CESTAT Allows Cenvat Credit Refund to Mercedes Benz Research and Development India (P) Ltd [Read Order]

The Bangalore bench of the  Customs, Excise & Service Tax Appellate Tribunal (CESTAT) allowed the Cenvat Credit refund to Mercedes Benz  Research and Development India (P) Ltd. The bench found that the services including the ‘Technical Consultancy Service’ and ‘Manpower Recruitment and Supply Agency Services’ are having direct nexus with the output services and sanctioned refund of cenvat credit.

The Revenuechallenged the Order-in-Appeal ruled in favour filed by the assessee, M/s. Mercedes Benz Research and Development India (P) Ltd. The assessee had submitted refund claim for Rs.40,42,329/- and Rs.59,29,798/-. The adjudicating authority had issued show-cause notice directing the assessee as to why refund claims should not be rejected since there is no nexus between the input service and output service.

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After considering the submissions made by the assessee, the adjudicating authority vide Order-in-Original sanctioned refund of Rs.82,13,666/- and rejected refund claim of Rs.17,58,461/-. Aggrieved by the said order, an appeal was filed by the assessee before the Commissioner (Appeals). The order of the adjudicating authority was reviewed by the Commissioner and a show-cause notice dated 11.05.2010 was issued directing the assessee to show-cause as to why the amount of Rs.65,39,144/- sanctioned by adjudicating authority should not be reviewed.

Thereafter, an appeal was filed before the Commissioner (A) and the Commissioner (A) modified the Order-in-Original and directed the lower authority to reexamine the rejected eligible input services on production of Chartered Accountant certificate. Aggrieved by the said order of the learned Commissioner (A) remanding the matter to lower authority, the Revenue had filed an appeal No.ST/322/2011 before this Tribunal on the limited ground that Commissioner (A) has no power to remand the matter to the original authority. 

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The lower authority issued fresh show-cause notice dated 11.05.2010 under Section 84 of the Finance Act, 1994 and also under Section 73 of the Finance Act, 1994. As per the showcause notice issued under Section 73(1) of the Finance Act, 1994 read with Rule 14 of Cenvat Credit Rules (CCR), 2004, the assessee was directed to show-cause as to why refund claim of Rs.65,39,144/- out of Rs.82,13,666/- sanctioned by adjudicating authority should not be demanded and recovered and as to why interest should not be demanded.

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The respondent vide Review Adjudication Order No.32/2011 dated 28.02.2011 held that the claim of refund preferred by the assessee and sanctioned vide Order-in-Original No.249/2009 dated 19.06.2009 is erroneous to the extent of Rs.65,39,144/- being the credit availed on ineligible input services. Accordingly, refund of Rs.82,13,666/- sanctioned vide Order-in-Original No.249/2009 dated 19.06.2009 is restricted to Rs.16,74,522/- by disallowing Rs.65,39,144/- and ordered recovery of the same from the assessee with applicable interest. Aggrieved by the said order, the assessee filed appeal No.ST/1459/2011 before this Tribunal.

The Chartered Accountant (CA) for the assessee submitted that when the refund applications were submitted, the entire issue regarding eligibility of the assessee for refund of the amount was considered and only thereafter, the adjudicating authority vide Order-in-Original No.249/2009-ST dated 19.06.2009 partially allowed the refund claim to the extent of Rs.82,13,666/- and rejected the claim of Rs.17,58,461/-.

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As regards the claim made by the assessee regarding ‘Technical Consultancy Service’, the CA drew out attention to the reply dated 10.03.2010 submitted by the assessee wherein it is specifically stated that assessee used to hire experienced professionals in IT field depending upon the situation and payment to such persons form bulk to appellants professional consultancy costs and they have carried out this service only to fulfil the requirement of output service, therefore, the assessee had rightly claimed the cenvat credit on such services. 

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As regarding ‘Manpower Recruitment and Supply Agency Services’, it is used by the Engineering Service Department for Finite Element Modelling to carry out virtual testing of designs of cars or trucks on the computer using commercially available software packages. The said services is also directedly used for software development as required by the customer of the assessee. The CA further submitted that only after considering the nexus between the input services and output services, the adjudicating authority partially allowed the claim of the assessee vide Order-in-Original No.249/2009-ST dated 19.06.2009.

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A two member bench of P. A. Augustian, Member (Judicial) and  R. Bhagya Devi, Member (Technical) observed  that these services including the ‘Technical Consultancy Service’ and ‘Manpower Recruitment and Supply Agency Services’ are having direct nexus with the output services and sanctioned refund of cenvat credit. Further, the assessee is a 100% Export Oriented Unit (EOU) and the inputs used for such services are having direct nexus with the output service

While allowing the appeal, the bench viewed that  the assessee had made proper claim for cenvat credit and eligible to claim refund of Rs.82,13,666/- as sanctioned by original authority vide Orderin-Original No.249/2009-ST dated 19.06.2009. 

To Read the full text of the Order CLICK HERE

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