2023 (8) TMI 699 - AT - Service Tax

Refund of unutilized service tax paid on input services used for providing output services - absence of nexus between input service and output service - non-submission of documents - claim being time barred - period April 2009 to September 2009 - HELD THAT - It is found that the finding of the Appellate Authority to reject the claim of the assessee on the ground that they are not eligible for the CENVAT credit since the input services have no nexus with the export service and it is unsustainable. As held by the Hon ble Telangana High Court in the case of Commissioner, Customs Central Excise, Hyderabad-IV Vs. M/s Qualcomm India Pvt. Ltd. 2021 (11) TMI 72 - TELANGANA HIGH COURT Rule 14 provided that in the case of irregular availment of CENVAT credit or its utilization, the authorities under the Finance Act are empowered to recover the same from the assessee and not by denying to the grant of refund under Rule 5 of the Finance Act without there being any proceedings initiated under Rule 14 of Rules seeking to deny the refund, especially since the claim pertains to the period prior to amendment under Rule 5 of CENVAT Credit Rules w.e.f. 01.04.2012. Appeal of assessee allowed.

Summary

Issues:
The issues involved in this case are the eligibility of refund claim for unutilized service tax, rejection of refund claim by the Adjudicating Authority, partial allowance of refund claim by the Commissioner (Appeals), and the relevant date for claiming refund of input service credit under Rule 5 of the Cenvat Credit Rules.

Eligibility of Refund Claim:
The appellant, engaged in the export of Information Technology and Enabled Services, filed a refund claim for unutilized service tax paid on input services used for providing output services. The Adjudicating Authority allowed eligible amounts but rejected ineligible amounts due to various reasons. On appeal, the Commissioner (Appeals) partially allowed the refund claim subject to verification. The appellant appealed against the rejected portion of the refund claim for the period April 2009 to September 2009.

Contentions Raised:
The appellant's counsel argued that services related to advertising, banking and financial services, interior decorator services, and import of services are eligible as input services for claiming refund. They cited relevant legal provisions and previous judgments to support their arguments. The counsel emphasized that once CENVAT credit is allowed, the refund of the same cannot be rejected under Rule 5 of the Cenvat Credit Rules.

Relevant Date for Refund Claim:
The appellant's counsel highlighted the issue of the relevant date for claiming refund of input service credit under Rule 5. They argued that the relevant date should be the date of receipt of consideration for service providers, as held by the Appellate Authority. Citing legal precedents and notifications, the counsel supported their stance on the calculation of the relevant date for filing refund claims.

Judgment:
After considering the arguments and reviewing the records, the Appellate Tribunal held that the rejection of the claim based on the absence of nexus between input services and export services was unsustainable. Referring to a judgment by the Telangana High Court, the Tribunal emphasized that denial of refund without invoking Rule 14 for irregular CENVAT credit availment is not justified. Therefore, the Service Tax Appeal filed by the assessee was allowed, granting consequential relief, while the Excise Appeal filed by the Revenue was dismissed.

Conclusion:
The Appellate Tribunal's decision favored the appellant, allowing their Service Tax Appeal and dismissing the Revenue's Excise Appeal. The judgment highlighted the importance of establishing a nexus between input services and output services for refund claims under Rule 5 of the Cenvat Credit Rules and emphasized the need to follow proper procedures for denying refund claims based on irregular CENVAT credit availment.