The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal has recently held that no direct correlation is required between the input and output services to avail refund of Cenvat Credit of Service Tax.
It was to be decided whether the authorities below have rightly rejected the refund claims in respect of Business Travel Service, Membership of club or Association, Event Management Service and Business Support Services as ineligible input services in terms of Rule 2(l) of the Cenvat Credit Rules, 2004 being no nexus with the output services.
The Adjudicating Authority rejected the refund claims on Business Auxiliary Service, Business
Travel Services, General Insurance Services, Event Management Service, Business Support Service and Membership of clubs and associations.
On the appeals filed by the Appellant before the 1st Appellate Authority, the learned Commissioner (Appeals) vide common impugned order dated 25.6.2019 partly modified the Adjudicating Orders and confirmed the rejection of refund claims on Business Travel Service, Membership of club or Association, Event Management Service and Business Support Services.
On behalf of the appellant, Tirumalai Sampath submitted that the refund was refused without issuing any show cause notice. It was also submitted that, after the amendment in Rule 5, there is no requirement of establishing a nexus between input and output services for claiming refund.
It was observed that, the Tribunal while allowing the appeal of the assessee in BNP Paribas India Solution Pvt. Ltd. vs. Commr. CGST, Mumbai East (2022), allowed the refund claim u/s. 5 ibid by holding that since the provisions of Rule 14 ibid have not been invoked, the refund of
Cenvat credit as claimed by the Appellant under Rule 5 ibid cannot be denied.
It was further pointed out by the Tribunal Bench of Judicial Member Ajay Sharma that, “It is settled legal position that denial of Cenvat credit can be done only by issuing notice under Rule 14 ibid and the department cannot reject refund of Cenvat credit solely under Rule 5.”
In the view that, since the availability of credit has not been questioned by the department herein by issuing show cause notice in terms of Rule 14 ibid, the refund benefit cannot be denied on the ground of non-establishment of nexus between input and the output services, it was ruled in favour of the assessee.
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