2025 (1) TMI 68 - AT - Service Tax

Cenvat credit - input services or not - refund claim - 'locus standi' to file this appeal - HELD THAT - The department has filed the appeal without even invoking Rule 14 of the Credit Rules, and without even issuing a SCN, hence the department does not have any 'locus standi' to file this appeal and hence this appeal should be dismissed on this ground only. The respondent has relied upon the decision of the Tribunal in the case of MICROSOFT GLOBAL SERVICES CENTER (INDIA) PRIVATE LIMITED AND MICROSOFT INDIA (R D) PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX HYDERABAD-IV 2020 (10) TMI 57 - CESTAT HYDERABAD wherein it is held that ' In the present case, it is an undisputed fact on record that the department had not proceeded against the appellant for effecting recovery of the allegedly availed irregular Cenvat credit, by taking recourse to Rule 14 ibid read with Section 73 ibid. On the other hand, the department had raised the issue of non-establishment of nexus between the input services and exported output service for the first time, while adjudicating the subject refund claims filed under Rule 5 ibid by the appellant.' Conclusion - The department has filed the appeal without even invoking Rule 14 of the Credit Rules, and without even issuing a SCN, hence the department does not have any 'locus standi' to file this appeal and hence this appeal should be dismissed on this ground only. Appeal of Revenue dismissed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the Respondent-Assessee was eligible to claim Cenvat credit on certain input services under the Cenvat Credit Rules, 2004.
Whether the Department's appeal against the Order-in-Appeal, which allowed the Respondent-Assessee's refund claim, was valid given the absence of a Show Cause Notice (SCN) under Rule 14 of the Cenvat Credit Rules.
Whether the observations made by the Adjudicating Authority regarding the irregularity of Cenvat credit availed by the Respondent-Assessee were valid without issuing a prior SCN.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Eligibility of Cenvat Credit

Relevant Legal Framework and Precedents: The Cenvat Credit Rules, 2004, particularly Rule 5, and Notification No. 27/12-CENT dated 18.06.2012, govern the eligibility for claiming refunds on Cenvat credit. The definition of 'Input Services' under Rule 2(1) is crucial for determining eligibility.
Court's Interpretation and Reasoning: The Tribunal considered the detailed evaluation by the Commissioner (Appeals-I), who found that the services in question fell within the definition of 'Input Services'. The Tribunal agreed with this interpretation.
Key Evidence and Findings: The Commissioner (Appeals-I) had evaluated each of the 13 disputed services and concluded that they qualified as input services, supporting the Respondent-Assessee's claim.
Application of Law to Facts: The Tribunal applied the definitions and provisions of the Cenvat Credit Rules to the facts presented, affirming the lower authority's findings.
Treatment of Competing Arguments: The Department's argument was that the credit was irregular, but this was not substantiated by a SCN as required by law.
Conclusions: The Tribunal upheld the decision of the Commissioner (Appeals-I) that the Respondent-Assessee was eligible for the Cenvat credit claimed.

Issue 2: Validity of Department's Appeal

Relevant Legal Framework and Precedents: Rule 14 of the Cenvat Credit Rules and Section 73 of the Finance Act, 1994, require a SCN to be issued for recovery of irregularly availed credit.
Court's Interpretation and Reasoning: The Tribunal noted that the Department had not issued a SCN, which is a prerequisite for challenging the credit's validity.
Key Evidence and Findings: The absence of a SCN was a critical factor, as it meant the Department had no legal basis to contest the credit at the refund stage.
Application of Law to Facts: The Tribunal applied the requirement of a SCN as per the legal framework, finding the Department's appeal procedurally flawed.
Treatment of Competing Arguments: The Respondent-Assessee successfully argued that without a SCN, the Department's challenge to the credit was without jurisdiction.
Conclusions: The Tribunal dismissed the Department's appeal due to the lack of a SCN.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "We find that the department has filed the appeal without even invoking Rule 14 of the Credit Rules, and without even issuing a SCN, hence the department does not have any 'locus standi' to file this appeal and hence this appeal should be dismissed on this ground only."
Core Principles Established: A SCN is essential for disputing the validity of Cenvat credit. Without it, the Department lacks jurisdiction to challenge credit claims at the refund stage.
Final Determinations on Each Issue: The Tribunal affirmed the eligibility of the Respondent-Assessee to claim Cenvat credit and dismissed the Department's appeal due to procedural deficiencies.

The judgment underscores the procedural necessity of issuing a SCN under Rule 14 before challenging Cenvat credit claims, reinforcing the importance of adhering to statutory requirements in tax disputes.

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