2022 (3) TMI 195 - AT - Service Tax

Refund of CENVAT Credit - export of output services without payment of service tax - Rule 5 of the CENVAT Credit Rules, 2004 - HELD THAT - From the reading of Rule 5, it is providing for the refund of the accumulated CENVAT Credit in the books of account against the goods exported under Bond or letter of undertaking and the services exported. The basic principle which is being provided by the said Rule, is as per the avowed policy of the Government to reduce the prices of export so that they are internationally competitive. It is also imperative to note that no country will like to export the taxes leviable locally along with the goods and services exported. To accomplish this Government has provided for various schemes to zero rate the goods and services exported. Rule 5 do not provide for disallowing any credit for any reason whatsoever. From the reading of the provisions of Rule 14 it is quite evident that if for a moment it is accepted that certain credit were wrongly or erroneously taken by the appellant contrary to the provisions contained in Rule 3 and 4 of the said Rules, then the same could have been denied by following the procedure as laid down in Rule 14. The so availed erroneous credit cannot be the subject matter of proceedings of Refund in terms of Rule 5 of the CENVAT Credit Rules, 2004 - Admittedly and undisputedly no proceedings for denial of any CENVAT Credit as claimed by the appellants, for encashment of which they have filed these refund claims have been initiated by the revenue. Without denying the CENVAT Credit taken/ availed by the appellant in their book of accounts during the relevant period (quarter) by way of initiating proceedings against the appellant in terms of Rule 14, revenue could not have altered the quantum of Net CENVAT Credit availed during the said quarter, and deny the encashment of that amount of the CENVAT Credit which is due as per the Rule 5. It is now well settled principle of law that where a statute provides for a thing to be done in a particular manner, then it has to be done in that manner, and in no other manner. It was held in the case of ADP PRIVATE LIMITED VERSUS COMMISSIONER OF SERVICE TAX, HYDERABAD-II 2020 (1) TMI 101 - CESTAT HYDERABAD that the rejection of refund of Cenvat credit partly on the ground that the input services are not eligible for Cenvat credit at all is not correct in law. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Event Management Services
2. Address not in ST-2 for two separate invoices
3. Payment not made within 90 days

Issue-wise Detailed Analysis:

1. Event Management Services:
The appellant claimed Cenvat credit for event management services used to organize an event for foreign clients. The adjudicating authority rejected this claim, stating that the services had no nexus with output services, as they were not directly related to the provision of exported services and could be for personal use of employees. The Commissioner (Appeals) upheld this decision, noting that the appellant failed to provide tangible evidence to prove the services were essential for the quality and efficiency of the exported services. The services did not fall within the ambit of Rule 2 (1) of the Cenvat Credit Rules, 2004.

2. Address not in ST-2:
- Invoice for ?1,16,000: The appellant argued that the company’s name had changed from M/s Aries India Pvt. Ltd. to M/s Aries Technology Group Pvt. Ltd., supported by ST-2 certificate and certificate of incorporation. The adjudicating authority rejected the claim on the grounds that the address was not in the claimant's name. The Commissioner (Appeals) accepted the appellant's contention, noting the ST-2 amendment and allowed the credit.
- Invoice for ?6,501: The appellant did not contest the rejection of input service credit availed on invoices from Vodaphone and Hathway Cable & Datacom Ltd. The Commissioner (Appeals) upheld the denial of credit as the appellant did not provide any arguments against the adjudicating authority's decision.

3. Payment not made within 90 days:
The appellant contended that the refund of Cenvat credit should not be disallowed based on delayed payment to the vendor. However, the adjudicating authority noted that Rule 4 (7) of the Cenvat Credit Rules, 2004 mandates that if payment is not made within three months of the invoice date, the credit availed must be reversed. Since the payments were made beyond 90 days, the credit was deemed inadmissible and disallowed. The Commissioner (Appeals) upheld this decision.

General Observations and Legal Principles:
The appellant filed the refund claim under Rule 5 of the CENVAT Credit Rules, 2004, for the period from Oct 2016 to Dec 2016. The Assistant Commissioner modified the refund claim, sanctioning ?51,56,107 and rejecting ?4,53,533. The Commissioner (Appeals) partially modified the order, and the appellant filed an appeal against this decision.

The tribunal noted that Rule 5 provides for the refund of accumulated CENVAT Credit against exported goods and services and does not provide for disallowing credit. Rule 14 specifies the procedure for recovering wrongly taken or erroneously refunded CENVAT credit. The tribunal emphasized that any disallowance of credit should follow the procedure in Rule 14 and cannot be part of the refund proceedings under Rule 5.

The tribunal referenced several legal precedents, including the Supreme Court judgments in Chandra Kishore Jha vs. Mahavir Prasad and Dhananjaya Reddy vs. State of Karnataka, which establish that statutory provisions must be followed in the prescribed manner. The tribunal also cited cases like Qualcomm India Pvt Ltd and ADF Pvt Ltd, supporting the principle that refund claims under Rule 5 should not be denied on grounds of irregular credit without following Rule 14 procedures.

Conclusion:
The tribunal set aside the impugned order, allowing the appeal and emphasizing the need for adherence to statutory procedures for disallowing CENVAT credit. The decision highlights the importance of following the prescribed legal framework for recovery of credit and ensuring that refund claims are processed in accordance with the rules.