1. The present appeal is directed against the impugned order dated 05.09.2019 passed by the Commissioner (Appeals) whereby the Commissioner (A) has rejected the appeal of the appellant only on the ground that the appellants have violated the Condition 2(h) of the Notification No. 27/2012-CE dated 18.06.2012.
2. Briefly the facts of the present case are that the appellant is a private limited company and are engaged in rendering various services in relation to information technology and is exporting the said services overseas and receiving consideration in convertible foreign exchange. During the disputed period, the appellant exported various taxable services for the purpose of providing and exporting taxable output service, the appellant inter alia received various input services from several service providers on which input services tax was paid. As the appellants were unable to utilize the CENVAT credit, they filed the refund claim of unutilized CENVAT credit of Rs. 19,18,600/- in terms of Rule 5 of the CCR, 2004 on 30.12.2016. Thereafter, the Department issued a SCN dated 31.03.2017 wherein it was alleged in Para 4(iii) that proof of debit of the amount claimed as refund was not submitted, invoices to the extent of Rs. 1,12,401/- were not submitted, that Service Tax registration numbers of vendors was not mentioned on invoices and also alleged other minor discrepancies as detailed in Para 4(v) of the SCN and the amount on this aspect was to the tune of Rs. 7,89,434/-. Accordingly, the SCN proposed to reject the refund application. After following the due process, the Deputy Commissioner of Service Tax vide OIO dated 30.06.2017 rejected the entire refund claim on the ground that the appellant was not eligible to credit of Rs. 2,07,499/- and that proof of debit of the amount was not submitted. Aggrieved by the said order, the appellant filed appeal before the Commissioner who rejected the appeal of the appellant.
3. Heard both the parties and perused the records.
4. Learned Counsel for the appellants submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law. He further submitted that both the authorities have erred in law in rejecting the refund claim in toto on two grounds that the appellant was not eligible to credits and non-submission of proof of debit of refund amount was a substantive requirement of law and subsequent debits could not be taken cognizance of as compliance with the requirement of law. He further submitted that the denial of refund of Rs. 2,07,499/- was on the grounds which were not germane to the SCN. He also submitted that both the authorities have not appreciated the fact that at the time of refund, eligibility to CENVAT credit cannot be questioned. He further submitted that Rule 5 of CCR clearly provides that the appellant can claim refund of unutilized CENVAT credit and at the time of refund, eligibility of the credit cannot be questioned. In support of this, he relied upon the decision in the case of K Line Ship Management (India) Pvt. Ltd. Vs CST, Mumbai, 2017-TIOL-2406-CESTAT-MUM. He further submitted that the Department had not questioned in the input services and its utilization for rendering the output service. Further, he submitted that as far as not debiting the CENVAT account before filing the refund claim, the Commissioner (A) in the impugned order has admitted that the appellant has not debited the CENVAT account before applying the refund but they have debited the same subsequently which is the violation of Condition 2(h) of the Notification. He further submitted that it is an admitted fact that they have filed the revised Return in which they have debited the CENVAT account to the extent of refund claim and the same has been accepted by the Commissioner (A). He further submitted that this is only a procedural violation and the substantive benefit cannot be denied on procedural and technical violations. In support of his submission, he relied upon the following decisions:
• Kony Labs IT Services Pvt. Ltd. Vs CCE, Hyderabad-IV : 2017 (3) GSTL 475 (Tri. Hyd.)
• Ingersoll Rand Technologies and Services Pvt. Ltd. Vs CCE, Bangalore-(Final Order No. 21023-21025/2019)
5. On the other hand, learned AR defended the impugned order.
6. After considering the submissions of both the parties and perusal of the material on record and the decision relied upon by the appellant cited supra, I find that rejection of refund of Rs. 2,07,499/- on the ground of ineligibility is not sustainable in law in view of the settled law that at the time of refund, eligibility cannot be questioned. In view of the decision in the case of K Line Ship Management (supra), I hold that it is not open to the Department to examine the eligibility of CENVAT credit while adjudicating the refund claim application, since in such matters of admissibility, the Department has mandated to take recourse under Rule 14 of the CCR. Further, the rejection of entire refund claims only on the ground of violation of Condition 2H of Notification No. 27/2012 is also not sustainable in law. Since, the appellants have debited the CENVAT account but only after filing the refund claim. Debiting the CENVAT account subsequent to the filing of the refund claim is only a procedural violation which cannot defeat the substantive right of the appellant to claim refund under Rule 5 of CCR, 2004. Further, In view of the decision of Kony Labs IT Services Pvt. Ltd.(supra) wherein it has been held that debiting the CENVAT account subsequently after filing the refund will not defeat the substantive right of the assessee. In view of my discussion above, I am of the considered view that the impugned order i
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s not sustainable in law and therefore the same is set aside by allowing the appeal of the appellant. The appellant is entitled to interest in terms of Section 11BB of the Central Excise Act, 1944 in view of the decision of the Hon'ble Apex Court in the case of Ranbaxy Laboratories Ltd. Vs UOI : 2011 (273) ELT 3 (SC) and UOI Vs Hamdard (Waqf) Laboratories : 2016 (333) STR 193 (SC). 7. In view of the above, the appeal is allowed and the authorities below is directed to sanction the refund with interest on delayed refund as per Section 11BB of the Central Excise Act, 1944. The appeal is accordingly allowed in above terms.