2011 (9) TMI 401 - AT - Service Tax

Refund claims for exported goods allowed under Notification 41/2007-ST. Input credit available for exports. Remanded for fresh decision.

The Tribunal allowed the appeals by setting aside the rejection of refund claims under Notification 41/2007-ST. It held that input credit is available for ... Refund claims under Rule 5 of the Cenvat Credit Rules, 2004 in respect of service tax paid on the input services used in or in relation to the manufacture of final product. The adjudicating authority considered the claims as per the provisions of Notification 41/2007-ST dated 6.10.2007 and rejected - Held that:- input credit is available in respect of the inputs used in the manufacture of final product being exported irrespective of the fact that the final product is otherwise exempted, matter remanded to the adjudicating authority Issues Involved:Refund claims rejection under Notification 41/2007-ST for exported goods.Analysis:The appellants, engaged in manufacturing stainless steel, aluminum utensils, and cutlery, filed refund claims under Rule 5 of the Cenvat Credit Rules, 2004, for service tax paid on input services used in manufacturing the final product. The adjudicating authority rejected the claims based on Notification 41/2007-ST, which provides a refund of service tax paid on specified services used for exporting goods. The appellants contended that despite the final product being exempted from excise duty, they are entitled to a refund under Rule 5. They cited decisions from the Bombay and Himachal Pradesh High Courts supporting their claim. The Revenue argued that since the appellants did not substantiate their claims, they were rightfully denied, and the claims were correctly considered under Notification 41/2007-ST due to the goods being duty-exempt.The Tribunal noted Rule 5 allows for a refund of CENVAT credit when inputs are used in manufacturing goods cleared for export, regardless of duty exemption on the final product. Rule 6 mandates maintaining separate records for common inputs used in manufacturing exempted and duty-paid goods. However, this requirement does not apply when goods are cleared for export under bond. Citing the Bombay and Himachal Pradesh High Court decisions, the Tribunal held that input credit is available for goods exported, even if otherwise exempted. Consequently, the rejection of refund claims under Notification 41/2007-ST was deemed unsustainable. The Tribunal set aside the impugned orders and remanded the matter to the adjudicating authority for a fresh decision, considering the High Court decisions and granting the appellants a hearing opportunity. The appeals were allowed by way of remand.