2026-VIL-1312-CESTAT-HYD-ST
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SERVICE TAX CESTAT Cases

Service Tax – Duty paying document, Admissibility of Cenvat Credit of Service Tax paid under Reverse Charge through TR-6 challans, Refund of unutilized credit – Appellant-exporter of IT software services paid Service Tax on reverse charge basis through TR-6 challans and claimed refund of accumulated Cenvat Credit of input services for export period - Department rejected refund claim on ground of violation of Rule 9(1)(bb) of Cenvat Credit Rules 2004 - Whether Service Tax paid under reverse charge on basis of TR-6 challans can be denied by invoking Rule 9(1)(bb) - HELD – The Rule 9(1)(e) of Cenvat Credit Rules specifically recognizes challan evidencing payment of Service Tax by person liable to pay tax under RCM as prescribed document for availing credit. Department's reliance on Rule 9(1)(bb) is legally erroneous as Rule 9(1)(bb) was introduced only with effect from 01.04.2011 and refund period involved is January 2010 to March 2010 making said provision not applicable to period in dispute. Further, the Rule 9(1)(bb) applies only to supplementary invoices issued by provider of output service and appellant is not claiming credit on basis of supplementary invoices but on basis of TR-6 challans evidencing payment of Service Tax under Reverse Charge. Therefore denial of refund relating to Cenvat Credit on ground that Rule 9(1)(bb) applies is not sustainable in law - The Tribunal has consistently held in multiple decisions that Service Tax paid under reverse charge is governed by Rule 9(1)(e) and not Rule 9(1)(bb) - The rejection of refund of amount relating to Service Tax paid under reverse charge is set aside and the appeal is allowed - Service Tax - Computation of refund of Cenvat Credit using statutory formula prescribed under Notification No. 5/2006 - Adjudicating Authority applied export turnover ratio on closing balance instead of gross eligible Cenvat Credit earned during quarter - Whether refund computation adopted is consistent with statutory formula - HELD - Computation of refund adopted by authority is inconsistent with formula prescribed under Notification No. 5/2006. The appellant has demonstrated through working sheet that authority incorrectly applied export turnover ratio on closing balance instead of on gross eligible credit earned during relevant quarter resulting in excess rejection of amount. Refund requires re-computation by strictly applying statutory formula on eligible credit earned during relevant quarter. Rejection arising from incorrect computation is set aside and direction is given to recompute refund in accordance with Notification No. 5/2006 - Service Tax - Rejection of refund claim on procedural grounds relating to non-submission of invoices - Appellant subsequently placed invoices on record before Tribunal - Whether refund can be denied merely on technical grounds when substantive eligibility is otherwise established - HELD - Refund cannot be denied merely on technical or procedural grounds when substantive eligibility is otherwise established. Original Authority shall verify invoices already produced by appellant and upon verification consequential refund shall be granted. Rejection of refund amount on procedural grounds based on alleged non-submission of invoices is remanded to Adjudicating Authority solely for verification of invoices now produced.
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