2020 (2) TMI 756 - AT - Service Tax

Refund of accumulated credit - proportionate credit of receipts attributable to exports of the quarter bore to the total turnover - rule 5 of CENVAT Credit Rules, 2004 - HELD THAT - There is no dispute on the receipts from export of services during the quarter. The rival contentions centered around the total turnover. In the review order, it was opined to be the total of the receipts and not related to the exports made while, according to the respondent, the total turnover, in the absence of any other activity, is the same as the computed receipts for the quarter. On perusal of definition of total turnover, it is receipts in relation to the export of services during the quarter added to consideration for any other services rendered. In the context of the sole activity of respondent, the receipts attributable to exports of the quarter with nil addition would be the denominator. With the numerator and denominator being identical, the eligible accumulated credit would have to be sanctioned in entirety. Once eligibility is articulated in the Rules as a formula, an interpretation of the formula is beyond the authority of law. Appeal dismissed - decided against Revenue.

Summary

Issues:
Challenge to refund order under CENVAT Credit Rules, 2004 by Revenue based on rejection of claim by original authority.

Analysis:
The appeal by Revenue contested the order-in-appeal allowing a refund of &8377; 26,40,073/-, which had been initially denied by the original authority concerning a claim for refund of &8377; 85,38,239/- under rule 5 of CENVAT Credit Rules, 2004 for the period April 2011 to June 2011. The total credit for the subsequent period of April 2012 to June 2012 was &8377; 83,38,272/-, but the claim was limited to the amount sanctioned by the original authority from the total export turnover of &8377; 32,99,10,338/-.

The first appellate authority, interpreting the formula specified in notification no. 18/2012-CE(NT) dated 17th March 2012, concluded that the values required for calculating eligible monetization of CENVAT credit should be as claimed by the respondent and that the export turnover had been unjustly reduced, leading to the full allowance of the claim.

The core issue revolved around determining the values for the formula in rule 5 of CENVAT Credit Rules, 2004, aimed at refunding accumulated credit proportionate to exports. While the receipts from export of services were undisputed, the disagreement centered on the definition of total turnover. The review order considered it as the total of receipts, whereas the respondent argued that in the absence of other activities, total turnover equates to computed receipts for the quarter. The definition clarifies total turnover as export receipts plus consideration for any other services provided. In the respondent's scenario, with no additional services, the eligible credit would have to be fully sanctioned due to the identical numerator and denominator, as per the formula stipulated in the Rules.

Ultimately, the Tribunal found no merit in the Revenue's appeal, dismissing it as the first appellate authority's interpretation of the formula was in accordance with the law, emphasizing that once eligibility is defined in a formula, deviating from that interpretation is impermissible.

Therefore, the Tribunal upheld the order-in-appeal, affirming the full allowance of the refund claim, as the interpretation of the formula was deemed appropriate and legally sound.