Document Fragment View

Matching Fragments

2.3. Learned Counsel for the appellants submits that the entire purpose of grant of refund of Cenvat credit is to ensure that no tax is exported, when output services are exported, out of the Country; If the period of availment of credit and period of export of services are linked as attempted by the lower Authorities with the concept of relevant period, contained in Explanation I below Rule 5 of the Rules, the whole purpose may be frustrated. For example, the input services are availed in quarter 1, invoice received and paid for in quarter 1 and the credit would have to be availed in quarter 1. But, if the export of output services occurs only in quarter 2, then Appeal No. ST/86111 & ST/86112/2015 MUM taking the view, as taken by the lower Authorities, the amount of Cenvat credit cannot be claimed as a refund, in spite of the fact that admittedly the services availed by the exporter of services were input services, the duty/tax was paid and was to be refunded by appropriate means by the Government to the said exporter of services. It is pertinent to note that due to change in Rule 5 of the Rules, the earlier procedure of payment of Service Tax on services, to be exported and claiming rebate, was not available during the relevant period due to change in law/procedure. The refund of Cenvat credit as per the provisions of Rule 5 of the Rules was the only method to reimburse the tax on input services collected by the Central Government. It is pertinent to note that before submitting the claim the amount of Cenvat credit claimed as refund as per the provisions of Rule 5 of the Rules need to be debited to the Cenvat credit account being a pool account. It is also pertinent to note that if out of the pool of Cenvat credit, certain amount is used by an exporter subsequent to exports of relevant period and the carried balance on date of application is less than the entitled refund calculated, only the reduced amount can be claimed as refund considering the aspect submitted above. As the Appellant was exporting entire output services, from both the premises, only refund claim could have been made and there was no possibility of utilizing Cenvat credit for liability to pay Service Tax for services rendered to domestic clients.

2.4. Learned Counsel for the appellants submits that old Rule 5 and new Rule 5 of the Rules are interpreted in the manner, as attempted by the lower Authorities, for several exporters of services, it would result in forfeiture of opening balance of Cenvat credit; such an interpretation is not a permitted as very objective of grant of refund of Cenvat credit to an exporter gets defeated; a substantive benefit should not to be denied just for some procedural aspects. This was emphasized by Circular No.120/01/2010 S.T. dated 19 January, 2010 and Notification No.27/2012 C.E.(N.T.) dated 18 June, 2012, providing for Procedures, Safeguards and Conditions for claiming refund under Rule 5 of the Rules. In the Order-in-Original for Onyx Building denial of Cenvat credit was on technical grounds; there was Appeal No. ST/86111 & ST/86112/2015 MUM no allegation that invoices do not reflect the same or the services were not availed or Service Tax was not paid. No Show Cause Notice was issued before denial of Cenvat credit while the same was decided while deciding the refund. He submits that in terms of Rule 9(2) (proviso) of the Rules the said credit cannot be denied to the Appellant; if at all any verification is required by the authorities the same needs to be allowed after such verification.

5.2. Corresponding provision of Para 5 of Notification 5/2006-CE (NT) dated 14.03.2006 reads as under:
"The refund of unutilized input service credit will be restricted to the extent of the ratio of export turnover to the total turnover for the given period to which the claim relates i.e. Maximum refund Total CENVAT credit taken on input services during the given period x export turnover/ Total turnover.
Illustration: If Total credit taken on input services for a quarter = Rs. 100 Export turnover during the quarter = Rs. 250 Total turnover during the quarter = Rs. 500 Refund of input service credit under Rule 5 of CENVAT Credit Rules, during the quarter = 100*250/500 i.e. Rs. 50.
(c) The value of bought out goods sold, during the given period.

5.3. The amended Rule 5 by virtue of as on 01.04.2012 reads as under:

"Rule 5 Refund of CENVAT Credit - (1) A manufacturer who clears a final product or an intermediate product for export without payment of duty under bond or letter of undertaking, or a service provider who provides an output service which is exported without payment of service tax, shall be allowed refund of CENVAT credit as determined by the following formula subject to procedure, safeguards, Appeal No. ST/86111 & ST/86112/2015 MUM conditions and limitations, as may be specified by the Board by notification in the Official Gazette: