2016 (3) TMI 952 - AT - Service Tax

Tribunal grants appeal, refunds Rs. 59,35,217 for unutilized CENVAT credit. Upholds judicial discipline.

M/s Lavino Kapur Cottons Pvt. Ltd. Versus Commissioner of Central Excise, Thane-II

The Tribunal allowed the appeal, setting aside the lower authorities' orders and directing the refund of Rs. 59,35,217/- for unutilized CENVAT credit on ... Rejection of refund claims for the period 10.09.2004 to 31.03.2005 - Eligible for benefit of Notification No. 05/2006 dated 14.03.2006 - 100% Export Oriented Unit received inputs services on which credit was availed and utilised for manufacturing for goods that were exported - Entitled to avail CENVAT credit on such input services that they are not in a position to utilise the CENVAT credit for discharge of duty liability for the clearance made to home consumption - Held that:- the first appellate authority had sanctioned the refund claims holding categorically in favour of the appellant. It was not left to the adjudicating authority to revisit the issue of rejection of the three refund claims which have been sanctioned by the higher judicial authority. In the absence of any appeal against such an order, the adjudicating authority has not followed settled principle of judicial discipline; and has entered further voyage to reject the refund claim by issuance another show-cause notice, which is beyond his jurisdiction. Both the lower authorities have not followed the judicial discipline while rejecting the refund claim which were already sanctioned by the first appellate authority.Therefore, the impugned order to that extent is unsustainable liable to be set aside. Also, in the three refund claims, the findings that the benefit of Notification dated 14.03.2006 is not applicable for the period prior to Notification dated 14.03.2006 are not sustainable followed by the judgment of Tribunal in the case of Fibres & Fabrics International Pvt. Ltd. Vs. Commissioner of Commissioner (Appeals), Bangalore [2009 (2) TMI 110 - CESTAT Bangalore]. Therefore, refund claims which were rejected by both the lower authorities are to be allowed. - Decided in favour of appellant Issues Involved:1. Refund claims for unutilized CENVAT credit on input services.2. Jurisdictional authority for processing refund claims.3. Interpretation and application of Rule 5 of the CENVAT Credit Rules, 2004.4. Adherence to judicial discipline and previous orders.5. Eligibility of Notification No. 5/2006-CE(NT) dated 14.03.2006 for periods prior to its issuance.Issue-wise Detailed Analysis:1. Refund Claims for Unutilized CENVAT Credit on Input Services:The appellant, engaged in the manufacture and export of absorbent cotton, filed four refund claims totaling Rs. 59,35,217/- for unutilized CENVAT credit on input services under Rule 5 of the CENVAT Credit Rules, 2004. The claims were for the periods from September 2004 to March 2006 and April 2006 to September 2006. The adjudicating authority initially rejected these claims, citing that the appellant had not availed the credit of service tax paid on input services as it was not reflected in the ER-2 returns.2. Jurisdictional Authority for Processing Refund Claims:The Assistant Commissioner of Service Tax, Division VI, Mumbai, initially returned the refund claims, stating that they were beyond the jurisdiction of the Service Tax Commissionerate. The appellant subsequently filed the claims with the Central Excise Division, Boisar II.3. Interpretation and Application of Rule 5 of the CENVAT Credit Rules, 2004:The first appellate authority, in its order dated 20.12.2006, held that the appellants, being a 100% Export Oriented Unit (EOU), were eligible for a refund under Rule 5 of the CENVAT Credit Rules, 2004, as they had exported 100% of their products and had no clearances for home consumption. The rule provides for a refund of credit in respect of input or input services subject to specified conditions. The Notification No. 5/2006-CE(NT) dated 14.03.2006, which includes 100% EOUs, was deemed applicable.4. Adherence to Judicial Discipline and Previous Orders:The adjudicating authority, upon remand, rejected the refund claims again, which was against the directive of the first appellate authority's order dated 20.12.2006. The first appellate authority had categorically sanctioned the refund claims, and no appeal was filed by the Revenue against this order. The adjudicating authority's action was seen as a violation of judicial discipline, as established by the Hon'ble Apex Court in Union of India Vs. Kamlakshi Finance Corporation Ltd. - 1991 (155) ELT 433 (S.C.).5. Eligibility of Notification No. 5/2006-CE(NT) Dated 14.03.2006 for Periods Prior to Its Issuance:The Tribunal, referencing the case of Fibres & Fabrics International Pvt. Ltd. Vs. Commissioner (Appeals), Bangalore - 2009 (14) STR 809 (Tri. - Bang.), held that the benefit of Notification No. 5/2006-CE(NT) dated 14.03.2006 was applicable even for periods prior to its issuance. The rule itself provided for the utilization of input credit and input service credit, and where such credit could not be utilized, it could be refunded. The Tribunal found no merit in the rejection of the refund claims for the period before the notification's issuance.Conclusion:The Tribunal allowed the appeal, setting aside the impugned orders of the lower authorities. It directed the adjudicating authority to refund all four amounts totaling Rs. 59,35,217/-, recognizing the appellant's legitimate claims for the refund of unutilized CENVAT credit on input services. The Tribunal emphasized adherence to judicial discipline and upheld the applicability of Notification No. 5/2006-CE(NT) for periods prior to its issuance, thereby providing consequential relief to the appellant.