ST - Refund - Even if CENVAT credit was considered to have been taken wrongly, disallowing same requires quasi-judicial process involving issuance of SCN followed by a speaking order: CESTAT
By TIOL News Service
NEW DELHI, JUNE 07, 2015: THE appellant is registered under the STPI Scheme. In the Software Export Declaration form, they described the nature of services as "Software Development".
Three refund claims filed in terms of Rule 5 of CCR, 2004 r/w Notf. No.5/2006-CE (NT) for the quarters April 2008 to June 2008, October 2008 to December, 2008 and January 2009 to March 2009 amounting to Rs.18,58,858/-, Rs.31,25,495/- and Rs.25,63,429/- were rejected by the lower authorities.
The adjudicating authority came to a finding that-
(i) While maintenance or repair of computer software under Annual Maintenance Contract or otherwise, was taxable under " Management, Maintenance or Repair" service under Section 65 (105) (zzg) of the Finance Act, 2004, "management, maintenance or repair" of software other than computer software were correctly classifiable under Information Technology Software services under Section 65 (105)(zzzze) which became taxable with effect from 16.5.2008 and, therefore, the Cenvat Credit availed before that date was not admissible and hence was not eligible for refund.
(ii) ST-3 return for June 2008 did not show unutilized closing balance of Cenvat Credit and, therefore, no refund was admissible.
(iii) The Cenvat credit amount of Rs.68,27,559/- was wrongly added by them to their Cenvat Credit Account and, therefore, the amount of refund of Rs.56,58,994/- was adjusted towards the said amount and, therefore, not disbursed.
Before the CESTAT the appellant submitted that -
+ They were not pressing for the refund of amount of Cenvat credit taken before 16.5.2008.
+ Merely because there was inadvertent mistake in ST-3 return that cannot be a ground for rejecting their claim when Cenvat credit balance was available in their Account. That a revised ST-3 return reflecting the correct Cenvat credit balance was filed before adjudication order was issued.
+ Amount of refund should not be adjusted against the dues which had not been determined quasi-judicially by issuance of SCN. That no action has been initiated even for recovery of Rs.11,68,565/- which remained as balance after adjusting the refund of Rs.56,58,994/-.
The AR supported the order of the lower authorities.
The Bench after considering the submissions inter alia held -
+ Omission to reflect the balance in ER 1 return is only a procedural error for which credit cannot be denied when there is no dispute about its eligibility. [ Jagdamba Polymers Ltd. 2010-TIOL-522-CESTAT-AHM refers]. Thus, the mistake in ST-3 return was a rectifiable mistake which was indeed rectified by filing revised ST-3 return and the revised return should not have been discarded as non-est.
+ Further, even if the Cenvat credit was considered to have been taken wrongly, disallowing the same requires quasi-judicial process involving issuance of show cause notice followed by a speaking order. In this case, it has obviously not been done.
+ We find that even after adjusting the amount of refund of Rs.56,58,994/- towards the cenvat credit amount of Rs.68,27,559/-summarily held to be inadmissible, no action has been initiated for recovering the remaining amount of Rs.11,68,565/-. Adjustment of refund claim in another pending case is not sustainable - Hindustan Zinc Ltd. 2007-TIOL-265-CESTAT-DEL refers.
++ The adjudicating authority has come to a clear finding that for the quarters October 2008 to December 2008 and January 2009 to March 2009, Rs.56,58,994/- is the amount of refund of unutilised Cenvat credit admissible to the appellant.
++ As regard the refund for the quarter April 2008 to June 2008, in view of the fact that Cenvat credit account had balance and a revised ST-3 return was also submitted the amount of refund is required to be recomputed in the light of the fact that credit taken before 16.5.2008 is to be disallowed and therefore, the question of refund of the same (i.e. of the credit taken prior to 16.5.2008) would not arise.
The Bench, therefore, concluded that the amount of Rs.56,58,994/- should be sanctioned and disbursed to the appellant within 30 days of receipt of the order.Further, as regards the refund claim for the period April 2008 to June 2008 the amount of refund due should be recalculated after disallowing the credit taken upto 16.5.2008 and thereafter the refund amount found admissible should be sanctioned, the Tribunal added.
(See 2015-TIOL-1044-CESTAT-DEL)
