2023 (3) TMI 238 - AT - Service Tax

Refund of CENVAT Credit - management consultancy service - real estate agent service - garden maintenance - club and association service - negative list services or not - HELD THAT:- From perusal of rule 5 of CENVAT Credit Rules, 2004, it is seen that it is not the utilization of input/input service in exports that has prompted this attractive neutralization scheme but the restricted scope for utilization of credit legitimately availed towards discharge of duty or tax liability. Though referred to as refund, it is also not refund in the true sense that the claimant is not ‘person liable to pay tax or duty’ having had to pay such duty or tax despite lack of authority of law; the discharge of tax liability by the provider of service, and in accordance with authority of law, is not in question at all. The intent is to neutralize the taxes included, thereby, in the value of goods manufactured or service so that taxes are not exported too.

The limited remit of the sanctioning authority, subject to procedural prescription separately notified, is spelt out in the rule itself to limit denial, if any, only to such contingencies and disallowance, if at all, is restricted to the ascertainment of proportion in accordance with that borne by exports to total turnover as mathematical attribution.

This has been held by the Tribunal in KKR INDIA ADVISORS PVT. LTD. VERSUS COMMISSIONER OF CGST, MUMBAI CENTRAL AND VICE-VERSA [2018 (6) TMI 797 - CESTAT MUMBAI] where it was held that The first step is to a show cause notice invoking Rule 14 of the Cenvat Credit Rules, 2004 for denial of the cenvat credit. Then only the refund can be rejected which was not done. Obviously the refund claim cannot be rejected by disputing the admissibility of the input services.

It is seen from the impugned order that no such notice was issued to the appellant herein. The preliminary objections to the refund limited itself to a few objections that appear to have been responded to and none of those have proposed that the said amount of credit was to be recovered. In the absence of this critical requirement to comply with principles of natural justice, the denial of credit is without authority of law and impugned order is set aside.

Appeal allowed.