2023 (12) TMI 569 - AT - Service Tax

Rejection of refund of Cenvat Credit - ineligible input services - General Insurance service - Security Insurance service - Restaurant facility service - HELD THAT - It is settled position that denial of Cenvat credit can be done by issuing notice u/r 14 ibid and it cannot be rejected solely u/r 5 ibid. Rule 14 provides for recovery of Cenvat credit wrongly taken or erroneously refunded. In the instant appeals, there are no document on record to establish that any notice under Rule 14 of Cenvat Credit Rules, 2004 has been issued to the appellant for recovery of irregularly availed Cenvat credit. From the language of Rule 5 ibid it is clear that it merely provides for refund of Cenvat credit and it nowhere talks about the correctness/recovery of availment of Cenvat Credit, which is the mandate of Rule 14 ibid only. Admittedly in the instant matter no such steps had been taken. The instant appeal is allowed by setting aside the impugned order.

Summary

Issues involved:
The issue in this case is whether the denial of Cenvat Credit on certain services by the Commissioner is justified under Rule 2(l) of the Cenvat Credit Rules, 2004.

Details of the Judgment:

Issue 1: Denial of Cenvat Credit
The appeal challenges the Order-in-Appeal upholding the rejection of refund of Cenvat Credit for General Insurance service, Security Insurance, and Restaurant facility service. The question is whether the denial of Cenvat Credit on these services is justified under Rule 2(l) of the Cenvat Credit Rules, 2004.

The Tribunal considered previous decisions where it was held that denial of Cenvat Credit can only be done by issuing a notice under Rule 14 of the Cenvat Credit Rules, and not solely under Rule 5. Since no notice under Rule 14 was issued in this case, the denial of refund based on the lack of nexus between input and output services cannot be sustained.

The Tribunal referred to a case where it was clarified that the amended Rule 5 does not require establishing a nexus between input and output services for claiming a refund. Denial of refund on this ground is not permissible under Rule 5, as it is governed by the formula prescribed therein.

In the absence of any notice under Rule 14 for recovery of irregularly availed Cenvat Credit, the Tribunal found no justification for the denial of Cenvat Credit solely based on Rule 5. Therefore, the appeal was allowed by setting aside the impugned order.

The Tribunal emphasized that the denial of Cenvat Credit can only be done through the proper procedure outlined in Rule 14, and Rule 5 is specifically for refund purposes without requiring a nexus between input and output services.

The Tribunal concluded that the denial of Cenvat Credit solely under Rule 5, without following the procedure under Rule 14, is not justified. Therefore, the appeal was allowed, setting aside the Commissioner's decision to reject the refund of Cenvat Credit.

This summary provides a detailed breakdown of the judgment, highlighting the key legal principles and decisions considered by the Tribunal in reaching its conclusion.