By TIOL News Service

MUMBAI, AUG 08, 2018: THE lower authorities have denied the refund claim filed under Rule 5 of the CCR, 2004 on the ground that the input services have no nexus with the output service exported by the appellant.

After considering the submissions made by both sides, the Bench noted that Rule 5 of the CCR, 2004 was substituted by Notification No. 18/2012-CX(NT) dated 17.03.2012, with effect from 01.04.2012 and the effect of such substitution was that a formula was prescribed under the amended rules, which the manufacturer or the service provider should follow for claiming the refund benefit; that the Tax Research Unit (TRU) of CBEC had issued clarification dated 16.03.2012 providing that establishment of nexus between the input service and output service should not be insisted upon and the refund should be processed and considered on the basis of formula prescribed under the said Rule. [Paragraph "F(Cenvat Credit Rules, 2004)", "F.1 (Simplified scheme for refunds)" refers.]

The Bench further observed -

"5. On perusal of the statutory provisions read with the clarification furnished by TRU, it transpires that for consideration of the refund application, it has to be only ensured that the refund claim is in consonance with the prescribed formula. Since there is no specific requirement under the Rule for establishing the nexus between input services and output service exported by the assessee, the nexus between the services cannot be insisted upon by the refund sanctioning authority."

Taking note of the fact that the lower authorities had denied the refund benefit mostly on the ground that there is no nexus between input services and output service provided by the appellant, the Bench held that the matter should go back to the original authority for consideration of the provisions of the amended Rule 5 read with TRU letter dated 16.03.2012 and thereafter, to determine whether the appellant is eligible for the benefit of refund as per the prescribed formula.

The appeal was allowed by way of remand.

(See 2018-TIOL-2443-CESTAT-MUM)