the sub-clauses under clause 3.0 of Notification No. 27/2012 ibid. The refund claim of the appellant is not a claim under Section 11 B per se and therefore provisions of 11 B cannot be blindly applied in this case because, there is no disputes that the refund claim was under Rule 5 and the allowability or otherwise could only be as per the guidelines or the proviso under Rule 5 ibid - Rule 5 extracted supra prescribes the formula for determination of refund of Cenvat credit, subject to procedure, safeguards, conditions limitations as may be specified by the Board; and it is that Notification which refers to Section 11 B as one of the conditions which is not the only condition. This may not be without a reason. The ruling in the case of CCE CST, BENGALURU SERVICE TAX-I VERSUS M/S. SPAN INFOTECH (INDIA) PVT. LTD. 2018 (2) TMI 946 - CESTAT BANGALORE squarely applies to the facts of the present case where it was held that in respect of export of services, the relevant date for purposes of deciding the time limit for consideration of refund claims under Rule 5 of the CCR may be taken as the end of the quarter in which the FIRC is received, in cases where the refund claims are filed on a quarterly basis - thus the relevant date as also the time limit specified in the above case is required to be applied in the present case as there is no disputes that the application for refund was very much within one year from the date of BRC in this case. In the impugned order, Ld. Commissioner (Appeals) has, however, remanded one of the issues, i.e., for re-quantification of total turnover, which is one of the key component in the formula prescribed under Rule 5, ibid. Therefore, when one of the components itself is not clear then it is not practical to workout the refund and therefore, the above appeals are also required to be remanded to the file of the original authority for this limited purpose of working out the refund. Appeal allowed in part and part matter on remand.
Issues Involved:
1. Service tax payment timing. 2. Rejection of refund claims based on time limitation. 3. Deduction of amounts reversed under sub-rule (5C) of Rule 3 in computing Net Cenvat Credit. Detailed Analysis: 1. Service Tax Payment Timing: The appellant, a 100% Export Oriented Unit (EOU) registered with Software Technology Parks of India, contended that the denial of Cenvat credit on the grounds that service tax was paid in the subsequent quarter was erroneous. The appellate authority's decision to uphold the lower adjudicating authority's order was challenged, arguing that the purpose of Rule 5 of the Cenvat Credit Rules (CCR) is to enable exporters to obtain refunds of Cenvat credit. The appellant emphasized that the denial of credit for a specific quarter based on the timing of service tax payment was inequitable. It was highlighted that there was no dispute regarding the appellant's export activities and receipt of foreign exchange. 2. Rejection of Refund Claims Based on Time Limitation: The rejection of part of the refund claims on the grounds of time limitation under Section 11B of the Central Excise Act, 1944, and Notification No. 14/2016-CE was contested. The appellant argued that the time limit of one year specified in Section 11B is for filing the refund claim, not for quantifying the export turnover. It was asserted that the refund claim was filed within the one-year limit and only pertained to input credit related to export turnover. The appellant relied on various case laws, including the Larger Bench decision in Span Infotech (I) Pvt. Ltd., which held that the relevant date for considering the time limit for refund claims under Rule 5 of the CCR should be the end of the quarter in which the Foreign Inward Remittance Certificate (FIRC) is received. 3. Deduction of Amounts Reversed Under Sub-Rule (5C) of Rule 3 in Computing Net Cenvat Credit: The appellant challenged the deduction of amounts reversed under sub-rule (5C) of Rule 3 in computing the Net Cenvat Credit, arguing that the conditions of Notification No. 5/2006-CE (NT) dated 14.03.2006, which had been superseded by Notification No. 27/2012-CE (NT) dated 18.06.2012, were erroneously applied. The appellant contended that the deductions contemplated in Rule 5 do not extend to the utilization of Cenvat credit under Rule 3(4) but only to reversals under Rule 3(5C), which applies only to manufacturers. Judgment Analysis: The Tribunal reviewed the relevant sections and rules, emphasizing that the refund claim was under Rule 5 of the CCR and should be evaluated based on the formula prescribed therein. The Tribunal noted that the authorities must adhere to the procedures, safeguards, conditions, and limitations specified by the Board through notifications. It was concluded that the refund claim was not a direct claim under Section 11B and should be considered in light of the guidelines under Rule 5. The Tribunal referred to the Larger Bench decision in Span Infotech (I) Pvt. Ltd., which clarified that the relevant date for the time limit in export of services cases should be the end of the quarter in which the FIRC is received. The Tribunal directed that this principle be applied to the present case, affirming that the refund application was filed within the one-year limit from the date of BRC. The Tribunal also acknowledged the remand by the Commissioner (Appeals) for re-quantification of total turnover, a key component in the refund formula under Rule 5. It was deemed practical to remand the appeals to the original authority for recalculating the refund based on the Tribunal's observations and the Larger Bench decision, after re-quantifying the total turnover as directed by the Commissioner (Appeals). Conclusion: The Tribunal set aside the impugned orders, partly allowed the appeals, and remanded the case to the original authority for recalculating the refund in accordance with the Tribunal's observations and the Larger Bench decision, after re-quantifying the total turnover as directed by the Commissioner (Appeals). The order was pronounced in the Open Court on 27.06.2019.
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