2022 (1) TMI 765 - AT - Service Tax

Tribunal Orders Refund Claim Approval: Emphasizes Substantive Benefits Over Technicalities

M/s Vaibhav Global Limited Versus Commissioner, Central Goods and Service Tax, Customs & Central Excise, Jaipur (Rajasthan)

M/s Vaibhav Global Limited Versus Commissioner, Central Goods and Service Tax, Customs & Central Excise, Jaipur (Rajasthan) - TMI Issues:- Refund claim of unutilised input service tax credit under Rule 5 of Cenvat Credit Rules rightly rejected in part for Rs. 30,19,866.Analysis:1. The appellant, a 100% EOU engaged in manufacturing jewelry, applied for a refund of Rs. 1,44,62,563 for the quarter April to June 2017. However, a show cause notice was issued as discrepancies were found in the cenvat credit amounts declared in the ER-2 returns. The department restricted the refund claim to Rs. 1,14,42,697 based on the closing balance of unutilised cenvat credit. The appellant's claim of Rs. 30,19,866 was deemed inadmissible due to excess credit debited without revision, leading to a sanctioned amount of Rs. 1,06,59,940.2. The appellant argued that a clerical error led to incorrect credit amounts declared in the returns, which was brought to the department's notice before filing the refund claim. The appellant's contention was that the actual closing balance should be considered as Rs. 1,44,42,750, and the denial of the refund claim based on the ER-2 return was unjustified.3. The Tribunal considered the facts that the appellant was eligible for the refund, had promptly informed the department of the error, and had maintained the correct credit balance in their records. The Tribunal held that denying the refund based solely on technical grounds was improper, citing legal precedents where substantive benefits cannot be denied due to procedural lapses.4. The Tribunal found that the denial of the refund claim was not legally justified, as there was no specific condition in the relevant notification requiring the closing balance to be based on the ER-2 return. Therefore, the Tribunal allowed the appeal, directing the original authority to sanction the balance refund claim of Rs. 30,19,866 along with interest within 45 days.5. The judgment highlights the importance of substantive benefits over technicalities in refund claims, emphasizing that procedural errors should not lead to the denial of legitimate claims. The Tribunal's decision ensures fairness and adherence to legal principles in dealing with refund claims under the Cenvat Credit Rules.