The Allahabad bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) in a ruling in favour of Samsung India, has held that Cenvat Credit Cannot be denied during refund proceedings under rule 5 without initiating proceedings under rule 14 Cenvat Credit Rules ( CCR ), 2004.
The Appellant, M/s Samsung India Electronics Pvt. Ltd is engaged in providing taxable services classifiable as “Management or Business Consultant Services, Consulting Engineer Services, market Research Agency Services, Commercial Training & Coaching Services, Maintenance and Repair Services, Business Support Services, IPR Services other than Copy Right Services, Work Contract Services and Information Technology Software Services”.
The appellant availed credit of the service tax paid on various services received which were used during the relevant period for exporting Information Technology Services, Business Auxiliary Services and Business Support Services. They filed a refund claim of Rs.3,82,74,143/- on 19.02.2013 with the Assistant Commissioner of Central Excise, Division-II, Noida in respect of accumulated Cenvat credit of Service Tax paid on such input services in terms of Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No.27/ 2012-CE(NT) dated 18.06.2012
A Show Cause Notice was issued proposing to disallow refund of Cenvat Credit availed on various input services by the Appellant under Rule 3 read with Rule 2(l) of the Rules. The SCN proposed to reject the refund claim. The Commissioner ( Appeals ) dismissed the appeal vide the Impugned Order.
Shri Atul Gupta and Shri Prakhar Shukla appeared for the Appellant and Shri Manish Raj, appeared for the Revenue.
The Department has not issued any Show Cause Notice under Rule 14 of the Cenvat Credit Rules, 2004 for denial of Cenvat Credit taken wrongly. It is disputing the availment of credit at the stage when the Appellant has filed a refund application under Rule 5 of the Credit Rules. Since the credit has not been denied under Rule 14, therefore the same is available in the books of the Appellant. Thus, the refund of the same is to be allowed under Rule 5 of the CCR, 2004.
It was observed that the appellants have contested the rejection of the refund of the CENVAT credit of Rs.54,20,341/- The adjudicating authority has rejected the said part of the refund on the grounds of limitation as being not claimed within one year from the payment thereof. While rejecting the refund of CENVAT credit of service tax the adjudicating authority observed that the invoices on which the credit was availed and sought as refund pertain to the period before the quarter for which the instant refund pertains and thus these services were not utilized during the quarter of which the appellants claimed refund.
The appellants contested that in terms of Rule 4(7) of the Rules ( CCR 2004 ), a manufacturer or a service provider can avail the credit of input services after payment of the value of taxable service along with the service tax; the appellants hence took the credit as per the Rules during the relevant period, i.e. April 2012 to June 2012; and therefore, the refund could be claimed only during the relevant quarter.
It was observed that impugned orders have gone beyond the scope of Rule 5 of CENVAT Credit Rules, 2004, which provides for the refund of the accumulated credit in respect of the export of goods and services. This rule does not provide for the denial of any credit while examining the refund claim filed under this Rule.
If any credit was to be denied it could have been done in an appropriate proceedings that were to be initiated under Rule 14 of the CENVAT Credit Rules, 2004. It was found that the Tribunal/ Courts have constantly held that denial of refund claim made in terms of Rule 5 without initiating any proceedings under Rule 14 is not tenable.
It was found that Notification No.27/2012-CE (NT) dated 18.06.2012 reproduced earlier at (h) provides that the appellant should have at the time of filing the refund claim, reversed the credit equivalent to the amount claimed as refund.
The Revenue authorities could not have denied the credit in the proceedings of refund under Rule 5. The in line with the view expressed by the Mumbai bench in the case of Responsibility India Business Advisors Pvt. Ltd.
A two-member bench comprising Mr P K Choudhary, Member ( Judicial ) and Mr Sanjiv Srivastava, Member ( Technical ) held that any amount which is not allowed as a refund under Rue 5, is to be credited back to the CENVAT account of the appellant.
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