Case Study

Prepared by:- CA Neetu Sukhwani &
Monika Tak
 

Introduction: M/s. Pelican Grani Marmo Pvt. Ltd., (100% EOU), Jodhpur (hereinafter referred to as the assessee also) engaged in the manufacture of Granite Slabs & Tiles, Marbles and Quartzite Slabs have filed refund claim for Rs. 7806/- on 19.09.2014 under the provision of Rule 5 of the CENVAT credit Rules, 2004 read with notification no. 27/2012-CE(N.T.) dated 18.06.2014 in respect of unutilized CENVAT credit as on 31.12.2013 and accumulated during the period from Oct, 2013 to December, 2013. The claim was filed on the grounds that they are registered as a 100% EOU and have taken credit of duty paid on inputs as well as input services in their records and are not able to utilize the same and, as such, the same is remaining unutilized in their CENVAT credit account. The details of CENVAT Credit taken and accumulated during the quarter Oct, 2013 to December, 2013 is CENVAT Credit of Rs. 4313/- on inputs & Rs. 3745/- on input services totaling to Rs. 8058/- and claimed refund for Rs. 7806/-. A show cause notice was issued to the assessee wherein the refund claim filed by them under Rule 5 was proposed to be rejected on the grounds that they have also availed the benefit of rebate of service tax under notification no. 41/2012-ST dated 29.06.2012. It was alleged that the refund claim of accumulated credit is not admissible to the assessee because it will amount to extending double benefit to the assessee. The outcome of the show cause notice is the subject matter of the present case study.

M/S PELICAN GRANI MARMO PVT. LTD.
[SCN NO. V(RFD) 18/JDR/207/2014/11136 DATED 05.12.2014 ADJUDICATED VIDE OIO NO. 283/2014-R DATED 18.12.2014]
 
 
Relevant legal provisions:

Rule 5 of CENVAT Credit Rules, 2004.
 
Notification no. 27/2012-CE (N.T.) dated 18.06.2012.
 
Notification no. 41/2012-S.T., dated 29.06.2012.
 
Issue involved:The issue involved before the adjudicating authority in this case was that-
Whether refund under Rule 5 can be rejected for reason that rebate of service tax claimed by assessee?
 
Brief facts:- M/s. Pelican Grani Marmo Pvt. Ltd., (100% EOU), E-847, IV Phase, RIICO Industrial Area, Boranada, Jodhpur (Rajasthan) (hereinafter referred to as the assessee also) engaged in the manufacture of Granite Slabs & Tiles, Marbles and Quartzite Slabs falling under Chapter Sub heading 68022310, 25169090, 25062190 and 25151220 of the First Schedule to the Central Excise tariff Act, 1985 having Central Excise Registration Number AADCP4571BXM001 have filed refund claim for Rs. 7806/- on 19.09.2014 under the provision of Rule 5 of the CENVAT credit Rules, 2004 read with notification no. 27/2012-CE(N.T.) dated 18.06.2014 in respect of unutilized CENVAT credit as on 31.12.2013 and accumulated during the period from Oct, 2013 to December, 2013. The claim was filed on the grounds that they are registered as a 100% EOU and have taken credit of duty paid on inputs as well as input services in their records and are not able to utilize the same and, as such, the same is remaining unutilized in their CENVAT credit account. As per Rule 5 of the CENVAT Credit Rules, 2004, refund is granted in such cases as per notification no. 27/2012-CE(N.T.) dated 18.06.2014. The details of CENVAT Credit taken and accumulated during the quarter Oct, 2013 to December, 2013 is CENVAT Credit of Rs. 4313/- on inputs & Rs. 3745/- on input services totaling to Rs. 8058/- and claimed refund for Rs. 7806/-.
 
On further examination of the documents submitted with refund claim it is noticed that the assessee has already claimed and received Rs. 16223/- as refund on taxable services on the shipping bills for the relevant period at the port of export at the time of export, as rebate available under the procedure specified in para 2 of notification no. 41/2014-S.T., dated 29.06.2012 and has also claimed refund of Rs. 3745/- on input services during the quarter Oct, 2013 to December, 2013.
 
The assessee accumulated this amount of Rs. 3745/- on input services credit where no CENVAT credit of service tax paid on the specified services used for export of goods ought to has been taken under the CENVAT Credit Rules, 2004 when he has received refund under notification no. 41/2012-S.T., dated 29.06.2012. Therefore, it appears that the assessee has willfully filed this refund with intention to get undue double benefit under Rule 5 of the CENVAT Credit Rules, 2004 even after receiving refund under notification no. 41/2012-S.T., dated 29.06.2012 for the same services & shipping bills.
 
Consequently, the refund claim of accumulated credit filed under Rule 5 of the Cenvat Credit Rules, 2004 was proposed to be rejected.
 
Assessee Contentions: The following submissions were made before the adjudicating authority by the assessee-

1. They submit that the impugned show cause notice has placed reliance on condition no. (d) of the notification no. 41/2012-ST dated 29.06.2012 to reject the refund of accumulated cenvat credit filed by them. In this respect, they submit that the erroneous reliance has been placed on the said condition as reproduced below:-
(d) no cenvat credit of service tax paid on the specified services used for export of goods has been taken under the Cenvat Credit Rules, 2004.
They submit that it is alleged that no cenvat credit can be taken of the specified services used for export of goods and so the refund claim of accumulated credit filed by them is liable to be rejected. In this regard, they firstly submit that the term “specified services” has been defined in the notification as follows:-
“Specified services” means-
(i)     In case of excisable goods, taxable services that have been used beyond the place of removal, for the export of said goods;
(ii)    In the case of goods other than (i) above, taxable services used for the export of said goods ;
But shall not include any service mentioned in sub-clauses (A), (B), (BA), and (C) of clause (l) of rule 2 of the Cenvat Credit Rules, 2004. 

They submit that the above condition has been duly satisfied by them and they have not availed cenvat credit of service tax paid on the specified services used for the export of goods. Moreover, if at all, they have availed cenvat credit of service tax on the specified services used for export of goods, the refund claim filed under notification no. 41/2012-ST would have been denied to them but it has been sanctioned to them. They submit that they have not filed refund of accumulated credit pertaining to specified services used for export of goods. They submit that the refund under notification no. 41/2012-ST is admissible for taxable services that have been used beyond place of removal, i.e., factory gate. However, they have filed refund of accumulated credit of inputs/input services used in the factory for manufacture of exported goods and on the services used in relation to import of goods. The details of the services availed for import of goods is tabulated as follows:-
 

 
They submit that the remaining credit pertains to inputs/input services used in relation to the manufacture of goods upto the clearance of goods from the factory. The copies of invoices of services received in relation to the import of goods along with relevant copies bill of entries was enclosed with the reply. The enclosures depict the true picture that the refund of accumulated credit filed by them is entirely different than the refund of specified services sanctioned to them under notification no. 41/2012-ST dated 29.06.2012. As such, the impugned show cause notice has placed erroneous reliance on the condition no. (d) as stated above and the same deserves to be dropped.
2. They further submit that the impugned show cause notice has also highlighted para no. 2(d)(ii) of the notification no. 41/2012-ST dated 29.06.2012 wherein it is stated that the exporter shall make declaration in the electronic shipping bill or bill of export, as the case may be, while presenting the same to the proper officer of customs to the effect that :-
(ii) no further rebate shall be claimed in respect of the specified services under procedure specified in paragraph 3 or in any other manner, including on the ground that the rebate obtained is less than the service tax paid on the specified services.
In this regard, they submit that they have claimed refund under notification in terms of para no. 2(d)(i) wherein rebate is allowed on specified services as a percentage of the declared Free on Board (FOB) value of the goods on the basis of rate specified in the schedule. Accordingly, the above cited para 2(d)(ii) requires exporter to give a declaration that no further rebate will be claimed in respect of the specified services in any other manner. Hence, by invoking the above para 2(d)(ii), the refund of accumulated credit filed by them is proposed to be rejected. In this regard, they reiterate that the refund claim of accumulated credit filed by them is entirely different from the refund claim of specified services sanctioned to them under notification no. 41/2012-ST. They submit that the refund under notification no. 41/2012-ST is granted for post removal specified services but they have filed refund of accumulated credit of services relating to import of goods and other inputs/input services availed before removal of goods from the factory. As such, they have not claimed further rebate of the specified services by way of accumulated credit refund and the allegation of the impugned show cause notice is totally erroneous.

3. They also submit that the condition no. (g) of para no. 2 is also highlighted which states that shipping bill or bill of export on which rebate has been claimed on the basis rate specified in the schedule by way of procedure specified in this paragraph shall not be used for rebate claim on the basis of documents specified in paragraph 3. In this respect, they submit that para no. 2 of the notification provides refund claim on the basis of percentage of FOB value of goods and para no. 3 of the notification provides refund claim on the basis of service tax actually paid supported by invoices of the service provider. They submit that the condition no. (g) has been inserted so as to ensure that exporter claims refund either under paragraph no. 2 or under paragraph no. 3 of the notification. Accordingly, they have also complied with the condition no. (g) as they have claimed refund under paragraph no. 2 of the notification no. 41/2012-ST. As such, invoking the said condition is not at all understandable. Moreover, the refund of accumulated credit filed by them pertains to altogether different services that pertain to import of goods and inputs/input services used before clearance of final product for export. As such, the refund of accumulated credit filed by them is not covered by the refund sanctioned to them under paragraph no. 2 of the notification no. 41/2012-ST dated 29.06.2012. Therefore, the impugned show cause notice placing erroneous reliance on the provisions of notification no. 41/2012-ST dated 29.06.2012 for denying the refund claim of accumulated credit is totally absurd and bad in law and deserves to be dropped.
4. They reiterate that the allegation of the impugned show cause notice that notification no. 41/2012-ST dated 29.06.2012 stipulates that no further rebate shall be claimed in respect of the specified services under procedure specified in paragraph 3 or in any other manner has been duly complied by them. They submit that the refund of accumulated credit that is being filed by them is not with respect to specified services and this fact has already been verified by them with appropriate evidences. As such, the filing of refund of accumulated credit does not amount to claiming rebate “in any other manner” because the refund under notification no. 41/2012-ST has been claimed for specified services availed after removal from factory whereas the refund of accumulated credit pertains to services in relation to import of goods and inputs/input services availed in the factory before clearance of final products for export. Therefore, the impugned show cause notice is devoid of merits and deserves to be quashed.

5. They submit that the impugned show cause notice has also placed reliance on the proviso to Rule 5 of the Cenvat Credit Rules, 2004 which reads as follows:-

Provided that no refund of credit shall be allowed if the manufactureror provider of output service avails of drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995, or claims rebate of duty under the Central Excise Rules, 2002, in respect of such duty; or claims rebate of service tax under the Service Tax Rules, 1994 in respect of such tax.

Accordingly, the refund claim filed by them pertaining to input services totalling to Rs. 3,745/- has been proposed to be rejected by contending that they have claimed rebate of service tax under notification no. 41/2012-ST dated 29.06.2012. In this regard, they submit that an absurd interpretation is being taken to deny the rightly admissible refund claim to them. They submit that the second proviso to Rule 5 of the Cenvat Credit Rules, 2004 is being incorporated to ensure that the exporter does not avails double benefit of rebate and refund of credit at the same time. They submit that the refund filed by them under Rule 5 is for accumulated service tax credit that consists of input services used in the manufacturing of goods upto the factory gate and the credit on input services availed by them in relation to imported goods that have been used in the manufacture of final products. On the contrary, the rebate claim of service tax filed by them under notification no. 41/2012-ST dated 29.06.2012 amounting to Rs. 16,223/- pertains to the services availed after the factory gate to the port of export. Moreover, while filing refund under Notification no. 41/2012-ST dated 29.06.2012, there is a condition in clause (d) of para 3 of the notification that no cenvat credit of the service tax paid on the specified services used for export of goods has been taken under the Cenvat Credit Rules, 2004. As such, they submit that when the refund of service tax amounting to Rs. 16,223/- has been claimed by them under the notification no. 41/2012-ST dated 29.06.2012 and has been duly sanctioned to them, it means that they have not availed credit of such service tax and so the said service tax is not included in the refund application filed under Rule 5 of the Cenvat Credit Rules, 2004. As such, they have not availed any double benefit with respect to input services availed by them. They submit that the refund claim filed under the provisions of Rule 5 of Cenvat Credit Rules pertains to credit legitimately availed and accumulated by them for which they have not claimed any rebate and so the impugned show cause notice proposing to reject their refund claim on the ground that they have availed rebate of service tax on the services availed after the factory gate to port of export is totally erroneous and deserves to be quashed. 
 
6. Aligning with the above, they further submit that if the proviso is closely analysed, it will be clear that the restriction as regards non admissibility of refund claim under Rule 5 of accumulated service tax credit is applicable only if the rebate of service tax is also being claimed with respect to such service tax. The use of “in respect of such tax” holds esteem importance because the restriction of filing refund of accumulated credit is only when the rebate is also being claimed with respect to such tax. However, if the refund of accumulated credit is being claimed for inputs/input services which can be clearly distinguished from the input services whose rebate has been claimed by the assessee (wherein rebate has also condition that no cenvat credit of the services for which refund claim is being filed is taken) then the refund of accumulated credit cannot be merely denied by literally interpreting the proviso to Rule 5. They submit that if an interpretation as taken in the impugned show cause notice is taken, then an assessee, who is 100% exporter and is filing refund claim of services availed from the factory gate to the port of export under notification no. 41/2012-ST will never be able to claim refund of accumulated credit under Rule 5 of the Cenvat Credit Rules, 2004. This is certainly not the intention of the legislature. They submit that the only purpose of the proviso to Rule 5 of the Cenvat Credit Rules, 2004 is to ensure that no assessee avails double benefit with respect to input services availed by the exporter. They submit that there is no doubt that both the benefits, i.e., filing refund claim of specified services under notification no. 41/2012-ST and filing refund of accumulated credit under Rule 5 of Cenvat Credit Rules, 2004 in terms of the notification no. 27/2012-CE (N.T.) dated 18.06.2012 are available to the exporter. This is with the sole aim that the domestic taxes are not exported with the goods. Accordingly, there are a number of benefits available to an exporter for compensating the duty incidence borne by him like drawback for inputs, rebate under Rule 18 of the Central Excise Rules, 2002, refund of specified services under notification no. 41/2012-ST dated 29.06.2012. However, at the same time, it is necessary for the government to make restrictions/prohibitions so that the benefits are not misused. One such measure is inclusion of conditions like non availment of credit under notification no. 41/2012-ST for services for which refund is being claimed. Similarly, there is proviso under Rule 5 that no rebate/refund of service tax should have been claimed for the service tax for which refund of accumulated credit is being filed. As such, these restrictions are only incorporated so as to ensure that no double benefit is availed. This is for the reason that there are number of decisions wherein it has been concluded that in case of export, the place of removal of goods is “the place of port”. Accordingly, there are number of decisions wherein it has been held that the credit of input services availed from the factory gate to the port of export is admissible to the assessee. Accordingly, if an exporter is eligible to avail the credit of input services and is also eligible to file refund claim, then there are bright chances that double benefit might be taken by the assessees. It is only for this reason that condition of non-availment of credit under notification no. 41/2012-ST dated 29.06.2012 and the proviso for non-availment of rebate claim under Rule 5 has been incorporated. However, these restrictions should not be taken as a tool to deny the rightly admissible benefit to the exporters because the ultimate intention of the government is to promote and incentivise exports so that more and more foreign currency is earned. Therefore, the interpretation taken by the impugned show cause notice is defeating the ultimate intention of the government and the same is not at all sustainable.
7. They submit that while interpreting any provision, the intention of law makers is to be kept in mind. This has been held in the following cases:-
 
          BALWANT SINGH VERSUS JAGDISH SINGH [2010 (262) E.L.T. 50 (S.C.)]:-
Interpretation of statutes - Legislative intention - Provisions of statute including every word to be given full effect keeping legislative intent in mind to ensure achieving projected object - No provision treatable as enacted purposelessly - Court not to give interpretation to provisions to render them ineffective or odious. [para 14]
·         COMMISSIONER OF CENTRAL EXCISE, LUDHIANA VERSUS RALSON INDIA LTD. [2006 (202) E.L.T. 759 (P & H)]
Interpretation of statute - Question whether a statutory provision is mandatory or directory depends upon intent of Legislature, and not language in which the intent is couched - Literal construction which makes a particular provision manifestly absurd or leads to anomalous results, to be avoided. [para 9]
The analysis of above decisions of hon’ble Supreme Court and High Court makes it clear that the intention of the law makers is to be kept in mind while interpreting any provision.If any interpretation defeats the intention of the law makers, it should be avoided. In their case also, the interpretation taken by the impugned show cause notice is defeating the intention of law makers that domestic taxes should not be exported with assurance that no double benefit is being claimed by the exporter. Therefore, the impugned show cause notice is not viable in the eyes of law and it should be quashed.
 
8. They reiterate that the objective of inserting the proviso under Rule 5 is only to avoid the situation of assessee availing credit of input services availed from the factory gate to the port of export simultaneously with the rebate of service tax under notification no. 41/2012-ST dated 29.06.2012. They submit that the refund under Rule 5 is nothing but refund of accumulated credit and the same should not be denied to the exporter solely on the ground that rebate has been claimed by them of specified services under notification no. 41/2012-ST dated 29.06.2012. As such, when the credit eligibility is not disputed, and no rebate has been claimed with respect to tax of which refund claim under Rule 5 is being filed, the impugned show cause notice proposing to reject the refund claim is not tenable and deserves to be dropped.

9. It is also submitted further that the benefit of rebate of service tax under notification no. 41/2012-ST dated 29.06.2012 is allowed in terms of section 93A of the Finance Act, 1994 and not under the Service Tax Rules, 1994. However, the second proviso prohibits availment of refund under Rule 5 if the rebate of service tax is claimed under the Service Tax Rules, 1994. Therefore, this also strengthens their contention that they are rightly eligible to claim refund under Rule 5 of the Cenvat Credit Rules, 2004 and there is no embargo in simultaneously claiming the benefit of rebate of service tax under notification no. 41/2012-ST dated 29.06.2012 and the refund of accumulated cenvat credit under notification no. 27/2012-CE (N.T.) dated 18.06.2012. Hence, the impugned show cause notice proposing to reject the refund claim filed under Rule 5 of the Cenvat Credit Rules, 2004 is not at all sustainable and is liable to be set aside.

10. In continuation to the above, in order to substantiate the fact that the rebate claim filed under notification no. 41/2012-ST dated 29.06.2012 is not covered by the restriction of the proviso to Rule 5 of the Cenvat Credit Rules, 2004, they hereby discuss the relevant provisions in detail as follows:-
The proviso to Rule 5 of the Cenvat Credit Rules, 2004 w.e.f. 01.07.2012 reads as follows:-

Provided further that no refund of credit shall be allowed if the manufactureror provider of output service avails of drawback allowed under the Customs and Central Excise Duties & Service Tax Drawback Rules, 1995, or claims rebate of duty under the Central Excise Rules, 2002, in respect of such duty; or claims rebate of service tax under the Service Tax Rules, 1994 in respect of such tax.
Further, it is worth observing that rebate of service tax under Service Tax Rules, 1994 hereby means the rebate claim of service tax under Rule 6A of the Service Tax Rules, 1994 which reads as follows:-

Rule 6A(1) The provision of any service provided or agreed to be provided shall be treated as export of service when,-
a)    The provider of service is located in the taxable territory,
b)    The recipient of service is located outside India,
c)     The service is not a service specified in section 66D of the Finance Act,
d)    The place of provision of the service is outside India,
e)    The payment for such service has been received by the provider of service in convertible foreign exchange, and
f)     The provider of service and receipt of service are not merely establishments of a distinct person in accordance with item (b) of the Explanation 3 of clause (44) of section 65B of the Act.
(2) Where any service is exported, the Central Government may, by notification, grant rebate of service tax or duty paid on input services or inputs, as the case may be, used in providing such service and the rebate shall be allowed subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification.

It is submitted that presently Notification no. 39/2012-ST dated 20.06.2012 prescribes the conditions, limitations and procedures for claiming the rebate of service tax on export of service. Furthermore, one of the conditions for claiming rebate of service tax under this notification is that no cenvat credit has been availed of the inputs or input services on which rebate has been claimed thereby ensuring that no double benefit is being taken by the exporter. They submit that the refund of service tax filed by them under the notification no. 41/2012-ST dated 29.06.2012 is with respect to input services used for the export of goods in pursuant to section 93A of the Finance Act, 1994 and not under Service Tax Rules, 1994. Moreover, the refund of specified services that is admissible under the notification no. 41/2012-ST dated 29.06.2012 is with respect to taxable services availed beyond the place of removal for the export of said goods. On the contrary, they have filed refund of accumulated credit of inputs/input services used up to the factory gate. As such, the denial of the refund claim of accumulated credit under Rule 5 by wrongly invoking the proviso to Rule 5 of the Cenvat Credit Rules, 2004 is totally erroneous and deserves to be quashed.            
11.          Aligning with the above, it is also worth noting that even prior to 01.07.2012, the prohibition as regards simultaneous availment of refund of accumulated credit under Rule 5 and the rebate of service tax was only applicable for the rebate of service tax under the Export of Service Rules, 2005. The proviso did not restrict availment of the refund of service tax under section 93(1) of the Finance Act, 1994 on the input services used for export of goods. The erstwhile proviso to Rule 5 is produced for the sake of convenient reference as follows:-
Provided that no refund of credit shall be allowed if the manufactureror provider of output service avails of drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995, or claims rebate of duty under the Central Excise Rules, 2002, in respect of such duty; or claims rebate of service tax under the Export of Service Rules, 2005 in respect of such tax.

Further, under the Export of Service Rules, 2005, rebate of service tax was governed by Rule 5 of the said Rules, which stated that:-

Rule 5 Rebate of service tax:-
Where any taxable service is exported, the Central Government may, by notification, grant rebate of service tax paid on such taxable service or service tax or duty paid on input services or inputs, as the case may be, used in providing such taxable service and the rebate shall be subject to such conditions or limitations, if any, and fulfilment of such procedure, as may be specified in the notification.

It is further worth noting that Notification no. 12/2005-ST dated 19.04.2005 governed the rebate of service tax under Rule 5 of the Export of Service Rules, 2005 whereby the conditions, limitations and procedure for claiming the said rebate claim was prescribed. It is also worth observing that at that material time, there existed separate notification no. 52/2011-ST dated 30.12.2011 for grant of refund of service tax on the specified services used for the export of goods which was under section 93(1) of the Finance Act, 1994 and not under the Export of Service Rules, 2005 or the Service Tax Rules, 1994. As such, from the inception, the proviso to Rule 5 of the Cenvat Credit Rules, 2004 prohibited rebate claim of service tax under the Export of Service Rules, 2005 or the Service Tax Rules, 1994. Therefore, the said restriction cannot be made applicable to refund of service tax claimed under section 93A of the Finance Act, 1994 when there is no such prohibition expressly mentioned. Hence, the impugned show cause notice proposing to reject the refund claim is not at all tenable and deserves to be set aside.

12. They further submit that the impugned show cause notice has been issued by wrongly invoking the proviso to Rule 5 of the Cenvat Credit Rules, 2004. They submit that first and foremost, the proviso does not has mention of the rebate claim filed under the provisions of Finance Act, 1994 and only covers the rebate claim filed under Rule 6A of the Service Tax Rules, 1994 concerning with export of service. As such, the refund claim filed by them in terms of provisions of section 93A of the Finance Act, 1994 under notification no. 41/2012-ST dated 29.06.2012 for specified services used for export of goods cannot be reason to deny refund of accumulated credit filed by them. Furthermore, it is also worth mentioning that they have filed refund claim under notification no. 41/2012-ST which was duly sanctioned to them as found to be proper. This means that they have fully complied with the formalities and conditions of the said notification no. 41/2012-ST including the non-availment of cenvat credit of the specified services of which refund has been sanctioned to them. Furthermore, the refund of service tax under the notification no. 41/2012-ST is admissible on services availed after clearance of goods from the factory gate to the port of export and the refund of accumulated credit filed by them under Rule 5 of the Cenvat Credit Rules, 2004 is with respect to services upto the factory gate, i.e., before clearance of goods for export and also pertains to certain services availed with respect to import of goods. They submit that they are eligible to avail the input service credit for the services availed for import of goods and no refund claim has been filed or sanctioned with respect to said services availed by them. This fact that the accumulated credit of which refund is being filed pertains to services availed till the factory gate, a copy of invoices is being enclosed with the reply. Moreover, they are also enclosing the copy of invoices on which input service tax credit has been availed pertaining to import of service along with the copy of relevant bill of entry. Therefore, the impugned show cause notice proposing to deny the refund claim is totally baseless and deserves to be dropped.

13. In continuation to the above, they wish to place reliance on the decision given by the Delhi Tribunal in the case of M/s Infosys Technologies Ltd. Vs Commissioner of Central Excise, Chandigarh [2014-TIOL-693-CESTAT-DEL] wherein it was held that:-
ST - Export of Services - Refund of accumulated CENVAT Credit - Procedure prescribed and the conditions to be fulfilled for claim of cash refund of accumulated CENVAT Credit under Rule 5 of the CCR, 2004 and for claiming rebate in respect of export of services in term of Rule 5 of the Export of Service Rules, 2005 are totally different - lower authorities mixing up the two issues - notification 12/2005-ST issued u/r 5 of Export of Service Rules, 2005 has no application in the present case - order set aside and matter remanded to original authority.
 
They submit that this case also concludes that the refund under Rule 5 of the Cenvat Credit Rules, 2004 and rebate claim are totally different and the said issues should not be mixed. Accordingly, the refund claim filed under Rule 5 of the CCR, 2004 should not be rejected merely because refund claim has been filed by the assessee. The refund claim under Rule 5 of the CCR, 2004 should be independently processed and should not be mixed with the rebate claimed filed by the assessee. In view of the same, the impugned show cause notice proposing to reject the refund claim of accumulated credit blindly without even examining the provisions of Rule 5 of the CCR, 2004 should be quashed and the refund claim filed by them should be sanctioned at the earliest possible.
 
14. Aligning with the above, they submit that when it has been established that no double benefit is being availed, the restrictions provided for refund claims should not be interpreted liberally. In this regard, they also wish to place reliance on the decision given by the Delhi Tribunal in the case of COMMISSIONER OF C. EX., ROHTAK VERSUS INDO DANE TEXTILE INDUSTRIES[2007 (213) E.L.T. 117 (Tri.-Del)]wherein it has been held that there is no embargo in claiming the refund of accumulated credit of Additional Excise Duty even when the rebate claim was filed with respect to goods exported by the assessee because it was established that no Additional Excise Duty was payable on the goods exported and so the rebate claim sanctioned was not with respect to Additional Excise Duty.

The synopsis of the case is produced for the sake of convenience as follows:-

Refund - Cenvat/Modvat - Unutilised Cenvat credit of additional excise duty as final product not subject to additional excise duty - Goods exported on payment of basic excise duty and rebate granted only in respect of ‘duty paid’ - Additional excise duty not being payable on final product, no rebate paid in respect of this duty - Accordingly, assessee not debarred for claiming refund of such additional excise duty under Rule 5 of Cenvat Credit Rules, 2002 - Refund admissible- Rules 18 and 19 of Central Excise Rules, 2002 - Rule 5 of Cenvat Credit Rules, 2004. - In the present case, admittedly, there were no exports without payment of excise and therefor, Rule 19 had no applicability. Thus, no question had arises of execution of bond as required by Notification No. 42/2001-C.E., dated 26-6-2001 issued under Rule 19(3). They admittedly exported the goods by payment of excise duty which was done by adjusting the basic excise duty which was payable under the Central Excise Act, 1944, for which the rebate claim was made under Rule 18. Rebate is granted ‘of duty paid’ on the excisable goods, as contemplated by Rule 18. No additional excise duty was payable on the final products and therefore, rebate could have been claimed only in respect of the duty paid which was the specific excise duty relatable to Rule 18 read with Section 3 of Central Excise Act, 1944. No application for rebate of additional excise duty which was paid on the inputs, was made under Rule 18 read with Section 3 of Additional Duties of Excise (Textiles and Textile Articles) Act. Therefore, an application for refund of such additional excise duty by way of Cenvat credit in the account of the respondents could be made under Rule 5 of Cenvat Credit Rules by these respondents. They were not debarred under the proviso to Rule 5 because they had not claimed rebate of  additional excise duty under Rule 18. The facts clearly disclose that there was ample evidence to show that the inputs were used in the final product which was exported on payment of duty. Thus, refund is admissible. [paras 8, 9]
They submit that it was concluded in this case that the refund of accumulated credit of additional excise duty is admissible even if rebate was claimed by the assessee because it was established that the rebate sanctioned did not contain rebate of additional excise duty. Similarly, in their case, the refund of accumulated credit filed by them pertains to credit of inputs/input services upto factory gate and those pertaining to import of goods for which refund has not been claimed by them under the notification no. 41/2012-ST because refund under the said notification is allowed for post removal services used for export of goods. As such, the benefit of above cited decision should be extended to them. It is also worth mentioning that the above cited decision has also been affirmed by the Punjab and Haryana High Court having citation as COMMISSIONER OF C. EX., ROHTAK VERSUS INDO DANE TEXTILE INDUSTRIES [2012 (275) E.L.T. 189 (P & H)] wherein the appeal filed by the revenue department was dismissed as devoid of merits. Hence, the impugned show cause notice should be quashed and the refund filed by them should be allowed without any further delay.

15. They also wish to further submit that there is no embargo in claiming two different benefits, i.e., credit availment with respect to input services upto the factory gate and pertaining to import of goods and refund claim for the input services from the factory gate to the port of export pertaining to goods exported. As such, the allegation of the impugned show cause notice is not sustainable. In this regard, they also wish to place reliance on the decision given by the Revisionary Authority in the case of Mars International [2012 (286) E.L.T. 146 (G.O.I.)] wherein it was held that:-
Rebate - Drawback - Simultaneous availment of drawback of duty under Section 75 of Customs Act, 1962 and rebate of duty under Rule 18 of Central Excise Rules, 2002 - Applicant claimed and got drawback under All Industry Rate only of Customs portion and no drawback in respect of Central Excise duty allocation under the All Industry Rate of drawback has been claimed - Rebate claim is governed under Notification No. 40/2001-C.E. (N.T.) wherein no exporter debarred from rebate in case the party exported the goods under claim of drawback, under All Industry Rate in force - Allowing rebate of duty paid on finished exported goods and drawback of Customs portion will not amount to double benefit - Matter remanded back to original authority for sanctioning rebate, if applicant has availed drawback of only Customs portion and claim is also otherwise in order. [paras 8, 9, 10, 11]
 In the above cited case, the rebate claim filed by the appellant was proposed to be rejected as declaration as regards non-availment of drawback was violated. It was concluded that allowing rebate of duty paid on finished goods and drawback of customs portion will not amount to double benefit and so appeal was allowed by way of remand. Similarly, it is submitted that if refund of specified services after removal of goods from the factory to the port of export is being claimed along with refund of accumulated credit of inputs/input services availed upto the factory gate, there is no double benefit and so the impugned show cause notice proposing to reject their refund claim by wrongly invoking the provisions of proviso to Rule 5 of the Cenvat Credit Rules, 2004 is bad in law and is liable to be quashed.

16. It is further submitted that the impugned show cause notice also proposes to impose penalty under Rule 15 of the Cenvat Credit Rules, 2004 read with section 11AC of the Excise Act. In this regard, they submit that the provisions of Rule 15 of the Cenvat Credit Rules, 2004 have been erroneously invoked in the present case because there is no wrong availment or utilization of cenvat credit and rather refund claim is being filed by them. The provisions of Rule 15 of the Cenvat Credit Rules, 2004 are produced for the sake of convenient reference as follows:-
Rule 15.  Confiscation and penalty.-(1) If any person, takes or utilises CENVAT credit in respect of input or capital goods or input services, wrongly or in contravention of any of the provisions of these rules, then, all such goods shall be liable to confiscation and such person, shall be liable to a penalty not exceeding the duty or service tax on such goods or services, as the case may be, or two thousand rupees, whichever is greater.

(2) In a case, where the CENVAT credit in respect of input or capital goods or input services has been taken or utilised wrongly by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of the Excise Act, or of the rules made thereunder with intent to evade payment of duty, then, the manufacturer shall also be liable to pay penalty in terms of the provisions of section 11AC of the Excise Act.

(3) In a case, where the CENVAT credit in respect of input or capital goods or input services has been taken or utilised wrongly by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of these rules or of the Finance Act or of the rules made thereunder with intent to evade payment of service tax, then, the provider of output service shall also be liable to pay penalty in terms of the provisions of Section 78 of the Finance Act.

(4) Any order under sub-rule (1), sub-rule (2) or sub-rule (3) shall be issued by the Central Excise Officer following the principles of natural justice.
On analysing the above provisions, it is crystal clear that penalty under this Rule is imposable only if the cenvat credit has been taken or utilized wrongly in contravention of the provisions of law. However, this is not the issue in the present case because the impugned show cause notice has not questioned or disputed the eligibility of cenvat credit. Rather, the present case pertains to refund of accumulated cenvat credit and it is settled principle of law that credit eligibility cannot be questioned at the time of processing refund claim. As such, when there is no allegation of wrong availment of cenvat credit, the penal provisions under Rule 15 cannot be invoked and the impugned show cause notice proposing to impose penalty is liable to be quashed. 

14. Moreover, mere stating the Rule is not sufficient and rather, the specific clause along with proper reasoning is required to be given in the show cause notice so as to impose penalty on the assessee. In this regard, reliance is placed on the recent judgment of Hon’ble Madras High Court, wherein the appeal filed by the Revenue for imposition of penalty under section 11AC was dismissed on account of the fact that there was no discussion as regards the various requirements which are necessary for the purpose of levy of penalty under Section 11AC of Central Excise Act 1944. The citation and the synopsis are reproduced as follows for the sake of convenient reference:
 
·         CCE Vs M/s Crocodile India Pvt. Ltd. [2013-TIOL-518-HC-MAD-CX]:
CE - Reversal of CENVAT Credit before issue of Show Cause Notice - SCN does not detail grounds for imposing penalty application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section - No penalty : A cursory reading of the notice shows that except for mere reference to the proposal to levy penalty under Section 13(1) of CENVAT Credit Rules, 2002, there is no discussion as regards the various requirements which are necessary for the purpose of levy of penalty under Section 11AB of Central Excise Act 1944. The Apex Court pointed out that the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable, the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. In so holding, the Apex Court held that in every case of non payment or short payment of duty, penal provisions cannot be automatically invoked; in other words, the conduct of the assessee in each of the case, before imposing penalty, has to be looked at on the bona fides of the assessee as regards his claim which otherwise would not be sustained in law. - Revenue Appeal Dismissed : MADRAS HIGH COURT.

In the present case also, mere reference has been made to the provisions of Rule 15 without even specifying the clause under which penalty is imposable on them. As such, no penalty is imposable on them under Rule 15 and the impugned show cause notice should be quashed.
 
Reasoning of Judgment:The adjudicating authority noted that the assessee filed refund claim of Rs. 7,806/- under the provisions of Rule 5 of the CENVAT Credit Rules, 2004 read with notification no. 27/2012-CE (N.T.) dated 18.06.2012 in respect of unutilized CENVAT credit accumulated during the period from October, 2013 to December, 2013. The claim was filed on the ground that they are registered as a 100% EOU. They have availed credit of duty paid on inputs and input services. They are not able to utilize the same and as such, the same is remaining unutilized in their CENVAT credit account. As per Rule 5 of the CENVAT Credit Rules, 2004, refund is granted in such cases. As per Notification No. 27/2012-CE (N.T.) dated 18.06.2012, they fulfill all the conditions.
They find that the show cause notice is proposing rejection of the refund claim amounting to Rs.3745/- on the ground that the assessee has already claimed and received Rs. 16223/- as refund on taxable services on the shipping bills for relevant period at the port of export at the time of export, as rebate available under para 2 of notification no. 41/2012-S.T., dated 29.6.12 and also claimed refund of Rs. 3745/- on input services during the quarter Oct, 2013 to Dec, 2013. As per the notification 41/2012-ST stipulates that no further rebate shall be claimed in respect of the specified services, under procedure specified in para 3 or in any other manner, including the rebate obtained is less than the service tax paid on the specified services and shipping bill or bill of export on which rebate has been claimed on the basis of rate specified in schedule, by way of procedure specified in this para, shall not be used for rebate claim on the basis of documents, specified in para 3 and also no CENVAT credit of service tax paid on the specified services used for export of goods has been taken under the CENVAT Credit Rules, 2004.
They find from the documents submitted with claim that the assessee has taken credit on GTA service, Consultancy service, service charge for Import of shipment and handling fee for Import of shipping totaling to Rs. 3745/- during the quarter, that the services related to services used in the factory for manufacture of exported goods. They find that the assessee has not taken credit on services used like terminal handling charges, bill of lading charges, agency charges, insurance charges and freight from factory gate to the port for export of goods and for which assessee has claimed benefit under notification no. 41/2012-ST, dated 29.6.2012. From the above they find that the assessee has taken credit only of input services used in the factory and on the services used in relation to import of goods and not the services used beyond the place of removal, for export of manufactured goods. Thus they find that no cenvat credit of service tax paid on the specified services used for export of goods has been taken under the Cenvat Credit Rules, 2004.
From the above it is clear that service tax credit taken on input services used in the factory for manufacture of exported goods and on the services used in relation to import of goods for goods manufactured can be refunded as per Rule 5 of the CENVAT Credit Rules, 2004. At the same time assessee can also avail benefit under notification no. 41/2012-ST, dated 29.6.2012 for specified services used in export of goods after “place of removal”. Therefore, they find that the refund is admissible to the assessee on input services used in the factory for manufacture of exported goods.
As per the provisions of Rule 5 of the CENVAT Credit Rules, 2004, the manufacturer is entitle for refund of cenvat credit in respect of the input as well as input services used in the manufacture of the final product which is cleared for export under Bond or LUT as the case may be, subject to such safeguards, conditions and limitations as may be specified in the notification no. 27/2012-CE (NT) dated 18.6.2012 issued under the said rule. The adjudicating authority noted that the assessee has complied with all the essential conditions as prescribed under the notification no. 27/2012-CE (NT) dated 18.06.2012.
They also find that an amount of Rs. 5,25,565/- was lying in balance as input credit at the end of quarter and an amount of Rs. 5,57,702/- was lying on the day of filing of the refund claim. Therefore they hold that the amount of refund claimed is not more than the amount lying in balance at the end of quarter for which refund claim is made or at the time of filing of the refund claim. They further find that the claimant has debited amount of Rs. 8057/- i.e. Rs. 4312/- from his Cenvat credit account vide RG23A part II entry no. 01/02.09.2014 and Rs. 3745/- from service tax credit register entry no. 8/02.09.2014.
The claim has been filed within the time limit of one year as provided under the provisions of section 11-B of the Central excise act, 1944. The doctrine of unjust enrichment is not applicable in this case in terms of clause (c) of the first proviso to section 11B (2) of Central excise act, 1944, as the same is a refund of Cenvat credit accumulated of duty paid on excisable goods used as inputs as well as inputs services in accordance with the rules made, or any notification issued ibid.
Thus in this view, they hold that refund of unutilized CENVAT credit of Rs. 7,806/- is admissible to the assessee in cash.
 
Decision:-SCN dropped.

Conclusion:- The ratio of this decision is that an exporter assessee is eligible to simultaneously avail the benefit of rebate of service tax under notification no. 41/2012-ST dated 29.06.2012 for specified services used for manufacture of goods that are exported and avail the benefit of accumulated credit if it is substantiated with evidences that the credit availed pertains to inputs/input services availed upto the factory gate or are not related to input services for which rebate claim has been filed. The reason for the same being that the rebate of service tax under notification no. 41/2012-ST dated 29.06.2012 is with respect to specified services availed from the factory gate to the port of export whereas the refund under Rule 5 pertains to the inputs/input services used upto the factory gate. Hence, there is no double benefit claimed by the assessee. Moreover, the condition of the notification no. 41/2012-ST dated 29.06.2012 that no cenvat credit should be availed for the input services for which rebate is being claimed itself ensures that no double benefit is availed by the assessee.

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