Whether registration pre-requisite for availing cenvat credit and claiming its refund?

PJ/CASE LAW/2015-16/2931

Case:- DORLING KINDERSLEY (I) PVT. LTD. VERSUS COMMR. OF C. EX. & S.T., NOIDA

Citation:- 2015 (40) S.T.R. 598 (Tri. - Del.)

Brief facts:-The appellant provides Business Support Services to its clients situated in United Kingdom and also to clients situated within the Country. The appellant avails Cenvat credit of various input services used for providing such output service. Since Service Tax attributable to the provision of domestic services are very meager, there was no scope for utilising the entire cenvat credit of service tax taken on input services and accordingly, for the disputed period, the appellant had filed the refund application under Rule 5 of the Cenvat Credit Rules, 2004, claiming refund of the unutilised Cenvat credit. The refund application filed by the appellant for the quarter ending September, 2012 was partly denied to the appellant on the ground that the Cenvat credit from the period 1-7-2012 to 31st August, 2012 was taken prior to obtaining Service Tax registration by the appellant as a service provider. Further, Cenvat credit of Rs.129/- on the domestic courier service has also been denied on the ground that the said service has no nexus with the service exported by the appellant.

Appellant’s contention:-The ld. CA appearing for the appellant submits that the Cenvat Rules dealing with refund of unutilised Cenvat credit, no where specifies that the service provider has to be registered with the Service Tax authority for claiming refund of service tax. According to him, the refund claim under Rule 5 of the CCR, 2004 can only be filed by the service provider, in the eventuality, when the output service have actually been exported and the credit taken on the input services are not utilised due to any reason. With regard to disallowance of Cenvat credit on the domestic courier service, the submissions of ld. Chartered Accountant is that the said service is confirming to the definition of input service and being utilised for providing taxable service to the clients located in both within and outside the country, the credit on such service cannot be denied. He further submits that the said service is qualifying as input service for the purpose of taking Cenvat credit and its refund under Rule 5 cannot be denied to the appellant. To support his stand that refund claim cannot be denied on the ground of non-registration of the service provider, he relied on the judgement of Hon’ble Karnataka High Court in the case of mPortal India Wireless Solutions P. Ltd.v. C. S. T., Bangalore, reported in (2011) 16 taxmann.com 353(Kar.) = 2012 (27)S.T.R.134 (Kar.)and also decision of this Bench of this Tribunal in the case of M/s. ML Outsourcing Services Pvt. Ltd.v. Commissioner of Service Tax, reported in 2013 (12) TMI 621 - CESTAT, New Delhi.

Respondent’s contention:- Per contra, the ld. DR appearing for the Revenue submits that Rule 4(1) of the Service Tax Rules and Notification No. 27/2012-C.E., dated 18-6-2012 specifically provides that the service provider has to statutorily required to be registered within 30 days from the commencement of the business activities, which in the present case has not been complied with by the appellant. According to the ld. D.R., since the appellant got itself registered after 60 days on 31st August 2012, Cenvat benefit by way of refund under Rule 5 of the rules is not permissible to the appellant. He further submits that the judgment of Hon’ble Karnataka High Court in the case of mPortal India (supra) is distinguishable from the facts of the present case, inasmuch as, the said judgment was delivered in the year 2011, whereas, the Notification No. 27/2012-C.E. (N.T.), dated 18-6-2012 was issued only in 2012, which is much later than the passing of judgment by the Hon’ble High Court. According to the ld. DR, since the appellant had subsequently registered with the Department on 31st August, 2012 (certificate issued on 14-9-2012), the application for refund filed for the period 1-7-2012 to 31-8-2012 will not be admissible.

Reasoning of judgment:- They find that substantial amount of Cenvat credit has been denied by the authorities below on the ground that the Service Tax registration has been taken belatedly after availing the Cenvat credit. Refund of Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004 entitles a service provider to claim refund of Cenvat credit, where the output services have been exported without payment of Service Tax. It is an admitted fact on record that the appellant being an exporter of taxable services, was not in a position to utilise the entire Cenvat credit taken on the input services, and accordingly, applied for refund of such unutilised Cenvat credit in terms of Rule 5 of the said Rules. No stipulation or embargo has been created in the Rule 5 of the rules that refund of Cenvat credit can be denied in absence of Registration Certificate issued by the Service Tax Authorities. It is for some other purpose, the requirement of registration has been provided in Rule 4 of the Service Tax rules as well as in the Notification dated 18-6-2012 and not for the purpose of Rule 5 of the Cenvat Credit Rules. In the present case, since the eligibility of the appellant to the Cenvat credit on the input services has not been disputed by the Department and the only ground taken for disallowance is on account of non-registration of the service provider, they are of the considered opinion that the same is not a valid ground for disallowance of the benefit of refund, to which, the appellant is legally entitled to.
They also find that the judgement cited by the ld. Chartered Accountant for the appellant in the case of mPortal India (supra) squarely applies to the facts of the present case, wherein it has been held that in absence of a statutory provision prescribing the condition that registration is mandatory, the authorities cannot take the view that the assessee shall not be entitled to the benefit of refund. They also find that placing reliance on the said judgment of the Hon’ble Karnataka High Court, this Bench of the Tribunal in the case of M.L. Outsourcing Services (Supra) has allowed the Cenvat credit by holding that registration of premises is not necessary for claiming the Cenvat credit.
With regard to the submissions of ld. DR that the judgement of Karnataka High Court in the case of mPortal India (supra) is distinguishable from the facts of the present case, they are of the view that the Notification dated 18-6-2012 (issued after delivery of the judgment in 2011) only prescribed the procedure for filing the refund claim and is no way connected with filing of refund claim under Rule 5 of the Cenvat Credit Rules, 2004. The said Notification having been issued in exercise of powers vested under Rule 5 of the said rules, where there is no specific prohibition been provided that refund has to be filed after registration of the service provider, in their opinion, the Notification dated 18-6-2012 will not override the provisions of Rule 5 of the rules for claim of refund of Service Tax by the service provider.
Denial of refund benefit on the courier service, without discussing the nature of utilisation of such service by the service provider cannot be a defensible ground to deny the benefit of refund, especially in view of the fact that the output service has been exported by the appellant.
In view of the above, they are of the considered opinion that the appellant is entitled for refund of Service Tax on the disputed input services and accordingly, they set aside the impugned order and allow the appeal in favour of the appellant.

Decision:- Appeal allowed

Comment:- The essence of the case is that refund claim under Rule 5 cannot be rejected on ground of non-registration of applicant because when there is no necessity to obtain registration for availing cenvat credit then there cannot be any prohibition of filing refund claim on grounds of non-registration. Output service having been admittedly exported, refund of accumulated credit on input service is admissible.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2931

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