2025 (4) TMI 820 - AT - Service Tax

100% EOU - Refund claim - alleged lack of a direct nexus between input and output services - FIRC s do not correlate to the export invoices - no nexus with the output services - HELD THAT - It is an admitted fact that while submitting the refund claims appellant have produced the relevant documents including invoices on which input service credit has been availed certificate from bank certifying list of export services copy of RC Register extract of Cenvat Credit Register for the period April 2010 to June 2010 and copy of export of invoices for the period from January 2010 to March 2010. As regards the refund claim for the period from January 2011 to March 2011 the appellant had submitted the refund application along with extract of cenvat credit register for the period January 2011 to March 2011 input credit Register for the period January 2011 to March 2011 along with summary of input credit list of import of services payment and challan copies list of export billing list of export sales invoice copies along with large number of documents including copy of ST-3 returns ST-3 copy of the declaration etc and also corelation of input service towards output service. The above said documents are sufficient enough to sanction the refund under Rule 5 of Cenvat Credit Rules 2004. Even if the Chartered Accountant (CA) Certificate was not according to the satisfaction of the Adjudication Authority the claim made by the appellant under Rule 5 of Cenvat Credit Rules cannot be rejected on such insubstantial grounds. Conclusion - The definition of input service under Rule 2(l) of the Cenvat Credit Rules 2004 does not require a direct nexus between input and output services especially for 100% EOUs. Appeal allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the appellant is entitled to a refund under Rule 5 of the Cenvat Credit Rules, 2004, despite the alleged lack of a direct nexus between input and output services.
• Whether the absence or defect in the Chartered Accountant (CA) certificate can be a valid ground for rejecting the refund claim.
• Whether the appellant complied with the statutory provisions and guidelines set forth in the relevant circulars for claiming the refund.

ISSUE-WISE DETAILED ANALYSIS

1. Entitlement to Refund under Rule 5 of Cenvat Credit Rules, 2004

- Relevant Legal Framework and Precedents: The appellant filed a refund application under Rule 5 of the Cenvat Credit Rules, 2004, which allows for a refund of unutilized Cenvat credit in cases of export without payment of duty. The definition of 'input service' under Rule 2(l) does not require a direct nexus between input and output services.

- Court's Interpretation and Reasoning: The Tribunal noted that the term 'direct nexus' is not included in the definition of 'input service'. It is sufficient if the services are used for the provision of output services. The Tribunal emphasized that as a 100% Export Oriented Unit (EOU), the appellant's entire input is used exclusively for export, justifying the eligibility for Cenvat credit.

- Key Evidence and Findings: The appellant provided various documents, including invoices, bank certificates, and credit registers, which were deemed adequate for establishing the eligibility for the refund.

- Application of Law to Facts: The Tribunal applied Rule 5 of the Cenvat Credit Rules, 2004, and found that the appellant met the requirements for a refund, as the input services were used in the provision of export services.

- Treatment of Competing Arguments: The Tribunal dismissed the argument that a lack of direct nexus could invalidate the refund claim, citing the broad definition of 'input service' and the appellant's status as a 100% EOU.

- Conclusions: The Tribunal concluded that the appellant is entitled to a refund under Rule 5, as the input services were used for export purposes.

2. Validity of Chartered Accountant (CA) Certificate

- Relevant Legal Framework and Precedents: The requirement for a CA certificate is outlined in Circular No. 120/01/2010-ST, which aims to simplify the refund process. The Tribunal referenced Supreme Court decisions that clarify circulars are not binding on the court.

- Court's Interpretation and Reasoning: The Tribunal held that the absence or defect in the CA certificate is not a mandatory ground for rejection of the refund claim, especially if the appellant has complied with the primary requirements under Rule 5.

- Key Evidence and Findings: The Tribunal noted that the appellant had submitted a CA certificate in line with ICAI guidelines and that previous refunds had been granted based on the same certificate.

- Application of Law to Facts: The Tribunal applied the principle that procedural defects, such as issues with the CA certificate, should not override substantive compliance with the refund rules.

- Treatment of Competing Arguments: The Tribunal rejected the argument that the CA certificate's defect was sufficient to deny the refund, noting the lack of contradictory evidence from the Department.

- Conclusions: The Tribunal concluded that the refund claim could not be denied solely based on the CA certificate's alleged defect.

3. Compliance with Statutory Provisions and Circulars

- Relevant Legal Framework and Precedents: The Tribunal considered the statutory provisions under the Cenvat Credit Rules and the guidelines in Circular No. 120/01/2010-ST.

- Court's Interpretation and Reasoning: The Tribunal found that the appellant had complied with the necessary statutory provisions and guidelines for claiming the refund.

- Key Evidence and Findings: The appellant submitted comprehensive documentation, including invoices, credit registers, and export service certificates, which were sufficient for the refund claim.

- Application of Law to Facts: The Tribunal applied the relevant rules and circulars, determining that the appellant had met all necessary conditions for the refund.

- Treatment of Competing Arguments: The Tribunal dismissed the Department's argument that insufficient evidence was provided, highlighting the extensive documentation submitted by the appellant.

- Conclusions: The Tribunal concluded that the appellant had complied with the statutory provisions and guidelines, warranting the approval of the refund claim.

SIGNIFICANT HOLDINGS

- The Tribunal held that the definition of 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004, does not require a direct nexus between input and output services, especially for 100% EOUs.

- The Tribunal emphasized that procedural defects, such as issues with the CA certificate, should not invalidate a refund claim if substantive compliance with the rules is demonstrated.

- The Tribunal reiterated that circulars are not binding on the court and that the appellant's compliance with Rule 5 was sufficient for the refund claim.

- The Tribunal allowed the appeals, granting the refund with consequential relief, if any, in accordance with the law.