2025 (4) TMI 812 - AT - Central Excise

Export Unit Wins CENVAT Credit Refund Battle, Secures Full Relief Under Notification 22/2003 Despite Revenue Challenge

CESTAT allowed an export-oriented unit's appeal for CENVAT credit refunds on High Speed Diesel and security services. The tribunal confirmed the ... 100% EOU - refund of unutilized CENVAT credit in relation to High Speed Diesel (HSD) and credit of Service Tax paid on Security Services - HELD THAT:- Since the issue of the refund claim of Cenvat credit of duty of Rs. 41,38,128/- paid by the appellant, while procuring HSD for their EOU is covered in favour of the appellant in their own case, the refund claim is sustainable. As regards the rejection of refund claim of Cenvat credit Rs. 2,42,192/- paid on security services, as held in catena of cases including Qualcomm India Pvt., Ltd. [2021 (11) TMI 72 - TELANGANA HIGH COURT], once it is admitted as eligible credit and if the respondent has reason to believe that, it is wrongly availed, Respondent could have proceeded against the appellant under Rule 14 Cenvat Credit Rules, 2004 for the recovery of irregular CENVAT credit and cannot adjudicate the same while processing the refund claim, hence this refund claim is also sustainable. Appeal allowed. ISSUES PRESENTED and CONSIDEREDThe primary issues considered in this appeal are: Whether the appellant, a 100% export-oriented unit (EOU), is eligible to claim a refund of unutilized CENVAT credit related to High Speed Diesel (HSD) used as fuel. Whether the appellant is entitled to a refund of CENVAT credit for the Service Tax paid on Security Services.ISSUE-WISE DETAILED ANALYSIS1. Refund of CENVAT Credit on High Speed Diesel (HSD) Relevant Legal Framework and Precedents: The appellant relied on Notification No. 22/2003, which allows EOUs to claim CENVAT credit on inputs such as HSD. The Tribunal's previous decisions in the appellant's own cases and other precedents, such as Hindustan Unilever Ltd. and Jagmini Micro Knit Pvt. Ltd., support this entitlement. Court's Interpretation and Reasoning: The Tribunal noted that the appellant's case is supported by previous decisions where similar claims were allowed. It emphasized that the definition of 'input' under Rule 2(k) of the CENVAT Credit Rules, 2004, does not restrict EOUs from claiming credit on HSD when Notification No. 22/2003 is applicable. Key Evidence and Findings: The appellant's previous successful claims for similar periods and the C.B.E. & C. Circular No. 799/32/2004-CX were pivotal in establishing the appellant's entitlement. Application of Law to Facts: The Tribunal applied the legal framework and precedents to the appellant's situation, confirming that the appellant's claim for a refund of unutilized CENVAT credit on HSD is valid. Treatment of Competing Arguments: The Tribunal rejected the Revenue's argument that the definition of 'input' under Rule 2(k) should restrict the appellant's claim, citing the specific provisions applicable to EOUs. Conclusions: The Tribunal concluded that the appellant is entitled to the refund of CENVAT credit for HSD as claimed.2. Refund of CENVAT Credit on Service Tax for Security Services Relevant Legal Framework and Precedents: The appellant cited the decision in Qualcomm India Pvt., Ltd., which held that denying a refund without initiating proceedings under Rule 14 of the CENVAT Credit Rules, 2004, is unjustifiable. Court's Interpretation and Reasoning: The Tribunal agreed that the eligibility of credit on security services was not contested earlier, and without any proceedings under Rule 14, the denial of refund at the refund adjudication stage is unsustainable. Key Evidence and Findings: The Tribunal noted that the credit on security services was duly reflected in the appellant's records and was not previously challenged. Application of Law to Facts: The Tribunal applied the principles from Qualcomm India Pvt., Ltd., confirming that the appellant's claim for a refund of CENVAT credit on security services is justified. Treatment of Competing Arguments: The Tribunal dismissed any contention from the Revenue that sought to challenge the credit's validity at the refund stage without prior proceedings. Conclusions: The Tribunal concluded that the appellant is entitled to the refund of CENVAT credit for the Service Tax paid on security services.SIGNIFICANT HOLDINGS The Tribunal reaffirmed the principle that EOUs are entitled to claim CENVAT credit on inputs like HSD used as fuel, as per Notification No. 22/2003, without restriction by the definition of 'input' in Rule 2(k) of the CENVAT Credit Rules, 2004. It was held that denying a refund of CENVAT credit on security services without initiating proceedings under Rule 14 of the CENVAT Credit Rules, 2004, is not permissible. The Tribunal set aside the impugned orders and allowed the appeal, granting the refund claims for both HSD and security services.The appeal was allowed with consequential relief, if any, in accordance with law, and the operative portion of the order was pronounced in open court on 04.12.2024.