2010 (2) TMI 133 - AT - Service Tax

Appellate Court Grants Refund on CENVAT Credit Denial

The appellate court allowed the appeals, setting aside the impugned order that rejected a refund claim for excess CENVAT credit. The court held that the ... Refund of Cenvat Credit – Duty paying documents – nature of input services – cenvat credit denied on the following grounds – cab services could not be established as related to output service – travel agents (air tickets) could be established as related to output service – assessee also contended that cenvat credit denied for the reasons not mentioned in the show cause notice i.e. non-utilization of CENVAT credit and difference in ST-3 and refund claim. Held that: adjudicating authority has gone beyond the scope of show-cause notice, while denying the refund claim on the ground of non-utilization of CENVAT credit and difference in ST-3. The adjudicating authority cannot go beyond the allegation made in the show-cause notice, hence the denial of CENVAT credit not utilized and the difference in ST-3 are not sustainable and the refund is allowed. - as the appellants are providing B.P.O. service and in relation to their business, they have to avail Rent-a-cab service and Air Travel Service, which are used by them in relation to their business activity. Accordingly, the appellants are entitled to take the CENVAT credit on these services. – Decided in favor of assessee Issues:Refund claim rejection based on excess CENVAT credit; Denial of CENVAT credit on specific grounds; Scope of show-cause notice in adjudication proceedings; Eligibility of inputs service credit on Rent-a-Cab and Air Travel Service.Analysis:The appeals were filed against the rejection of a refund claim for excess CENVAT credit by both lower authorities. The appellants sought a refund under Rule 5 of the Cenvat Credit Rules, 2004 amounting to Rs.4,66,090. The show-cause notice raised several grounds for rejection, including issues with service tax registration on invoices, utilization of cab services outside Mumbai, lack of original invoice copies, and more. The adjudicating authority held that the amount could be adjusted against the refund claim, leading to the rejection of the claim, a decision upheld by the appellate authority.The learned C.A. for the appellants argued that the adjudicating authority overstepped by denying the refund claim based on non-utilization of CENVAT credit and discrepancies in ST-3, which were not part of the original show-cause notice. Citing legal precedents, he contended that authorities cannot decide issues not raised in the notice. Regarding the eligibility of inputs service credit on Rent-a-Cab and Air Travel Service, the C.A. relied on previous tribunal decisions emphasizing that eligibility cannot be questioned without disputing the credit taken. He highlighted that the lower authority failed to provide a clear rationale for disallowing the credit on these services essential to the appellants' business activities.On the contrary, the SDR supported the impugned order, arguing that the refund claim did not align with Rule 5 of the Cenvat Credit Rules, 2004. After hearing both sides, the Member (Judicial) found that the adjudicating authority exceeded the notice's scope by rejecting the refund claim based on non-stipulated grounds. The denial of CENVAT credit and discrepancies in ST-3 were deemed unsustainable, leading to the allowance of the refund. Additionally, the Member disagreed with the lower authorities' reasoning for denying inputs service credit on Rent-a-Cab and Air Travel Service, asserting that these services were essential for the appellants' business activities, making them eligible for CENVAT credit. Consequently, the impugned order was set aside, and the appeals were allowed with consequential relief.