Bangalore CESTAT Decides major issues on refund of CENVAT Credit
IN a path breaking Order in which as many as 56 appeals were decided together, the Bangalore Bench of the CESTAT decided certain major issues concerning refund of CENVAT Credit for exporters. This is an interim order on issues and each of the appeals will be decided separately. The appeals are considered to be part heard.
This is a laudable effort on the part of the Bangalore Bench that appeals involving common issues are to be identified and listed together and decided, in order to reduce pendency.
Perhaps this, being an interim order, cannot be challenged in the High Court.
The issues and the decisions are:
Issue No.1: Whether Refund under Rule 5 of CENVAT Credit Rules would be admissible when there was no notification issued prescribing safeguards, conditions and limitations to be fulfilled?
Decision: wherever the refund has been rejected on the ground of words used in the notification, will have to be remanded to the original adjudicating authority for reconsideration of the eligibility of credit in the light of amendment issued in 2010 with retrospective effect.
Issue no. 2: In the case of refund under Rule 5 the place of removal which has been a subject matter of dispute in several cases.
Decision: place of removal is taken as port/airport/land customs station and all the services utilized up to the stage would become eligible for refund under Rule 5.
Issue No.3: Whether CENVAT credit can be refunded under Rule 5 when there was no notification prior to 14.03.2006.
Decision: YES
Issue No. 4: stand taken by the Revenue that in respect of 100% EOUs, the CENVAT credit cannot be taken at all since the finished goods are exempt.
Decision: After 10.09.2004 CENVAT credit cannot be denied on the ground that unit availing the credit is a 100% EOU. And so refund has to be given.
Issue No. 5: The activity of provision of service is in India and therefore the claim for refund on the ground that service has been exported cannot be accepted.
Decision: Board itself has issued a clarification vide Circular No. 111/5/2009-ST dated 24.02.2009. In this circular in paragraph-3 Board has accepted that for category (iii) services (As per Export of Services Rules), it is possible that export of service may take place even when all the relevant activities take place in India so long as benefits of these services accrue outside India.
Issue No. 6: Nexus between the input services and the output services.
Decision: It is nobody's case that there is no need to establish the relation between the input services and the business of manufacture.
Issue No.7: Foreign Inward Remittance Certificate
Decision: In certain cases, the lower authorities have taken a view that production of foreign inward remittance certificate by the claimant to claim refund is not sufficient. A certificate from the bank certifying that the amount in the invoice has been received specifically with reference to the invoice has to be made available. What is required to be established by an exporter is that in respect of Invoices raised by him, consideration in foreign currency has been received.
Issue No.8: Can clearance to a 100% EOU be considered as export?
Decision: YES; this issue is no longer res integra and is covered by the decision in the case of NBM Industries & Shilpa Copper Wire Industries.
Issue No.9: Proof of payment of service tax
Decision: In some cases, the authorities sanctioning the refund are insisting that the claimant should produce proof of payment of service tax by the service provider. - Not required
Issue No. 10: Defective documents:
Decision: rejection of the claim for refund of Cenvat credit on the ground that it is not admissible when the unit was not registered cannot be upheld.
Issue No. 11: Condonation of omissions in documents as per the provisions of Rule 9 of Cenvat Credit Rules, 2004.
Decision: Rule 9(2) of Cenvat Credit Rules provides that if the document does not contain all the particulars but contains details of duty or service tax payable, description of goods, etc, Cenvat credit may be allowed.
Issue No.12: Rejection of refund claim on the ground that output service is not taxable.
Decision : decisions in cases where credit has been denied or refund has been denied on the ground that export is not made under Bond or Letter of Undertaking cannot be sustained.
Issue No.13: Cenvat credit without registration
Decision: Provisions of Rule 3 of Cenvat Credit Rules, 2004 show that credit can be taken by a manufacturer or a provider of output service and there is no requirement of registration under Rule 3 of the CCR, 2004 at all.
Issue no. 14: Taxability of output and admissibility of Cenvat credit.
Decision: The admissibility of Cenvat credit is not relevant for the purpose of determination whether refund is admissible under Rule 5 of CCR or not.
Issue No. 15: Relevant date for filing refund claim.
Decision: provisions of Section 11B for the purpose of limitation would be applicable.
Issue No.16: Method for calculation of relevant date
Decision: the relevant date should be the date on which the consideration has been received where the claimant is service provider and consideration paid where the claimant is service receiver.
We bring you this order of the Tribunal today. Please see