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ST - If availment of ST credit has not been challenged, refund u/r 5 of CCR, 2004 cannot be rejected: CESTAT

By TIOL News Service

MUMBAI, MAR 15, 2017: APPELLANTS had filed periodic claims of refund of CENVAT Credit availed on exported services. Part of the refund was rejected.

Aggrieved by the said order of the lower authorities, the appellants are before Tribunal.

It is argued that the refund was rejected on the ground that there is no nexus between the services exported and the certain input services. Reliance is placed on the Board Circular 120/01/2010-Service Tax to submit that once availment of credit is not challenged, refund of credit in terms of rule 5 of CCR, 2004 cannot be denied.

The Bench extracted paragraph 3.1.1 of the referred Circular dated 19.01.2010 which reads -

"3.1.1 The primary objection indicated by the field formations is that the language of Notification No. 5/2006-CX (NT) permits refund only for such services that are used in providing output services. In other words, the view being taken is that to be eligible for refund, input services should be directly used in the output service exported. As regards the extent of nexus between the inputs/input services and the export goods/services, it must be borne in mind that the purpose is to refund the credit that has already been taken. There cannot be different yardsticks for establishing the nexus for taking of credit and for refund of credit. Even if different phrases are used under different rules of CENVAT Credit Rules, they have to be construed in a harmonious manner. To elaborate, the definition of input services for manufacturer of goods, as given in Rule 2 (l) (ii) of CENVAT Credit Rules, 2004, includes within its ambit all services used " in or in relation to the manufacture of final products " and includes services used " directly or indirectly ". Similarly Rule 2 (l) (i) of CENVAT Credit Rules also gives wide scope to the input services for provider of output services by including in its ambit services " used....for providing an output service ". Similar is the case for inputs."

And observed - "…, it is clear that if availment of credit of the Service Tax has not been challenged, the nexus between input services and the export services cannot be challenged ."

Setting aside the impugned order, the appeals were allowed with consequential relief.

(See 2017-TIOL-822-CESTAT-MUM)


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