2025 (1) TMI 72 - AT - Service Tax

Refund of the accumulated CENVAT credit under Rule 5 of the Cenvat Credit Rules 2004 - It was alleged that the credit was not admissible because the services on which credit was taken were not falling under the definition of Input Service - HELD THAT - Since no SCN has been issued previously disputing the taking of Cenvat credit itself, the same cannot be disputed at the stage when the Appellant has filed refund applications under Rule 5 of Credit Rules. As the credit has not been denied under Rule 14, therefore the same is available to the Appellant and a refund of the same is to be allowed under Rule 5 of the Credit Rules. Even as per Rule 5 and Notification No. 27/2004, the requirement was to ascertain whether services were exported and whether the balance of CENVAT Credit as claimed is available with the assessee or not. It was not the requirement to ascertain the correctness of admissibility of CENVAT Credit at the stage of refund proceedings. The reasons based on which the Department filed the appeal before the Commissioner (Appeals) were not legally tenable and justified. The provisions of Rule 5 or the Notification No. 27/2012 do not require one-to-one correlation of the input services with the output services exported by the Appellant. The foreign service provider was not an Assessee under the Finance Act, 1994 and documents were not issued in terms of Section 4A of the Act. However, the Appellant being an Assessee in India, paid the service tax on reverse charge basis under the appropriate service classification and such payment was accepted by the department. Further, the absence of invoices in terms of Rule 4A of the Service Tax Rules does not disentitle the Appellant to claim refund of the CENVAT Credit as the service providers were not bound to issue such invoices. Conclusion - The admissibility of CENVAT Credit cannot be disputed at the refund stage without prior denial under Rule 14. There is no requirement for one-to-one correlation between input and exported services for refunds under Rule 5. The absence of Rule 4A invoices does not bar refund claims if service tax is paid on a reverse charge basis. Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The judgment addresses the following core legal questions:

Whether the admissibility of CENVAT Credit can be disputed at the stage of filing a refund claim under Rule 5 of the Cenvat Credit Rules, 2004, without issuing a Show Cause Notice (SCN) under Rule 14 of the CENVAT Credit Rules, 2004.
Whether the requirement of one-to-one correlation between input services and exported services is necessary for claiming a refund under Rule 5 of the Cenvat Credit Rules, 2004.
Whether the absence of invoices issued under Rule 4A of the Service Tax Rules disentitles the appellant from claiming a refund of CENVAT Credit.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Admissibility of CENVAT Credit at the Refund Stage

Relevant legal framework and precedents: Rule 5 of the Cenvat Credit Rules, 2004, and Rule 14 of the CENVAT Credit Rules, 2004. Precedents include decisions in Microsoft Global Services Center (India) Private Limited and others.
Court's interpretation and reasoning: The court held that the admissibility of CENVAT Credit cannot be disputed at the refund stage without issuing an SCN under Rule 14. The credit must first be denied under Rule 14 before it can be contested during refund proceedings.
Key evidence and findings: The department did not issue an SCN under Rule 14 to dispute the CENVAT Credit's admissibility, making the credit available for refund.
Application of law to facts: The Tribunal found that since no SCN was issued, the credit was not denied under Rule 14, thus making it available for refund under Rule 5.
Treatment of competing arguments: The appellant argued that the credit's admissibility should not be questioned at the refund stage without an SCN, which the court accepted.
Conclusions: The Tribunal concluded that the department's action of disputing the credit at the refund stage without an SCN was not legally sustainable.

Issue 2: Requirement of One-to-One Correlation

Relevant legal framework and precedents: Rule 5 of the Cenvat Credit Rules, 2004, and Notification No. 27/2012-CE(NT).
Court's interpretation and reasoning: The Tribunal held that there is no requirement for one-to-one correlation between input services and exported services for claiming a refund under Rule 5.
Key evidence and findings: The Tribunal noted that the appellant paid service tax on a reverse charge basis, which was accepted by the department.
Application of law to facts: The Tribunal found that the appellant complied with the legal requirements, and the absence of one-to-one correlation was not a valid ground to deny the refund.
Treatment of competing arguments: The department's argument for requiring one-to-one correlation was rejected based on the legal framework and precedents.
Conclusions: The Tribunal concluded that the lack of one-to-one correlation does not disentitle the appellant from claiming a refund.

Issue 3: Absence of Invoices under Rule 4A

Relevant legal framework and precedents: Rule 4A of the Service Tax Rules and related provisions.
Court's interpretation and reasoning: The Tribunal held that the absence of invoices issued under Rule 4A does not bar the appellant from claiming a refund, as the service providers were not bound to issue such invoices.
Key evidence and findings: The appellant paid service tax through challans, which were deemed eligible documents for claiming CENVAT Credit.
Application of law to facts: The Tribunal found that the appellant's compliance with reverse charge payment and the use of challans were sufficient for claiming the refund.
Treatment of competing arguments: The department's reliance on the absence of Rule 4A invoices was found to be legally untenable.
Conclusions: The Tribunal concluded that the refund claim was valid despite the absence of Rule 4A invoices.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "Since no SCN has been issued previously disputing the taking of Cenvat credit itself, the same cannot be disputed at the stage when the Appellant has filed refund applications under Rule 5 of Credit Rules."
Core principles established: The admissibility of CENVAT Credit cannot be disputed at the refund stage without prior denial under Rule 14. There is no requirement for one-to-one correlation between input and exported services for refunds under Rule 5. The absence of Rule 4A invoices does not bar refund claims if service tax is paid on a reverse charge basis.
Final determinations on each issue: The Tribunal set aside the impugned order, allowing the appellant's refund claims and rejecting the department's grounds for appeal.

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