Tribunal overturns rejection of CENVAT credit refund claim, directs refund with interest

The Tribunal allowed both appeals, overturning the Commissioner (Appeals)'s decision to reject the refund claim for unutilised CENVAT credit under the VCES, 2013. It held that Section 109 of the Finance Act, 2013 did not prohibit the appellant from claiming a refund if entitled, as clarified by the Circular allowing CENVAT credit on inputs and input services used for declared output services under VCES, 2013. The Tribunal found the rejection without a show-cause notice to be erroneous, directing the respondent to refund the unutilised credit with interest within three months.

---

---

Issues:
- Refund of unutilised CENVAT credit under Voluntary Compliance Encouragement Scheme (VCES), 2013.

Analysis:
The case involved the rejection of a refund claim for unutilised CENVAT credit under the VCES, 2013 by the Commissioner (Appeals) based on Section 109 of the Finance Act, 2013, which stated that amounts paid under the VCES shall not be refundable under any circumstances. The appellant, engaged in providing various services to clients outside India, sought a refund for the unutilised credit. The appellant argued that the rejection was erroneous as the Board's clarificatory Circular allowed the admissibility of CENVAT credits except for the payment of tax dues under the scheme. The appellant cited relevant case laws and circulars to support their claim and contended that principles of natural justice were not followed in rejecting the refund without issuing a show-cause notice.

The Authorized Representative for the respondent-department supported the Commissioner (Appeals)'s decision, emphasizing that Section 109 had an overriding effect over the CENVAT Credit Rules and the clarificatory Circular could not aid the appellant. However, after hearing both sides and examining the relevant provisions of the law and circular, the Tribunal found that Section 109 did not debar the appellant from claiming a refund if otherwise entitled. The Tribunal noted that the Circular clarified the admissibility of CENVAT credit on inputs and input services used for output services declared under VCES, 2013, and that the CENVAT Credit Rules, 2004 were applicable except for the payment of tax dues under the scheme. Therefore, the Commissioner (Appeals)'s rejection of the refund without providing an opportunity for the appellant to be heard was deemed erroneous.

Consequently, the Tribunal allowed both appeals, setting aside the Commissioner of CGST & CX (Audit-II), Mumbai's order and directing the respondent to refund the unutilised CENVAT credit accrued by the appellant under VCES, 2013, along with applicable interest within three months of the order communication.

---