Export service rebate must be refunded in cash when Cenvat credit cannot be effectively utilised.

Export rebate on consulting engineering services was to be paid in cash rather than by credit entry in the Cenvat account, because debit in the Cenvat account operates as discharge of tax liability and a credit-only refund would defeat the rebate where the credit cannot be effectively utilised against domestic clearances. Relying on supporting High Court decisions, CESTAT Mumbai accepted that the rebate claim was refundable in cash and not merely through credit, resulting in relief to the assessee.

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Issues: Whether the rebate arising from export of services was required to be granted in cash instead of credit in the Cenvat account.

Analysis: The appellant exported consulting engineering services and sought rebate after paying service tax. The Tribunal noted that debit in the Cenvat account is treated as discharge of tax liability and that, where the credit cannot be effectively utilized against domestic clearances, sanction of rebate by credit defeats the refund itself. Relying on the supporting High Court decisions cited in the order, the Tribunal accepted that the rebate claim was payable in cash.

Conclusion: The rebate claim was held to be refundable in cash and not merely by credit entry, in favour of the assessee.

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