By TIOL News Service

BANGALORE, SEPT 24, 2014: 56 Appeals were heard together and the CESTAT passed an interim order on 16 Common/Legal Issues pertaining to refund of CENVAT Credit. Based on these orders, individual cases will be considered as part heard and decisions given.

The Major issues and the Tribunal's decisions on them are:

Issue No.1 : Whether Refund under Rule 5 of CENVAT Credit Rules would be admissible when there was no notification issued prescribing safeguards, conditions and limitations to be fulfilled?

Decision: Wherever refund claims have been rejected on the ground that the notification provides the benefit of refund when the inputs have been used in providing the output services will have to be set aside and will have to be re-examined in the light of amendment carried out with retrospective effect by the Government in Finance Act 2010. Therefore wherever the refund has been rejected on the ground of words used in the notification, will have to be remanded to the original adjudicating authority for reconsideration of the eligibility of credit in the light of amendment issued in 2010 with retrospective effect.

Issue no. 2: In the case of refund under Rule 5 the place of removal which has been a subject matter of dispute in several cases.

Decision: There are several decisions which have been taken subsequent to 2006 wherein the Tribunal has taken a view that wherever exports have taken place on FOB basis, the place of removal has to be considered as port/airport/land customs station. Therefore once place of removal is taken as port/airport/land customs station all the services utilized up to the stage would become eligible for refund under Rule 5.

Issue No.3 : Whether CENVAT credit can be refunded under Rule 5 when there was no notification prior to 14.03.2006.

Decision: wherever refunds have been rejected on the ground that prior to issue of notification on 14.03.2006 refund is not admissible cannot be sustained and they also need reconsideration in the hands of original adjudicating authority.

Issue No. 4: stand taken by the Revenue that in respect of 100% EOUs , the CENVAT credit cannot be taken at all since the finished goods are exempt.

Decision: after 10.09.2004, CENVAT Credit Rules have been amended to provide for availment of CENVAT credit by 100% EOUs also and thereafter no refund claims can be rejected on this ground. After 10.09.2004 CENVAT credit cannot be denied on the ground that unit availing the credit is a 100% EOU . Further note of the fact that Circular No. 54/2004- Cus . dated 13.10.2004 also clarifies that credit can be taken by 100% EOUs .

Issue No. 5: The activity of provision of service is in India and therefore the claim for refund on the ground that service has been exported cannot be accepted.

Decision: Board itself has issued a clarification vide Circular No. 111/5/2009-ST dated 24.02.2009. In this circular in paragraph-3 Board has accepted that for category (iii) services (As per Export of Services Rules), it is possible that export of service may take place even when all the relevant activities take place in India so long as benefits of these services accrue outside India. This is because service tax is a destination based tax. It is felt that many claims have been disallowed because benefit of this Circular was not available and we are quite sure that when the issue is reconsidered, wherever this circular is applicable, the same would be applied and therefore wherever refund claims involve this service and claim has been disallowed on this ground, they have to be remanded with a direction to follow the remand instructions and apply the instructions to the facts of the case.

Issue No. 6: Nexus between the input services and the output services.

Decision: any service used by the provider of a taxable service for providing an output service including services used in relation to the setting up, modernisation , renovation or repairs of the premises of the provider of output service or for an office relating to such premises, procurement of inputs, activity relating to business such as inter alia inward transportation of inputs or capital goods and output transportation to the place of removal, would constitute input service. “Input service” is defined as applicable to either a manufacturer or any other provider of output service. It is nobody's case that there is no need to establish the relation between the input services and the business of manufacture.

Issue No.7 : Foreign Inward Remittance Certificate

Decision: In certain cases, the lower authorities have taken a view that production of foreign inward remittance certificate by the claimant to claim refund is not sufficient. A certificate from the bank certifying that the amount in the invoice has been received specifically with reference to the invoice has to be made available. What is required to be established by an exporter is that in respect of Invoices raised by him, consideration in foreign currency has been received. This is what is required to be established. It is definitely possible for the proper officer considering the refund claim to verify the documents produced and come to the conclusion whether foreign remittances in respect of exports made have been received or not. If there is difficulty, they can definitely seek clarification. If it is found that claimant is misleading the department, Investigations can be taken up. If there is misdeclaration or mala fide, proceedings can be initiated.

Issue No.8 : Can clearance to a 100% EOU be considered as export?

Decision: YES; this issue is no longer res integra and is covered by the decision in the case of NBM Industries & Shilpa Copper Wire Industries . Therefore, we consider that wherever this issue is involved, the authorities sanctioning the refund would follow these decisions.

Issue No.9 : Proof of payment of service tax

Decision: In some cases, the authorities sanctioning the refund are insisting that the claimant should produce proof of payment of service tax by the service provider. It was also mentioned during the course of hearing that in one of the cases, the Revenue was insisting that the invoices should have been issued in terms of Rule 4A of Service Tax Rules by the foreign service provider. We consider that these are not requirements which are required to be fulfilled in the notification and we are sure, the wiser counsel would prevail.

In some cases, the authorities have insisted that the invoice for the input service and output service should be on the same bunch. This is also not a requirement as per the Notification and therefore this also cannot be insisted upon.

Issue No. 10: Defective documents:

Decision: One of the objections raised while considering the refund claims is that the concerned input service receiver or the manufacturer had not been registered during the period when credit was taken. This issue is no longer res- integra since in the case of mPortal India Wirless Solutions P. Ltd . vs. C.S. T ., Bangalore, High Court of Karnataka has taken a view that registration with department is not a pre-requisite for claiming the Cenvat credit. At this juncture, it would be appropriate to refer to Rule 3 of Cenvat Credit Rules, 2004 which also provides that a manufacturer or producer of final products or a provider of service shall be allowed to take credit and nowhere the word ‘registered' is found. If the intention was not to allow the Cenvat credit when the unit or the service provider was not registered, Rule 3(1) of the Cenvat Credit Rules would have read as a ‘registered manufacturer' or registered service provider. Therefore, the rejection of the claim for refund of Cenvat credit is not admissible when the unit was not registered cannot be upheld.

Issue No. 11: Condonation of omissions in documents as per the provisions of Rule 9 of Cenvat Credit Rules, 2004.

Decision: Rule 9(2) of Cenvat Credit Rules provides that if the document does not contain all the particulars but contains details of duty or service tax payable, description of goods, taxable service, assessable value, Central Excise or Service tax registration number of person issuing the invoice, as the case may be, name and address of the factory or warehouse or premises of first or second stage dealers or provider of taxable service, and the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise is satisfied that the goods or services covered by the document have been received and accounted for in the books of the account of the receiver, he may allow the Cenvat credit. We find that the assessees are also making mistake of not filing application seeking consideration of their claim by applying provisions of Rule 9(2) of the Cenvat Credit Rules 2004 and the departmental authorities also have refused to consider during the course of appeal. Wherever documents are defective but these requirements are the ones which are not mandatory as per the provisions of Rule 9 of CCR , 2004 or defects are held to be curable by precedent decisions cited before the original adjudicating authority, in our opinion, such claims have to be considered by applying provisions of Rule 9(2) instead of rejecting the claims outright. We also advise the assessees wherever such requests have not been made, they may make such requests and the authority can consider such requests and thereafter, process the refund claim.

As regards defects which are not covered by Rule 9(2), in the absence of any specific decision or a general ruling taking a view that all defects are curable, at this stage, it has to be considered on case to case basis and a view has to be taken. Therefore, we do not propose to render a decision on this issue treating it as a common issue.

Issue No.12 : Rejection of refund claim on the ground that output service is not taxable.

Decision: High Court of Bombay in the case of Repro India Ltd. vs. Union of India has taken a view that even if finished goods are exempted, the refund of Cenvat credit would be admissible. In that case, the issue under consideration was where the goods are not exported under Bond or Letter of Undertaking which is a requirement under Rule 19 of the Central Excise Rules 2002, credit can be allowed or not. High Court took a view that even if export is not made under Bond or Letter of Undertaking, refund is admissible. Subsequently, amendment was carried out but during the period prior to such amendment, the decision would be applicable in any of the cases if export has taken place prior to amendment. Therefore, decisions in cases where credit has been denied or refund has been denied on the ground that export is not made under Bond or Letter of Undertaking cannot be sustained.

Issue No.13 : Cenvat credit without registration

Decision: Provisions of Rule 3 of Cenvat Credit Rules, 2004 show that credit can be taken by a manufacturer or a provider of output service and there is no requirement of registration under Rule 3 of the CCR , 2004 at all.

Issue no. 14: Taxability of output and admissibility of Cenvat credit.

Decision: when we consider Rule 5 of Cenvat Credit Rules, without consideration of any case law or any decision, it appears that there may not be any such restriction that output service or goods should be taxable. The admissibility of Cenvat credit is not relevant for the purpose of determination whether refund is admissible under Rule 5 of CCR or not.

Issue No. 15: Relevant date for filing refund claim.

Decision: for the purpose of refund, in view of the specific provisions of Section 83 and notification under Rule 5, it is necessary to substitute service in place of goods. Therefore, provisions of Section 11B for the purpose of limitation would be applicable.

Issue No.16 : Method for calculation of relevant date

Decision: for the purpose of calculating limitation in respect of claim for refund of tax paid on input service, the relevant date should be the date on which the consideration has been received where the claimant is service provider and consideration paid where the claimant is service receiver.

(See 2014-TIOL-1836-CESTAT-BANG)