2020 (12) TMI 121 - AT - Service Tax

Court upholds refund claim, emphasizes input credit eligibility without nexus. Remanded for fresh decision.

The High Court upheld the decision of the Tribunal, setting aside the partial rejection of the refund claim by the adjudicating authority. The Court ... Refund of unutilized/accumulated Cenvat credit - refund rejected on the ground of input credit availed being prior to the date of registration - period April 2012 to June 2012 - D.O.F No. 334/1/2012-TRU dated 16.03.2012 - HELD THAT:- It is unfortunate that the learned First appellate authority (FAA for short) has given some excuses to not to follow the orders of CESTAT, in the appellant’s own case. It is not even the case of the learned FAA that the earlier order/s of this Bench that are referred in his own orde, have been reversed by High court or have been set aside. The facts may or may not vary, but the principle that is laid down by a higher forum is required to be followed. For these reasons, the impugned order has to set aside at once. The matter is required to be remanded to the file of ld. FAA to pass fresh order on merits after hearing the assessee. When the assessee claims that the issue on hand stands covered by an order of a higher forum, in respect of the very same assessee but for a different period, such previous order/s of a higher Forum shall be followed as long as the same are not stayed/set aside by Hon’ble High court - Appeal allowed by way of remand. Issues:1. Partial rejection of refund claim by adjudicating authority.2. Eligibility of credit on input services.3. Requirement to establish nexus between input services and output service exported.Analysis:1. The appellant, engaged in providing design and graphics services, filed a refund claim under Rule 5 of the Cenvat Credit Rules, 2004 for the period April 2012 to June 2012. The claim was partially rejected by the adjudicating authority, leading to an appeal. The first appellate authority set aside the rejection, allowing the appeal. Subsequently, the department appealed to CESTAT, which dismissed the appeal. The department then approached the High Court without obtaining a stay. Following this, the appellant filed a refund claim on 30.05.2018, which was partially allowed by the lower appellate authority. The appellant contended that the eligibility for credit on input services should be determined at the time of invoicing or service provision, and there was no requirement to establish a nexus between input and output services exported.2. The appellant argued that the credit availed by them was eligible, citing relevant case laws and clarifications by the Government. The appellant emphasized that the new scheme of refund did not necessitate a correlation between exports and input services used in such exports, as per the clarifications provided. The Department, however, maintained that the interpretation drawn by the lower authorities, considering the change in law effective from 01.04.2011, should be upheld. The Tribunal found that the FAA did not provide justifiable findings on merits and failed to follow the principle laid down by a higher forum in the appellant's own case. As a result, the impugned order was set aside, and the matter was remanded to the FAA for a fresh decision on merits, emphasizing the need to follow hierarchical judicial discipline and principles of natural justice.3. The Tribunal highlighted the importance of following precedents set by higher forums unless stayed or set aside by the High Court. The FAA was directed to pass a de-novo appellate order within six months, ensuring a fair hearing for the appellant. The judgment emphasized the necessity of adhering to established principles and ensuring procedural fairness in the adjudication process.