2020 (9) TMI 435 - AT - Service Tax

Refund of accumulated credit - ascertainment of eligible refund amount in terms of the formula prescribed in Rule 5 of the Credit Rules - input services availed for export of services - period from April 2012 to June 2012 - HELD THAT - n the instant case, the lower authority has allowed refund of ₹ 4,73,929/- and rejected the balance refund of ₹ 3,47,183/-. While arriving at the total turnover, they have taken the aggregate of the value of export invoices for which payment has been received (₹ 6,79,78,169/-) and the value of export invoices for which payment has not been received in the relevant period (₹ 4,62,61,441/-), i.e. total ₹ 11,42,39,610/- in the denominator, whereas, in the numerator, they have considered ₹ 6,79,78,169/- i.e. the value of export services. In both the numerator and denominator, the amount of export turnover have to be considered i.e. ₹ 6,79,78,169/- when there is no domestic services rendered by the assessee appellant inasmuch as the value of all other services would be NIL in the given case. There is no reason to consider the aggregate of the value of export turnover payment of which has been received and those for which payment has not been received, since not required in the prescribed formula - When the value of export services has been considered for which payment has been received, in that case the refund is automatically allowed to that extent and therefore, there is no further need to add the value for which payment has not been received since not required as per the formula. The refund claim of ₹ 3,47,183/- is admissible. - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against denial of refund of accumulated credit on input services for export of services during a specific period.

Analysis:
The appellant, a 100% exporter of services, filed for a refund of accumulated Cenvat Credit under Rule 5 of the CENVAT Credit Rules, 2004. The authorities denied the refund by including the value of export invoices for which payment was not received in the total turnover calculation. The appellant argued against this inclusion, emphasizing their sole engagement in 100% export of services. They relied on tribunal decisions to support their claim for refund.

The only issue for consideration was the determination of the eligible refund amount as per the formula in Rule 5 of the Credit Rules. The formula prescribed factors such as export turnover of goods and services, net CENVAT credit, and total turnover. The formula aimed to allow a proportionate refund of the net credit availed amount concerning the value of export services. It differentiated between export and domestic services, restricting the refund to export services only.

The lower authority allowed a partial refund but rejected a portion based on incorrect calculation methodology. The tribunal clarified that when no domestic services were rendered, the value of export turnover should be considered in both the numerator and denominator. The inclusion of export turnover for which payment was not received was deemed unnecessary and against the prescribed formula.

Accepting the lower authority's contention would prevent the appellant from receiving the refund of the Cenvat credit amount availed in the relevant period. This outcome was not intended by the law or the formula. Consequently, the tribunal found the refund claim of ?3,47,183/- admissible and allowed the appeal with consequential relief.

In conclusion, the tribunal's decision rectified the incorrect calculation methodology applied by the lower authorities, ensuring the appellant received the rightful refund of accumulated credit for export services within the specified period.