2025 (7) TMI 1643 - AT - Service Tax

Refund of unutilised Cenvat Credit of service tax paid on input services - export of services - Rule 5 of the Cenvat Credit Rules 2004 read with N/N. 27/2012-ST dated 18.06.2012 - availment of such Cenvat credit was not challenged by the department in the first place under Rule 14 of the Credit Rules - refund can be denied to the appellant now under Rule 5 of the Credit Rulesor not - HELD THAT - It is settled principle law that the eligibility of Cenvat credit availed by the assesse cannot be disputed in the refund proceedings under Rule 5 of the Cenvat credit Rules as held by the Hon ble Allahabad High Court in the case of Commissioner service Tax Commissionerate Vs. M/s HCL Comet System Services Ltd. 2017 (12) TMI 1661 - ALLAHABAD HIGH COURT wherein it has been held that the refund of Cenvat credit was correctly allowed as no show cause notice for recovery of wrongly availed credit was issued. Further the Tribunal in the case of Qualcomm India Pvt. Ltd. Vs. Commissioner of Cus. C.Ex. S.T. Hyderabad 2019 (8) TMI 1645 - CESTAT HYDERABAD as held that Rule 5 nowhere specifies that Cenvat credit can be denied on the ground of irregular availment or utilization of the same in the absence of specific provision contained in the statute denial of refund benefit provided under Rule 5 cannot stand for judicial scrutiny. This decision of the Tribunal was challenged by the Department before the Telangana High Court and Telangana High Court vide its order in 2021 (11) TMI 72 - TELANGANA HIGH COURT dismissed the appeal of the Revenue and upheld the order of the Tribunal. The impugned order is not sustainable in law. Therefore the same is set aside by allowing the appeal of the appellant - Appeal allowed.

Summary

ISSUES:

Whether the eligibility of Cenvat credit availed by an assessee can be disputed during refund proceedings under Rule 5 of the Cenvat Credit Rules, 2004.Whether refund of unutilised Cenvat credit can be denied on grounds of irregular availment or utilization without issuance of a show cause notice under Rule 14 of the Cenvat Credit Rules, 2004.Whether input services such as cargo handling, event management, catering, and tour operator services qualify as input services eligible for Cenvat credit refund.Whether non-mentioning of service tax registration number or improper description in invoices can be a valid ground for denial of refund under Rule 5 of the Cenvat Credit Rules, 2004.

RULINGS / HOLDINGS:

The eligibility of Cenvat credit availed by the assessee cannot be disputed in refund proceedings under Rule 5 of the Cenvat Credit Rules, 2004, unless a show cause notice under Rule 14 has been issued; thus, denial of refund on such grounds without Rule 14 notice is impermissible.Refund of Cenvat credit cannot be denied on the basis of alleged irregular availment or utilization in the absence of a specific provision in the statute or a show cause notice under Rule 14; Rule 5 does not empower the department to question credit admissibility during refund claims.The impugned input services (cargo handling, event management, catering, and tour operator services) qualify as input services under the Cenvat Credit Rules, 2004, and refund cannot be denied on this basis.Refund cannot be denied due to non-mentioning of service tax registration number or improper description of services in invoices, as these are not valid grounds under Rule 5 for rejection of refund claims.

RATIONALE:

The Court applied the statutory framework of the Cenvat Credit Rules, 2004, particularly Rule 5 (refund of unutilised credit) and Rule 14 (recovery of wrongly availed credit), emphasizing that these rules address distinct aspects of credit availment, utilization, and refund.Precedents from multiple Tribunals and High Courts were relied upon, including the Allahabad High Court and Telangana High Court decisions, which consistently hold that the department must issue a show cause notice under Rule 14 before disputing credit admissibility, and cannot reject refund claims under Rule 5 on the same grounds.The Court rejected the department's attempt to deny refund based on invoice irregularities and the nature of input services, following established judicial interpretations that such grounds do not justify refund denial under Rule 5.No dissent or doctrinal shift was noted; the judgment reaffirms settled legal principles regarding the separation of credit availment disputes and refund claims under the Cenvat Credit Rules.