2021 (7) TMI 102 - AT - Service Tax

Refund of unutilized cenvat credit - validity of SCN - SCN was challenged on the ground of Order-in-Original has traversed beyond the show-cause notice inasmuch as the ground for rejection did not form part of the show-cause notice and other grounds were also taken - refund claim was rejected for the reason that the appellant had transitioned the credit for the said period into GST regime and consequently the appellant has not complied with the conditions of N/N. 27/2012-CE dt. 18.06.2012 - HELD THAT - It is not in dispute that the appellant is an exporter and does not have any domestic services at all. Appellant availed input services for the purpose of rendering output service exporting to his foreign company for which he pays service tax and take cenvat credit. Since the appellant was unable to utilize the cenvat credit for payment of its output liability, the appellant filed a refund claim for the period April 2016 to June 2016 which was rejected by the original authority on the ground that appellant has not debited the refund amount in cenvat credit and service tax return and consequently the refund was rejected on the ground that the appellant has transitioned the input tax credit into TRAN-1 and as per Section 142(4), the refund is liable to be rejected once the cenvat credit is transferred to TRAN-1. The appellant has proved that he has actually reversed the amount of refund claimed in its cenvat credit account maintained in the books of accounts as prescribed in the Notification before filing the refund claim and Exhibit B clearly shows the reversal of cenvat credit but Commissioner(Appeals) has not appreciated that aspect and has wrongly observed in para 9.1 of the impugned order that the assessee has failed to debit the refund amount in cenvat account. As per the Notification No.27/2012, there is no requirement to debit in the service return, the only requirement under Condition 2(h) of Notification No.27/2012 dt. 18/06/2012 is that the amount i.e. claimed as refund under Rule 5 of the said Rules shall be debited by claimant from his cenvat credit account at the time of making the claim and this condition has been followed by the appellant before filing the claim of refund but the impugned order has misconstrued and misinterpreted the requirement of Notification No.27/2012 - Further it is found that appellant by sheer inadvertent mistake has transitioned the cenvat credit into TRAN-1 during the GST regime. As soon as, he realized his bona fide and unintentional mistake and the reversal was done in GSTR-3B returns in May 2018 itself. Scope of SCN - HELD THAT - The impugned order has also travelled beyond the show-cause notice because all the submissions made by the appellant during the adjudication proceedings were not considered by both the authorities below. It is also found that the act of inadvertent transition of refund amount to GST regime and voluntarily reversal of such amount made by the appellant has been submitted before the adjudicating authority by the appellant vide his letter dt. 13.05.2018 which is much before the issuance of the adjudication order in October 2018 but the same was not considered by the adjudicating authority. The transition of refund amount into GST regime was merely inadvertent error and the same was made good by the appellant by reversing the credit into GSTR-3B filed in May 2018 - the appellant has not violated conditions of the N/N. 27/2012 dt. 18/06/2012 - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Rejection of refund claim by Commissioner(Appeals) for unutilized cenvat credit availed during a specific period.
2. Dispute regarding the debiting of the refund claim amount from the cenvat credit and service tax return at the time of making the refund.
3. Allegation of transitioning the credit into GST regime and non-compliance with the conditions of the notification.
4. Appellant's contention of procedural lapse and substantive right to claim refund as a 100% exporter of service.
5. Misinterpretation of Notification No.27/2012 and failure to consider submissions made during adjudication proceedings.
6. Appellant's argument of inadvertent transition of credit, subsequent reversal, and the need for a liberal view on the mistake.

Analysis:
1. The appellant, engaged in providing support services to group companies outside India, claimed a refund of unutilized cenvat credit for the period April 2016 to June 2016. The refund was rejected on the grounds of transitioning credit to the GST regime and non-compliance with Notification No.27/2012.
2. The appellant argued that the rejection was based on the failure to debit the refund amount from cenvat credit and service tax return, despite subsequent reversal in GSTR-3B. The Commissioner(Appeals) upheld the rejection, citing non-adherence to notification conditions.
3. The Tribunal found that the appellant had indeed reversed the claimed amount in the cenvat credit account before filing the refund claim, as required by the Notification. The misinterpretation of the notification's requirements led to the erroneous rejection of the refund claim.
4. Emphasizing the appellant's status as a 100% exporter of service and the rectification of the inadvertent credit transition, the Tribunal held that the procedural lapse should not deny the substantive right to claim a refund. Precedents were cited to support the argument of not allowing procedural lapses to defeat legitimate refund claims.
5. The Tribunal criticized the impugned order for overlooking the appellant's submissions and factual inaccuracies in observations. It highlighted that the appellant had rectified the mistake voluntarily and informed the authorities before the adjudication order.
6. Ultimately, the Tribunal set aside the impugned order, acknowledging the inadvertent error in transitioning the credit, the subsequent reversal, and the appellant's compliance with the notification conditions. The decision favored the appellant, allowing the appeal with consequential relief, if any.