Refund for Unutilized CENVAT Credit Rejected Over Lack of Input-output Nexus: CESTAT  Partially Remands Matter for Further Document Submission [Read Order]

Considering the lack of input-output nexus and procedural lapses, CESTAT partially remanded the matter on unutilized CENVAT credit refunds for further documentation
CESTAT - Over Lack of Input-output Nexus - CENVAT Credit - taxscan

The Hyderabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) partially remanded the matter concerning refund claims for unutilized CENVAT credit which had been rejected on grounds of lack of input-output nexus and procedural lapses, directing the appellant to produce further documentation for reassessment.

AMD Research & Development Center India Pvt Ltd., the appellant, is engaged in exporting software development and IT-enabled services. The appellant filed multiple refund claims for unutilized Cenvat credit under Rule 5 of the Cenvat Credit Rules read with Section 11B of the Central Excise Act, 1944.

The department processed these claims and rejected certain amounts on various grounds including lack of nexus between input and output services, procedural lapses such as invoices from unregistered premises, and errors in refund computation. Aggrieved by these rejections, the appellant filed appeals before the CESTAT.

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The appellant’s counsel argued that the disputed input services, including event management, outdoor catering, and general insurance services, were essential for providing their output services. The counsel relied on the judicial precedents such as in HCL Technologies Ltd. v. CCE, Noida, and Stanzen Toyotetsu India (P) Ltd. v. CCE, to support their claim.

The revenue counsel countered that several refund claims were rejected on technical grounds, such as failure to substantiate reverse charge payments with invoices or incorrect formula application in computing refunds. The counsel argued that certain premises were unregistered at the time invoices were issued, violating procedural requirements.

The two-member bench comprising A.K. Jyotishi (Technical Member) and Angad Prasad (Judicial Member) observed that the department had allowed similar claims for most of the input services in remand proceedings or subsequent appeals and now only four disputed services and procedural rejections under consideration.

The tribunal found that input services except for a few had sufficient nexus with the appellant’s output services and were eligible for refund. It also found the denial of refunds due to incorrect formula application citing precedent in Commissioner of CGST & C.Ex, Mumbai v. Morgan Stanley Investment Management Pvt Ltd which required re-examination.

The tribunal remanded the matter to the original authority for verification of procedural issues and recalculation of eligible refunds. It allowed refunds of Rs 83,95,136, and denied Rs. 2,03,867 due to admitted lapses.

The tribunal directed a reassessment of Rs. 39,20,942 based on rules and additional documentation. The appellant’s claims were partially upheld.

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