Manufacturer wins appeal for refund claim on service tax credit due to payment evidence

The appellant, a manufacturer, filed a refund claim for mistakenly reversing CENVAT Credit on service tax for outward transportation services. The claim was rejected due to lack of documentation. The appellant argued successfully that they were eligible for the credit until March 31, 2008, supported by original challans. The rejection was overturned as the appellant had indeed paid the service tax and was entitled to the credit. The appeal was allowed, and the order rejecting the refund claim was set aside.

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Issues:
Refund claim rejection based on lack of documentation.

Analysis:
The appellant, a manufacturer of instruments & equipments, filed a refund claim of &8377; 89,965/- due to mistakenly reversing CENVAT Credit of service tax paid on outward transportation services from January 2005 to March 2008. The adjudicating authority rejected the refund claim for the appellant's failure to produce sales invoices or purchase orders. The first appellate authority upheld this decision citing lack of documentation as the reason for rejection.

The appellant argued that during the relevant period, service tax liability on outward transportation charges was under reverse charge mechanism, and they had paid the service tax and availed CENVAT Credit. Referring to legal precedents, the appellant asserted that CENVAT Credit could be availed on service tax paid for outward transportation services until March 31, 2008, as per judgments from the Hon'ble Apex Court.

The Departmental Representative contended that the appellant did not provide the necessary documents to prove that the claimed refund was related to transportation of finished goods, despite being requested to do so. However, upon careful consideration, it was found that the appellant was indeed eligible to avail CENVAT Credit on service tax paid for outward transportation of finished goods until March 31, 2008. The show-cause notice acknowledged that the refund amount was in connection with service tax paid on outward transportation charges. The appellant had also submitted original GAR-7 challans to verify the payment of service tax to the Government. Therefore, the lower authorities' finding that the appellant did not produce sales invoices and purchase orders was deemed invalid, as the show-cause notice itself proceeded on the basis that the appellant had availed ineligible CENVAT Credit.

Consequently, the impugned order rejecting the refund claim was deemed unsustainable and set aside. The appeal was allowed with any consequential relief deemed appropriate.

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