Question of eligibility of CENVAT Credit while claiming Rebate?
HERE is another interesting case:
The appellants are engaged in providing information technology software services (ITSS). The entire service is provided to customers located outside India and it is the claim of the appellants that all the services are exported. On this basis, the appellants filed claim for rebate of the CENVAT credit availed by them on various input services under Notification No.11/2005-ST. A portion of the rebate claim has been rejected on the ground that the appellant cannot not avail CENVAT credit on hotel bills, air travel, employees' insurance, repair of vehicles, hospitality service. Further some of the amounts have also been rejected on the ground that the documents on the basis of which credit has been taken are not in compliance with the provisions of Rule 9 of CENVAT Credit Rules.
The Assessee submitted that Notification No. 11/2005-ST under which rebate claim was made has no condition requiring the verification of correctness of CENVAT credit availed. It was also submitted that in this case, the Assistant Commissioner had exceeded his power in issuing show-cause notice since total amount of CENVAT credit denied was more than Rs.5 lakhs which is the monetary limit imposed as far as the adjudication by the Assistant Commissioner / Deputy Commissioner is concerned. Therefore it was not proper to deny the CENVAT credit to the appellants.
The Tribunal agreed with the submissions of the assessee and observed,
The proper course to adopt was to hold up the rebate claim, issue a show-cause notice proposing to deny the CENVAT credit and that has to be a separate proceedings since the total amount proposed to be denied was in excess of the adjudication powers of the concerned authority. If it was within the power of concerned authority, one could take a view that the Assistant Commissioner did not exceed his powers in compiling the show-cause notice denying the CENVAT credit while considering the rebate claim. Therefore the action by the Assistant Commissioner cannot be sustained.
Nevertheless, the Tribunal also found that it cannot be said that these services have no nexus. It was submitted that the hotel bills related to the training of the employees which is definitely an input service covered in the definition. As regards air travel, there are several decisions taking a stand that service tax credit in respect of air travel of the employees for the business purpose is admissible as credit. As regards employees insurance, High Court of Karnataka in the case of CCE Vs. Stanzen Toyotetsu Ltd. - has held that credit is admissible. Further repair of vehicles also cannot be said to be unrelated to the output service.
Therefore on merit also, Tribunal found that CENVAT credit cannot be said to be inadmissible and therefore the benefit has to be given to the appellants.
The Tribunal further observed,
What is required to be verified while sanctioning rebate claim under Notification No.11/2005 is whether service has been exported or not and whether consideration has been received for the exported service and whether the tax has been paid on the service exported or not. Other than this, no other verification is required. Therefore on this ground also, the impugned order cannot be sustained.
The appeals were allowed with consequential relief.
The appellants have won the case, but will they get refund?