Refund of accumulated CENVAT credit cannot be denied solely because the output service is not taxable; limitation needs fresh scrutiny.

Refund of accumulated CENVAT credit under Notification No. 5/2006 read with Rule 5 of the Cenvat Credit Rules, 2004 cannot be denied merely because the output service is not taxable, where the input service credit remains unutilised. For service-related refund claims involving services received from abroad, limitation may have to be computed with reference to the relevant date of payment of consideration. The non-taxability objection was rejected, and the limitation issue required fresh consideration by the adjudicating authority.

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Issues: (i) Whether refund of unutilised CENVAT credit could be denied on the ground that the output service was not taxable. (ii) Whether the refund claim for the disputed period was barred by limitation and required reconsideration.

Issue (i): Whether refund of unutilised CENVAT credit could be denied on the ground that the output service was not taxable.

Analysis: The refund claim was made under Notification No. 5/2006 read with Rule 5 of the Cenvat Credit Rules, 2004. The prior decision of the jurisdictional High Court had already held that refund of CENVAT credit cannot be rejected merely because the output service was not taxable, where the input service credit could not be utilised.

Conclusion: The issue was decided in favour of the assessee and the refund could not be denied on this ground.

Issue (ii): Whether the refund claim for the disputed period was barred by limitation and required reconsideration.

Analysis: For the portion of the refund rejected as time-barred, the Tribunal accepted that in cases involving services received from abroad, the date of payment of consideration was relevant for computing limitation. The matter therefore required reconsideration by the original adjudicating authority in the light of that principle.

Conclusion: The limitation issue was remitted for fresh consideration in favour of the assessee.

Final Conclusion: The rejection of refund on the ground of non-taxability was unsustainable, and the limitation aspect was sent back for reconsideration, resulting in partial relief to the assessee.

Ratio Decidendi: Refund of accumulated CENVAT credit under the refund scheme cannot be denied merely because the output service is not taxable, and limitation for service-related refund claims may have to be computed with reference to the relevant date applicable to the transaction.

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