2024-VIL-367-CESTAT-ALH-ST
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SERVICE TAX CESTAT Cases

Service Tax – Section 73 of Finance Act, 1994 – Rules 5 and 14 of Cenvat Credit Rules, 2004 – Export of services – Availment of cenvat credit – Rejection of refund claim – Appellant is engaged in exporting Information technology Software Services – Appellant filed refund claims under Rule 5 of the Rules for refund of cenvat credit taken on inputs/input services used for export of services – On verification, adjudicating authority found that Appellant was also providing such taxable services to own DTA units for which service considerations were received in name of salary and other allowances, but did not pay service tax on such service value – Adjudicating authority also observed that if Appellant would have discharged his service tax liability properly, there would not have been any accumulated cenvat credit for claiming refund – Adjudicating authority rejected refund claims and disallowed Cenvat Credit wrongly taken on ineligible input services and also order for recovery of said amount under Rule 14 of the Rules – Whether Adjudicating authority is justified in rejection of refund claim and denial of CENVAT Credit on ground of non-payment of service tax – HELD –Entire case against Appellant is based on fact that Appellant had been recovering certain amounts from their own units located in DTA towards salary and allowances – Revenue holds the view that these amounts are towards services provided by them to their units in DTA, and hence leviable to service tax and as Appellant had not paid any service tax in respect of these services, amounts claimed as refund of accumulated credit would not be admissible as same would have been used for payment of service tax – Refund of accumulated cenvat credit has been rejected for reason of non-payment of service tax on amounts received by Appellant from their DTA units – In case revenue authorities were of view that certain amount of tax due was not paid by Appellant, proper course would have been to confirm demand under Section 73 of the Act and recover amount so confirmed, from amounts admissible as refund to Appellants by appropriating same against amounts confirmed – Instead of confirming demand of service tax, adjudicating authority not only denied refund claim, but also denied Cenvat Credit of amount claimed as refund of accumulated ground for reason that same has not been utilized for payment of service tax due – Non-payment of some amounts towards due service tax liability cannot be a reason for denial of CENVAT Credit or refund under Rule 5 of the Rules – Order under challenge is set aside – Appeals allowed
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