2025 (10) TMI 879 - AT - Service Tax

Appellant entitled to refund of Rs.29,06,290 accumulated CENVAT credit for exports before service tax registration

CESTAT CHENNAI - AT allowed the appellant's appeal and set aside the impugned order, holding the appellant entitled to refund of accumulated CENVAT credit ... 100% EOU - refund of the unutilized CENVAT Credit on the inputs used in the output service that are exported - exports are attributable to the period prior to registration of the appellant with the Service Tax Department - HELD THAT:- The very same issue of allowing accumulated CENVAT Credit for refund prior to registration was considered by the Tribunal in The Commissioner of Service Tax, Chennai Vs. M/s. Saipem India Projects Limited [2023 (6) TMI 544 - CESTAT CHENNAI], which was decided against Revenue by placing reliance on the decision of coordinate Bench of the Tribunal in the case of M/s. mPortal India Wireless Solutions P. Ltd. v. Commissioner of Service Tax, Bangalore [2011 (9) TMI 450 - KARNATAKA HIGH COURT] where it was held that 'Whether it be registration or centralized registration, when there is no mandatory provision in the Rules regarding registration, the CENVAT Credit cannot be denied.' The appellant is eligible for the refund of accumulated CENVAT Credit of Rs.29,06,290/- on exports attributable to the period prior to registration of the appellant with the Service Tax Department. The impugned order is set aside - Appeal is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether unutilized CENVAT credit attributable to exported services for the period prior to registration of the service provider is eligible for refund under Rule 5 of the CENVAT Credit Rules, 2004. 2. Whether statutory or rule provisions (including Section 69 of the Finance Act read with Rule 4 of the Service Tax Rules, 1994 and Rule 3 of the CENVAT Credit Rules, 2004) mandate registration of premises as a pre-condition for claiming CENVAT credit or refund of accumulated CENVAT credit on exported services. 3. Whether the Refund Notification (Appendix 2/Notification under Rule 5 CCR) imposes a prohibition on granting refund of unutilized CENVAT credit where the premises were not registered during the relevant period. ISSUE-WISE DETAILED ANALYSIS Issue 1: Eligibility of refund of unutilized CENVAT credit attributable to exported services for period prior to registration Legal framework: Rule 3 of the CENVAT Credit Rules, 2004 permits availing CENVAT credit on input services; Rule 5 of the CENVAT Credit Rules, 2004 provides for refund of unutilized CENVAT credit where output services are exported without payment of service tax; the Refund Notification (Appendix 2 to Notification issued under Rule 5 CCR) prescribes procedure for claiming refund, including Form A and jurisdictional submission requirements. Precedent treatment: Decisions of coordinate benches and High Courts (including mPortal India Wireless Solutions P. Ltd. and subsequent Tribunal/High Court decisions cited) have held that denial of refund solely on ground of non-registration during the claim period is not sustainable in absence of statutory prescription. Interpretation and reasoning: The Tribunal observed that Rule 3 and Rule 5 CCR contemplate entitlement to CENVAT credit and refund where the outputs are exported without payment of service tax. The Rules do not expressly condition refund entitlement upon the existence of registration at the time the input services were received or the CENVAT credit was accumulated. The Refund Notification regulates procedure (such as filing in Form A and jurisdictional submission) but does not contain a substantive prohibition against refunding credit accumulated prior to registration, provided other conditions for refund are satisfied. Ratio vs. Obiter: Ratio - Where statutory rules permitting CENVAT credit and refund do not expressly require registration as a substantive pre-condition, accumulated unutilized CENVAT credit attributable to exports prior to registration cannot be denied solely on that ground. Obiter - Observations on procedural compliance and the timing of centralized registration vis-à-vis branch premises registration serve as guiding remarks but are ancillary to the core conclusion. Conclusion: The accumulated unutilized CENVAT credit of Rs.29,06,290/- attributable to exported services for the period prior to registration is allowable for refund. Issue 2: Whether registration (including registration of premises) is a mandatory condition for entitlement to CENVAT credit or refund Legal framework: Section 69 of the Finance Act and Rule 4 of the Service Tax Rules, 1994 require registration where a person is liable to pay service tax; Rule 3 CCR allows taking credit by a provider of taxable service; Rule 5 CCR provides refund mechanism for exporters. The legal text must be read to ascertain whether registration is a substantive condition for credit/refund. Precedent treatment: The Tribunal relied on prior coordinate Bench decisions holding that absence of an express rule making registration a condition for claiming CENVAT credit/refund precludes denial of such benefits; higher court decisions cited by parties indicate similar treatments in factual matrices concerning export services and registration timing. Interpretation and reasoning: The Court contrasted the obligation to register where liability to pay service tax arises with entitlement to credit/refund under CCR. The Tribunal found no provision in the CENVAT Credit Rules or the Refund Notification that prescribes registration of premises as a condition precedent to the substantive entitlement to CENVAT credit or refund. The obligation to register under Section 69/Rule 4 concerns compliance and liability; it does not, per se, create a substantive bar to refund of legitimately accumulated credit when the statutory credit/refund conditions are otherwise met. Ratio vs. Obiter: Ratio - Registration is not a substantive pre-condition under the CENVAT Credit Rules for claiming refund of accumulated unutilized CENVAT credit attributable to exported services where no statutory provision so prescribes. Obiter - Distinctions between centralized registration and branch registration and administrative conveniences noted are non-decisive on substantive entitlement. Conclusion: Registration of premises (or earlier registration) is not a mandatory statutory condition for claiming CENVAT credit/refund; denial on that ground is unsustainable absent express rule or statutory provision. Issue 3: Effect of Refund Notification/Appended conditions requiring jurisdictional filing from the registered premises on refund entitlement Legal framework: Appendix 2 to the Refund Notification (Notification issued under Rule 5 CCR) prescribes that the provider of output service shall submit application in Form A to the Deputy/Assistant Commissioner in whose jurisdiction the registered premises from which output services are exported is situated; condition No.3 in Appendix was relied upon by Revenue to reject refund for pre-registration period. Precedent treatment: Authorities and decisions relied upon by both sides interpret the Refund Notification as procedural, and coordinate Tribunal decisions have held that procedural requirements cannot be expanded into substantive prohibitions where statutory rules do not so provide. Interpretation and reasoning: The Tribunal differentiated between procedural requirements for filing the refund claim and substantive eligibility to obtain refund. The Refund Notification prescribes jurisdictional locus for submission once registration exists at the time of filing; however, the notification does not expressly prohibit refund of credit accumulated prior to registration. The Court reasoned that compliance with filing procedure at the time of claim (when the appellant was registered) satisfied the notification's requirements and that procedural locus cannot be converted into a substantive disqualification for credit accumulated earlier. Ratio vs. Obiter: Ratio - Procedural prescriptions in the Refund Notification (relating to place and mode of filing) do not operate to deny substantive refund entitlements unless the notification or Rules expressly condition substantive eligibility upon registration at the time the credit was accumulated. Obiter - Practical implications for administrative jurisdiction and filing formalities are noted but not decisive for entitlement. Conclusion: The Refund Notification's procedural requirement to file with the jurisdictional authority of the registered premises does not, in absence of an express substantive bar, preclude refund of unutilized CENVAT credit attributable to exports effected prior to registration, provided the claim is filed in the prescribed manner after registration. Cross-references and Concluding Observations 1. Issues 1-3 are interlinked: the central principle is that substantive entitlement to CENVAT credit/refund flows from the CENVAT Credit Rules and Export/Refund provisions, and absence of express statutory conditioning by registration prevents denial of refund solely on pre-registration accumulation of credit. 2. The Tribunal followed coordinate decisions that directly addressed the identical question (allowing refund of accumulated CENVAT credit prior to registration) and applied those precedents as binding on the facts, treating contrary administrative orders as unsustainable where no statutory foundation existed for the denial. 3. Disposition: The impugned order rejecting refund on the ground of non-registration during the relevant period was set aside and the refund claim allowed with consequential relief as per law. (Order pronounced in open court.)