2017 (1) TMI 1282 - AT - Service Tax

100% EOU - Refund claim - unutilised CENVAT credit - inward freight - Rule 5 of the CCR, 2004 read with N/N. 5/2006 dated 14.03.2006 - Held that - the clearing charges/inward freight is specifically covered in the amended definition of input service as contained in Rule 2(l) of the Cenvat Credit Rules - reliance placed in the case of CCE, Nagpur Versus Ultratech Cement Ltd. 2010 (10) TMI 13 - BOMBAY HIGH COURT - credit allowed - appeal allowed - decided in favor of assessee.

Summary

Issues:
- Appeal against rejection of refund for cenvat credit on outward transportation expenses.

Analysis:
The case involved an appeal against an order passed by the Commissioner (Appeals) rejecting a refund claim of ?5,385 for cenvat credit taken on outward transportation expenses by an appellant, a 100% Export Oriented Unit (EOU) engaged in the manufacture and export of processed Gherkins. The appellant filed a refund claim for ?5,79,014 representing unutilized cenvat credit for the quarter April to June 2011. The Assistant Commissioner had initially sanctioned the entire refund, but the Department's appeal led to the rejection of a portion of the refund by the Commissioner (Appeals). The appellant contended that the rejected amount was wrongly disallowed, as the expenses in question fell within the definition of 'input service' under the Cenvat Credit Rules 2004. The appellant argued that the Commissioner (Appeals) erred in considering the expenses as outward freight instead of inward freight, which was covered under the definition of 'input service.' The appellant cited various authorities to support their claim, highlighting similar instances where refunds were allowed in similar situations.

During the hearing, the appellant's counsel argued that the impugned order was not sustainable in law and cited relevant judgments to support their position. The appellant emphasized that the expenses in question should be considered as 'input service' based on the definition provided in the Cenvat Credit Rules. The appellant pointed out that in a previous appeal, the Commissioner (Appeals) had sanctioned a refund in a similar scenario, further strengthening their argument. After considering the submissions from both parties and reviewing the cited judgments, the Judicial Member, S.S Garg, concluded that the impugned order was not sustainable in law. Relying on the precedents and legal principles cited, the Judicial Member set aside the impugned order and allowed the appeal of the appellant, granting consequential relief as deemed necessary.

In the final judgment pronounced on 02/01/2017, the Appellate Tribunal CESTAT, Bangalore, through Judicial Member S.S Garg, overturned the decision of the Commissioner (Appeals) and allowed the appeal of the appellant, directing the refund of the disputed amount for cenvat credit on outward transportation expenses. The judgment highlighted the importance of correctly interpreting the definition of 'input service' under the Cenvat Credit Rules and ensuring consistency in refund decisions based on legal principles and precedents.