ST - Claim of rebate of Tax under Export of Services Rules, 2005 and refund of CENVAT Credit u/r 5 of CCR are mutually exclusive schemes: CESTAT
By TIOL News Service
MUMBAI, APRIL 12, 2017: THE appellant paid Service Tax on the exported services and claimed rebate thereof. During the same period, the appellant had also claimed refund of CENVAT Credit under Rule 5 of the CCR.
The claim of rebate of Service Tax paid on exported services was disallowed by the lower adjudicating authority on the ground that the appellant had also availed refund of CENVAT Credit paid under Notification No. 5/2006-CE(NT) by observing that both rebate as well as refund of input service credit cannot be availed in respect of same set of input invoices.
As this order was upheld by the Commissioner(A), the appellant is before the CESTAT.
It is inter alia submitted that there is no bar in claiming both the benefits; that Notification No. 11/2005-ST and 12/2005-ST deal with two different situations namely , rebate of Service Tax paid on exported services and rebate of Service Tax on inputs as well as input services used in the exported services. Furthermore, refund claim under Rule 5 of CCR would not change even if the services, which were exported on payment of Service Tax and in respect of which rebate has been claimed, were excluded from the turnover, contended the appellant.
The AR supported the stand taken by the department.
The Bench remarked -
+ Refund under Rule 5 is granted only in respect of invoices in which export has been done without payment of duty and under bond. Therefore, technically the appellants were not entitled to include the said amount of export in their turnover for the purposes of claiming rebate under Rule 5. The appellants have done so and the same according to them has not made any difference to the total refund admissible under Rule 5 of the Cenvat Credit Rules. A perusal of the chart of the calculation given above shows that the refund claimed by them did not change as a result of inclusion of such invoices. Moreover, while there is a bar in including the total export turnover on which Service Tax has been paid under the Notification issued under Rule 5 of the Cenvat Credit Rules, there is no such bar in the Notification No. 12/2005-ST issued under Rule 5 of the Export of Services Rules, 2005.
After extracting rule 5 of CCR, 2004, the CESTAT further observed -
+ It clearly lays down that the refund of CENVAT Credit is admissible provided the claimant does not claim rebate of duty under Central Excise Rules in respect of such duty or rebate of Service Tax under Export of Service Rules, 2005 in respect of such taxes.
+ It is apparent that the claim of rebate of Service Tax under Export of Services Rules, 2005 and refund of CENVAT Credit under Rule 5 of the Cenvat Credit Rules are mutually exclusive schemes.
+ Moreover from the calculation in the sheet above, it can be seen that while the appellant has shown utilized Rs.1,23,690/- in the quarter ending March, 2010 they have failed to include the amount utilized in respect of exports in respect of which rebate has been claimed. It is apparent that the duty paid on this export is payment of Service Tax on output services and to the extent that such credit is utilized, the claim is to be adjusted for that.
+ Thus, it is apparent that the appellants have not excluded the said amount in the calculation shown while claiming that the refund under Rule 5 of the Cenvat Credit Rules does not change if the value of service exported under claim of rebate after payment of Service Tax is excluded.
+ In view of the above, there is merit in the argument of the Revenue that this amounts to double benefit and it is prohibited in terms of Rule 5 of the Cenvat Credit Rules to claim both.
To the submission made by the appellant that the words "such tax" appearing under the first proviso to Rule 5 refers only to input duty, the Bench rejected the same by observing thus -
"…It can be seen that in the entire Rule, the word "tax" has been used only to define Service Tax on output service. The duty paid on input has only been referred as CENVAT Credit."
Holding that there is no merit in the arguments made by the appellants, the appeal was dismissed.
Quick reference:- The first proviso to rule 5 of CCR, 2004 read -
Provided that no refund of credit shall be allowed if the manufacturer or provider of output service avails of drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995, or claims rebate of duty under the Central Excise Rules, 2002, in respect of such duty; or claims rebate of service tax under the Export of Service Rules, 2005 in respect of such tax.
(See 2017-TIOL-1215-CESTAT-MUM)
