2021 (12) TMI 1015 - AT - Service Tax

Refund of tax paid - rents charged on the space which remained unregistered as premises from which output service was rendered - after examining the two claims for refund, the file was sent for pre-audit and objection, of wrongful availment of credit of tax on rentals paid by the assessee, originating there prompted rejection of the claims- rule 5 of CENVAT Credit Rules, 2004 - HELD THAT - The scheme of rule 5 of CENVAT Credit Rules, 2004 is abundantly clear. To the extent of eligibility, the assessee cannot be denied refund and the disallowed portion, if any, remains in the credit of the assessee for debit of future tax/duty liability. Therefore, denial of refund does not extinguish the credit but restores it in the account. In the impugned order, there is no finding of disallowance and, on the contrary, the denial has been on the ground of ineligibility for CENVAT credit which is permissible to be ordered only in proceedings initiated under rule 14 of CENVAT Credit Rules, 2004 after issuing notice to the assessee. Neither of the two is evident in the records. The denial of refund CENVAT credit is incorrect in law in the absence of recovery of credit for ineligibility - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Dispute over disallowance of refund of taxes paid on rents for unregistered premises used for rendering output services.

Analysis:
In the case involving M/s Responsibility India Business Advisors Pvt Ltd, the dispute revolved around the disallowance of refund claims for taxes paid on rents for unregistered premises used for rendering output services. The appellant, engaged in providing business consultancy services outside the country, sought reimbursement of taxes paid on input services procured during the relevant period under rule 5 of CENVAT Credit Rules, 2004. The challenge specifically focused on the disallowance of refund for tax paid on rents charged on unregistered space from which output services were provided.

The appellant's Chartered Accountant argued that the dispute was limited to the rejection of the claim related to tax paid on renting immovable property services. They contended that the absence of registration should not hinder the substantive claim for refund, especially when the service itself was eligible under the CENVAT Credit Rules. Legal precedents, such as the decision of the Hon'ble High Court of Karnataka and the Tribunal, were cited to support the appellant's position.

On the other hand, the Authorized Representative for the respondent highlighted that the delay in registration was due to preparatory activities, indicating that the premises were not used for rendering output services at the relevant time. References were made to legal decisions, including those of the Tribunal and the Hon'ble High Court of Bombay, to support this argument.

The Tribunal observed that the dispute centered on the denial of a portion of the refund claim under rule 5 of the CENVAT Credit Rules. It emphasized that any ineligible credit availed by an assessee is subject to recovery under rule 14 of the Rules. The orders of the original authority revealed that the claims for refund were rejected based on objections raised during pre-audit regarding the wrongful availment of credit on rentals paid by the assessee.

Ultimately, the Tribunal held that denial of refund did not extinguish the credit but restored it in the assessee's account for future tax liabilities. Since there was no recovery of credit for ineligibility as required by law, the denial of refund was deemed incorrect. Consequently, the impugned order was set aside, and the appeals were allowed. The judgment was pronounced in open court on 23/12/2021.