In a recent case, the New Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) Cenvat Credit on refund to exporter of Cricket Match broadcasting service cannot be denied merely on procedural infraction.
Times Content Limited, the appellant was engaged in the business of live broadcasting of cricket matches on DTH and other digital media exclusively in the territory of USA and Canada, for which the appellant had entered into an agreement with its foreign buyers. In order to provide the aforesaid services, the appellant had to acquire digital media broadcasting rights for cricket matches from different cricket boards/ licensers outside India.
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The appellant executed one deal in the last quarter of F.Y.2015-16, wherein this business was conducted for the entire year. As such sports rights were for live broadcast of matches in the territories outside India i.e., for USA and Canada etc. Thus, the place of provision of service was outside India in terms of Rule 3 of Place of Provision of Service Rules, 2012 read with Rule 6A of Service Tax Rules, 1994. As the appellant was exclusively engaged in export of services outside India, he filed a refund claim of CENVAT Credit for the period in dispute i.e. April 2016 to June 2016 totalling to Rs. 3,99,12,617/- in terms of Rule 5 of Cenvat Credit Rules, 2004 read with Notification no. 27/2012-CE ( NT ) dated 18.06.2012.
The Department issued a show cause notice as to why the claim should not be rejected. The Adjudicating Authority vide order rejected the refund claim amounting to Rs. 3,85,36,320/- under Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No. 27/2012CE ( NT ) dated 18.06.2012. An appeal before Commissioner (Appeals) got rejected their appeal by upholding the order of the lower authority.
Counsel for the appellant submitted that the issuance of an Addendum/ Corrigendum to the Show Cause Notice ( SCN ) after a six-month gap, and only after considering the appellant’s response to the SCN, constitutes an afterthought. As such, it cannot be relied upon as a valid basis for rejecting the refund claim. He contended that concept of Addendum/corrigendum is not statutorily provided under the law. However, references have been made in circulars where it is clarified that the scope of Addendum/corrigendum is very limited. The Addendum/corrigendum is normally issued by the Department when there is a change in adjudicating authority or there is some arithmetical error.
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It was stated that even if the export turnover is calculated to be nil under Rule 5(1)(D) of the CENVAT Credit Rules, 2004, the appellant was still entitled to a refund of Rs. 3,99,12,617/- for the subsequent quarter ( July-September 2016 ). He submitted that this entitlement arises from the provisions of Rule 5 of the CENVAT Credit Rules, 2004 read in conjunction with Notification No. 27/2012CE ( NT ) dated June 18, 2012. He stated that premature filing of the refund claim cannot be the sole reason for rejection by the department.
As long as the claim is substantively valid and compliant with all relevant rules and regulations, the department cannot deny it solely on the ground of early submission. He further stated that the appellant could not file the refund in the subsequent quarter as the SCN proposing rejection of its refund claim was issued in 2019 i.e., after introduction of GST regime and at that point of time, the appellant could not even transfer the eligible credit to the electronic credit ledger through TRAN-1 under GST era. Thus, the refund should not be denied to the appellant.
Authorized Representative for the Department while reiterating the findings of the impugned order, submitted that the Adjudicating Authority had rejected the refund claim as its export proceeds were not received in that quarter in which the refund was claimed, for consideration in calculating export turnover of that particular quarter.
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A two member bench of Binu Tamta, Member ( Judicial ) and Hemambika R. Priya, Member ( Technical ) observed that the it was submitted that the formula prescribed under said rule is not applicable in the present case as the appellant is 100% exporter and the entire turnover pertains to the export of services. He contended that the formula is intended to restrict the refund of tax paid on input services to the extent of export services, effectively excluding the refund of tax paid on domestic services.
The counsel further submitted that since the appellant is a 100% exporter, and that the appellant was eligible to claim a full refund of the tax paid on input services. The Department’s application of the formula is erroneous and has led to denial of rightful refunds to the appellant in quarters where no export receipts are collected.
The bench noted that the original authority has noted that the appellant did not provide supporting documents in relation to the payment received during the relevant period. It was also admitted that the appellant had satisfied all the other conditions of the said notification.
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It is settled law that substantive benefit cannot be denied for procedural infractions. We note that procedure has been prescribed to facilitate verification of substantive requirement. As long as a fundamental requirement is met, other procedural deviation can be condoned.
The Tribunal held that there is no reason for denying the refund on minor procedural infractions and the appellant cannot be denied the refund of what is allowed to them statutorily, merely on the grounds that they have submitted a letter to the Department for not pressing the same. While allowing the appeal, the Tribunal set aside the impugned order.
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