2025 (2) TMI 743 - AT - Service Tax

Rejection of refund claim of accumulated Cenvat Credit - rejection on the ground that since opening balance in ST-3 return for the period April 2015 to September 2015 was Nil hence credit was never availed in returns and consequently there is no question of refund - HELD THAT - Apparently the refund claim was filed by the Appellant in terms of Rule 5 of the CENVAT Credit Rules 2004 and sub-rule (1) of Rule 5 provides that refund of CENVAT credit shall be allowed subject to procedure safeguards conditions and limitations as may be specified by the Board by notification in the Official Gazette. A perusal of Rule 5 nowhere indicates that the same provides disclosure of balances of CENVAT credit in ST-3 return as the condition precedent for claiming refund of credit. There is nothing in Rule 5 to assume that if credit was validly availed but not disclosed in ST-3 return the same would prohibit the refund of credit. In exercise of powers conferred under Rule 5(1) Notification No.27/2012-CE(N.T.) dated 18.06.2012 has been issued specifying the safeguards conditions and limitations and also the procedure for filing the refund claim - clause 2(g) has to be read as it is without any addition or subtraction of words and clause 2(g) cannot be interpreted on any presumption or assumption that balance has to be considered as the amount shown as closing balance in ST-3 return. The interpretation to the contrary placed in the impugned order is therefore clearly erroneous and is not flowing from a plain reading of clause 2(g) of the notification - clearly clause 2(g) of the notification has been incorrectly interpreted in the impugned order and rejection of refund claim on this ground is not sustainable. Both the parties are ad-idem to the fact that no objection has been raised by the Revenue to the revised return for the subsequent period Oct 2015 to March 2106 showing the same opening balance as disclosed by the Appellant in corrigendum for the period April 2015 to Sep 2015 - It is not disputed before me that by the time the Appellant realised the mistake the time period for revising the return got expired and therefore the Appellant cannot be expected to perform an impossible task. Thus there are no reasonable reason for not extending the benefit of the corrigendum to the Appellant. As regards finding in the adjudication order regarding taking credit within a period of one year it is found that the said finding has been recorded only on the ground that the amount of credit was not disclosed by the Appellant in ST-3 return for the period April 2015 to Sep 2015. The adjudicating authority appears to have misguided himself by taking a view that credit is taken by declaring the amount of credit in ST-3 return. On the contrary credit is always taken in account books and/or other statutory records. The disclosure of opening/closing balance of credit and utilised amount of credit in ST-3 may be a condition required to be complied by a taxpayer but the same by itself is not a condition to claim credit. There is absolutely no finding in the adjudication or appeal order that the invoices in question were issued prior to period of one year. no adverse finding has been recorded by the two authorities and therefore the submission to the contrary made by the Ld. A.R. deserves to be rejected. Conclusion - i) Substantive benefits cannot be denied on technical grounds such as non-disclosure in ST-3 returns. ii) Clause 2(g) of Notification No. 27/2012-C.E should be interpreted based on the actual balance not the disclosed balance in ST-3 returns. iii) The Adjudicating Authority is directed to sanction the refund claim in accordance with the law. Appeal allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

1. Whether the non-disclosure of CENVAT credit in the ST-3 return for the period April 2015 to September 2015 invalidates the refund claim of the Appellant.

2. Whether the refund claim can be denied based on the timing of the revision of the ST-3 return for the subsequent period (October 2015 to March 2016) being after the filing of the refund claim.

3. Whether the rejection of the refund claim is justified under clause 2(g) of Notification No. 27/2012-C.E dated 18.06.2012, which limits the refund to the amount of CENVAT credit lying in balance at the end of the quarter.

4. Whether the Appellant's claim of taking CENVAT credit within one year of invoice issuance is valid despite non-disclosure in the ST-3 return.

ISSUE-WISE DETAILED ANALYSIS

1. Non-disclosure of CENVAT Credit in ST-3 Return

- Relevant legal framework and precedents: The Appellant's refund claim was filed under Rule 5 of the CENVAT Credit Rules, 2004. The rule does not stipulate that disclosure of CENVAT credit balances in ST-3 returns is a condition for claiming refunds.

- Court's interpretation and reasoning: The Tribunal found that Rule 5 and Notification No. 27/2012-CE(N.T.) do not require the disclosure of CENVAT credit in ST-3 returns as a condition for refund. The Tribunal emphasized that substantive benefits cannot be denied on technical grounds.

- Key evidence and findings: The Appellant rectified the omission by filing a corrigendum and revised returns, which were not objected to by the Revenue.

- Application of law to facts: The Tribunal concluded that the non-disclosure was a bona fide mistake and should not preclude the refund.

- Treatment of competing arguments: The Tribunal rejected the Revenue's argument that non-disclosure in ST-3 returns invalidates the refund claim.

- Conclusions: The Tribunal held that the refund claim should not be denied on the basis of non-disclosure in ST-3 returns.

2. Timing of Revision of ST-3 Return

- Relevant legal framework and precedents: Paragraph 3 of Notification No. 27/2012-CE(N.T.) requires verification of documents at the time of sanctioning the refund claim.

- Court's interpretation and reasoning: The Tribunal noted that the refund claim's timing and the revised ST-3 return were not materially irregular since the verification process allows for such corrections.

- Key evidence and findings: The Appellant revised the return for October 2015 to March 2016 after filing the refund claim, but this was before the Show Cause Notice was issued.

- Application of law to facts: The Tribunal found no material irregularity in the timing of the revised return.

- Treatment of competing arguments: The Tribunal dismissed the Revenue's contention that the timing of the revised return invalidated the refund claim.

- Conclusions: The Tribunal ruled that the timing of the revised return did not affect the validity of the refund claim.

3. Interpretation of Clause 2(g) of Notification No. 27/2012-C.E

- Relevant legal framework and precedents: Clause 2(g) limits the refund to the balance at the end of the quarter or at the time of filing the refund claim, whichever is less.

- Court's interpretation and reasoning: The Tribunal interpreted clause 2(g) as not requiring the balance to be shown in ST-3 returns. The interpretation should be based on the actual balance, not the disclosed balance.

- Key evidence and findings: The Tribunal referenced the decision in Vaibhav Global Limited, which supports the interpretation that substantive benefits should not be denied on technical grounds.

- Application of law to facts: The Tribunal found that the rejection based on clause 2(g) was erroneous.

- Treatment of competing arguments: The Tribunal rejected the Revenue's interpretation that the balance must be shown in ST-3 returns.

- Conclusions: The Tribunal concluded that the refund claim should not be denied based on clause 2(g).

4. Claim of Taking CENVAT Credit within One Year

- Relevant legal framework and precedents: The Appellant argued that all invoices were issued within one year of claiming the credit, supported by a Chartered Accountant's certificate.

- Court's interpretation and reasoning: The Tribunal found that credit is taken in account books, not merely by declaration in ST-3 returns.

- Key evidence and findings: The Appellant provided evidence that invoices were issued within one year, which was not disputed by the Revenue.

- Application of law to facts: The Tribunal held that the Appellant's claim of taking credit within one year was valid.

- Treatment of competing arguments: The Tribunal dismissed the Revenue's argument based on non-disclosure in ST-3 returns.

- Conclusions: The Tribunal ruled that the Appellant validly claimed credit within one year.

SIGNIFICANT HOLDINGS

- The Tribunal emphasized that substantive benefits cannot be denied on technical grounds, such as non-disclosure in ST-3 returns.

- The Tribunal held that clause 2(g) of Notification No. 27/2012-C.E should be interpreted based on the actual balance, not the disclosed balance in ST-3 returns.

- The Tribunal found that credit is taken in account books, and non-disclosure in ST-3 returns does not invalidate a refund claim.

- The Tribunal directed the Adjudicating Authority to sanction the refund claim in accordance with the law.