By TIOL News Service

MUMBAI, JULY 13, 2017: THE appellants are engaged in providing Ship management services to the foreign going vessels. The refund claim made by the appellant under Rule 5 of CCR was rejected by the lower authorities and aggrieved by the same the appellants are before the Tribunal.

It is submitted that CENVATCredit has been denied relying on the decision in the case of Maruti Suzuki Ltd. - 2009-TIOL-94-SC-CX and Manikgarh Cement - 2010-TIOL-720-HC-MUM-ST. However, since training is an integral part of their business activity, therefore, credit of the services received in respect of training of the crews cannot be denied, the appellant emphasized. Inasmuch as the refund claim should be allowed, the appellant pleaded.

The AR justified the impugned orders.

The Bench observed that instead of testing the eligibility of Cenvat already availed by the appellant for refund under Rule 5 of the CCR, the lower authorities have gone into the question of eligibility to the CENVATCredit itself.

The CESTAT added -

++ Eligibility to Cenvat Credit cannot be challenged without issue of show-cause notice under Cenvat Credit Rules. For the purpose of recovery of Cenvat Credit wrongly taken or erroneously refunded,Rule 14 has been provided in CCR.

++ In the instant case no show-cause notice has been issued under Cenvat Credit Rules and in these circumstances, it is not permissible to deny Cenvat Credit already availed. In the instant case, the appellant had claimed refund claim and the same needs to be examined in terms of Rule 5 of Cenvat Credit Rules read with notification issued there under. It is seen that the lower authorities have not dealt with this issue. Lower authorities have gone into the admissibility of the Cenvat Credit already availed . In these circumstances, it is not possible to uphold the impugned order. If the lower authorities wanted to challenge the admissibility of credit, the same cannot be done while examining the refund claim of the appellant, without following the due process prescribed.

++ The only test of admissibility of refund can be Rule 5 (of CCR, 2004) and notification (5/2006-CE(NT)) issued there under. I find that the impugned order instead of dealing with this rule and notification issued thereunder, deals with the admissibility of credit itself.

++ It is seen that for examining the admissibility of credit a separate procedure has been provided under Rule 14 of the Cenvat Credit Rules. It is not open to Revenue to examine the admissibility of Cenvat Credit while adjudicating the admissibility of refund under Rule 5 read with Notification issued there under.

The impugned orders were set aside and the matter was remanded to the original adjudicating authority to decide the issue solely on the basis of Rule 5 of CCR r/w notification issued thereunder.

(See 2017-TIOL-2406-CESTAT-MUM)