Interest allowable on Cenvat Credit refund after expiry of 3 months from date of filing claim to date of claim

HCL Technologies Ltd. Vs Commissioner of Central Excise (CESTAT Allahabad)

Conclusion: Interest for period after 3 months refund of 19 crores of cenvat credit was allowable after expiry of three months from the date of filing the claim to the date of claim. In the present case refund claim was filed on 27.12.2012 the period of three months will be over on 26.03.2013. They would be entitled to the interest for the period beyond 26 March, 2013 to the date of payment i.e. 21.05.2013, which was about 55 days.

Held: In the present case assessee-company had filed a refund claim of Rs.19 Crores and refund of the same amount i.e. Rs.19 crores, had been allowed by the Assistant Commissioner, Customs, Noida. When the amount as claimed and the refund claim filed had been sanctioned in toto where could there be any further dispute arisen, for assessee to be aggrieved with. Rule-5, as amended in 2012, did not require the refund claim filed by assessee, to be examined determining admissibility of credit against which refund claim was filed. It only required examination of the refund claim vis-à-vis the whole credit availed during the quarter and the total turnover and the export turnover having on the basis of such examination even after allowing certain amounts inadmissible for refund Assistant Commissioner had in the present case concluded the entire amount of refund claim of Rs.19 Crores was admissible to assessee and had allowed the same. It could not be that the order did not decide the admissibility of credit which could have been questioned only by way of a show cause notice in terms of Section 14 as has been held by various decisions referred in submissions of the Counsel. However, in the present case even after considering that amounts to be ineligible for refund. Assistant Commissioner by applying the formula as prescribed by Rule 5 had concluded that admissible refund to assessee was same as the refund claimed by assessee and had allowed the refund of entire amount as claimed by assessee. As the amount of refund allowed was equal to the amount as claimed by assessee, the assessee could not have been aggrieved by the order of the Assistant Commissioner. In absence of any proceedings under Rule 14 of Cenvat Credit Rules, 2004 observations recorded by Assistant Commissioner were only in nature observation could not be taken as denial of the credit. Even Assistant Commissioner had nowhere said so she only find this amount to ineligible for refund, but even after holding them to be ineligible for refund has allowed the refund claim filed by the appellant in toto. Appellant filed an appeal before the Commissioner (Appeals) not against the order of the Assistant Commissioner but against these observations made in the discussions and findings of the order. Commissioner (Appeals) modified these findings without any change in order portion which in any case was in accordance with the claim made by assessee. Revenue has not filed any appeal either before Commissioner (Appeals) or before this Tribunal for seeking modification of the refund of Rs.19,00,00,000/- (rupees Nineteen Crores only) allowed by the Assistant Commissioner. Assessee had claimed interest as per Section 11BB. As per Section 11BB interest is to be paid after expiry of three months from the date of filing the claim to the date of claim. In the present case refund claim was filed on 27.12.2012 the period of three months will be over on 26.03.2013. They would be entitled to the interest for the period beyond 26 March, 2013 to the date of payment i.e. 21.05.2013, which was about 55 days. To that extent appeal was allowed in favour of assessee.

FULL TEXT OF THE CESTAT ALLAHABAD ORDER

This appeal is directed against Order-in-Appeal No. NOI/EXCUS/000/APPL/197/2013 dated 30/09/2013 passed by Commissioner (Appeals) Customs, Central Excise & Service Tax, Noida. By the impugned order Commissioner (Appeals) has held as follows:-

ORDER

(i) The credit of service tax in respect of Pest Control Service is allowed to the appellants subject to the verification of the relevant documents and observance of the procedure and terms and conditions as laid down under the law at the relevant time.

(ii) The appeal in respect of the rest of the claim is rejected on merits.”

2.1 Appellant have filed a refund claim of Rs.19,00,00,000/- on 27.12.2012 in terms of Rule 5 of Cenvat Credit Rules, 2004 read with Notification No.05/2006-CE(NT) dated 14.03.2006 for the period January, 2012 to March, 2012.

2.2 Taking note of the verification report dated 28.03.2013 submitted by the Superintendent Service Tax, Noida, a show cause notice dated 30.04.2013 was issued to the appellant, asking them to show cause as to why their refund claim to the extent of Rs.23,39,587/- may not be rejected for the reasons that certain credit which has been claimed as refund claim under Rule 5 was not admissible to them.

2.3 This show cause notice was adjudicated by the Assistant Commissioner Central Excise, Noida vide order dated 21.05.2013 by holding as follows:-

“ORDER

I, hereby, Sanction the refund claim of Rs.19,00,00,000/- (Rupees Nineteen Crore Only) to M/s HCL Technologies Ltd., A-10-11, Sector-3, Noida in terms of Circular No.120/01-ST dated 19.01.2010 as discussed above, under rule 5 of CENVAT Credit Rules, 2004 read with Notification No.05/2006-CE(NT) dated 14.03.2006 A cheque bearing No.494540 dated 21.05.2013 of Rs.19,00,00,000/- is enclosed.”

2.4 Aggrieved by the above order appellant filed appeal before the Commissioner (Appeals), which has been disposed of the appeal by the impugned order. Aggrieved appellants have filed this appeal.

3.1 We have heard Shri Atul Gupta learned Counsel appearing for the appellant and Shri Manish Raj learned Authorised Representative appearing for the revenue.

3.2 Arguing for the appellant learned Advocate submits that-

• Eligibility of Cenvat Credit cannot be questioned at the stage of refund. As has been held in following decisions:-
  • Gemini Software Solutions Pvt. Ltd. Vs Commissioner of Central Excise, Customs and Service Tax, Trivandrum, 2020 (1) TMI 844-CESTAT Bangalore.
  • Microsoft Global Services Center (India) Pvt. Ltd. and Microsoft India (R&D) Pvt. Ltd. Vs Commissioner of Customs, Central Excise & Service Tax, Hyderabad-IV, 2021 (44) GSTL 264 (Tri.-Hyd.).
  • HCL Comnet Systems and Services v. CC & CE & ST, Noida, 2016 (8) TMI-1236-CESTAT ALLAHABAD, upheld by the Hon’ble Allahabad High Court vide 2017 (12) TMI 1661 – Allahabad High Court
  • Allied Chemical & Pharmaceuticals Pvt. Ltd. vs. CCE & ST, Jaipur-1, 2019 (2 TMI 849 CESTAT NEW DELHI
  • Computer Science Corporation India Pvt. Ltd. v. CCE, Noida, 2017 (7) TMI 760-CESTAT ALLAHABAD
  • CCE, NOIDA v. Free Scale Semiconductors India (P) , 2017 (4) TMI 1238 – CESTAT ALLAHABAD
  • EXL Com(India) Pvt. Ltd. v. CCE, Noida, 2017 (8) TMI 1002 – CESTAT ALLAHABAD
  • EXL Service Com (India) Pvt. Ltd. v. CCE, Noida, 2017 (10) TMI 1058 – CESTAT NEW DELHI.

• Objection of jurisdiction cannot be raised any stage of the litigation as held by following decisions:-
  • Macnair Exports (P) Ltd. v. Commissioner of Customs, Cochin, 2002 (142) E.L.T. 593 (Tri-Bang lore)
  • Commissioner v. Macnair Exports (P) Ltd., 2013 (152) E.L.T. A87 (S.C)
  • Nylex Traders v. Commissioner of Customs (Preventive), Mumbai, 2011 (274) E.L.T. 71 (Tri-Mumbai)

• Refund should be allowed along with interest. Reliance can be placed on the following decisions:-
  • Ranbaxy Laboratories Ltd v. UOI & Ors, 2011 (10) TMI 16 (Supreme Court)
  • Comm. of Customs & Central Excise v. J.K Drugs & Pharmaceuticals, 2013 (29) STR 634 (All.)
  • Bright Engineering Works Erstwhile 100 EOU v. C.E. & S.T.-Daman & C.C.E & S.T.-Surat, 2022 (12) TMI 720
  • C.E. & S.T. Ahmedabad -III v. Raajratna Metal Industris Ltd, 2023 (8) TMI 183
  • Commissioner of Central Excise v. Reliance Industries Ltd, 2010 (10) TMI 190 (Gujarat High Court)

3.3 Arguing for the revenue learned Authorised Representative reiterates the findings recorded in the impugned order.

4.1 We have considered the impugned order alongwith the submissions made in the appeal and during the course of arguments.

4.2 Undisputedly, in the present case appellant has filed a refund claim of Rs.19 Crores and it is evident from the Order-in-Original that refund of the same amount i.e. Rs.19 crores, has been allowed by the Assistant Commissioner, Customs, Noida and cheque for the same amount has been issued by the Assistant Commissioner to the appellant. When the amount as claimed and the refund claim filed has been sanctioned in toto where can there be any further dispute arisen, for the appellant to be aggrieved with. Might be appellant is aggrieved by certain portions of the order which are recorded in following paras-

“8.1. In the defense reply dated 6.5.2013 the exporter has withdrawn their refund claim in respect of allegations made out in para 3, 6, 13 to 17, 23, and 25 to 27. Since the refund claim amounting to Rs.53005/- pertaining to these paras has been suo moto withdrawn by them, no further discussion is required.

8.2. At serial No.1 and 9 of the show cause notice, proposal is for denial of refund of service tax paid on the charges incurred for pest control and rodent management. In their defence it has been contended by the exporter that pest control services were taken in the premises and were essential in nature. Without these services provision of any service was not to be imagined. Despite the submissions of the exporter calling these services as essential, I do not see any relationship between the pest control measures taken and the services exported. Export of services remain unaffected even if pest control measures are not under taken and hence are not essential for running the business. The exporter is not entitled to credit of Rs.33872/- and Rs.12176/-

8.3 At serial No 2 of the table of the Show cause notice dated 6.5.2013 refund on Additional Car parking has been proposed to be disallowed. I have gone through the reply of the exporter who have stated that Car parking is located within the business premises and are part of the premises of the company from where they are exporting their output service. It has also been stated by them that the same is used by the employees of the company for smooth functioning of the business. I have weighed the reply of the exporter and since it has been admittedly stated that the parking is for the use of employees, I am of the view that such facility being solely for the benefit of employees and the same cannot be said to be for the smooth functioning of their business. Thus, they are not entitled to refund of Rs.155603/- on such service.

8.4 I have examined the reply of the exporter in respect of Sl. Nos. 4 and 11 of the table of the show cause notice pertaining to refund of service tax paid on Carpet Cleaning and maintenance service. The exporter has stated that such activity, is essential to provide neat and clean environment in the office from where output service is provided. I am also of the view that cleaning services are essential for smooth functioning of any business, more so in IT industry where the services are provided on high profile Computer systems. The sensitive computer systems which are the backbone of any IT industry cannot function if the environs of the premises from where the service is provided are not clean. Thus, refund of service tax paid on such essential service cannot be denied. The exporter, is therefore entitled to refund of Rs.55396/- on such service.

8.5 I have examined the reply of the exporter in respect of allegation made out in sl number 5 of the table of the show cause notice pertaining to refund of service tax paid on charges paid for pantry boy. The exporter has stated that the service is related to Manpower supply. The vendor has supplied manpower for various supporting jobs such as offering tea coffee to the staff and other supporting service. In my view such service is solely for the convenience of the employees and is no way connected to providing output service. The exporter is therefore not entitled to refund of service tax paid on such service. The refund amounting to Rs.719/- claimed on such service is disallowed.

8.6 I have examined the reply of the exporter in respect of allegation made out in s! number 7 of the table of the show cause notice pertaining to refund of service tax paid on charges paid for Consulting (description not mentioned). In the reply the exporter has stated that the service provider has provided IT Software consultancy service and have also provided copy of invoice as well as agreement dated 9.5.2012 with them. I have examined the same and find that while the relevant invoice has been raised by one PNS Consultancy, the agreement dated 9.5.2012 is between HCL Technologies and one Mr Pradeep Srivastava. On comparing the two documents no nexus can be established that the invoice and agreement is related to each other. Thus the exporter is not entitled to refund of Rs.25750/- paid as service tax on such service.

8.7 The party has not given any reply in respect of allegation raised in sl umber 8 of the table of the show cause notice. They have also not stated anything in their support during the course of the personal hearing. Since they have nothing to say in their claim, I reject their claim of Rs.5721/- claimed on invoices mentioned in serial number 8 of the table.

8.8 I have gone through the reply of the party in respect of serial number 10 of the table of the show cause notice. According to them the invoices pertain to sewage tank cleaning (Cleaning services), drinking water testing and analysis service, maintenance service of RO for drinking water and emission testing and analysis, and noise monitoring. In my view such service are essential not only for clean environment but also for effective pollution control. Therefore, the exporter is entitled to refund amounting to Rs.76085/- paid as service tax on such service.

8.9 I have gone through their reply in respect of point number 12, 19 and 21 of the table of the show cause notice. They have stated that the service has been procured in respect of maintenance of washroom, vending machine and repair of wooden door. I have also examined the respective invoices and find that these have been raised for various maintenance and repair services. The exporter is therefore entitled to refund of Rs.21890/-.

8.10 I have gone through their reply in respect of point number 18 & 24 of the table of the show cause notice. The concerned invoices pertain to services provided by Chartered accountant firm for audit service. Apart from the bill for Internal audit service, the service provider has billed them for certain out of pocket expenses and loan staffing charges and charged service tax on the same. I am of the view that the out of pocket expenses and loan staffing charges are in relation to the audit service which is a valid input service. In terms of service tax (Determination of value rules), 2006 expenditure or cost incurred during the course of providing service shall be includible in the assessable value. Since the Service tax has been paid after including such expenditure/costs, the exporter shall be entitled to refund of Rs.47005/- and 10672/- on such out of pocket expenses and loan staffing.

8.11 Now I come to serial 22 of the show cause notice. It has been stated in their reply that garden maintenance is essential for upkeep of the office premises. It is a fact that a garden adds to the beauty of the work place but I do not see any relationship between the maintenance of garden and the services exported. Maintenance of garden is not eligible for cenvat credit and the exporter is not entitled to refund of credit of Rs.6586/-.

8.12 Now, I come to serial 20 of the show cause notice. It has been stated in their reply that they have taken office premises on rent from West Bengal Electronics Development Corporation Limited and that the premises is registered in Service Tax and that they are providing taxable services from there. Apart from Rent, WBEDCL has also recovered maintenance charge of the said premises. However, on examining the invoices produced by the party I find that no such description is forthcoming in them and the exporter has not filed any supportive document which could corroborate their version. I am therefore not inclined to grant them any relief and reject their refund claim of Rs.3554/- pertaining to such service.

8.13 I have gone through their reply in respect of point number 28 of the table of the show cause notice They have claimed Cenvat credit on invoices pertaining to Event management Service. They have stated that the Company has organized meeting/events for the purpose of conveying the direction with regard to the business policy and system of the company to its employees. They have not filed any documents of their contention and the nature of service received is not clearly forthcoming in the invoices.. Therefore, the refund of Cenvat credit involved in such invoices amounting to Rs.531859/- appears liable for rejection.

8.14 I have gone through their reply in respect of point number 29 and 30 of the table of the show cause notice It has been stated that the service has been received by them for promoting its products/services. According to them such services are specifically added in the definition of input services as they have claimed Cenvat credit on invoices pertaining to Sponsorship Services and Advertising agency. So far as the exporter’s submission regarding the essentiality of Advertisement service for promoting a Brand, product/service feature resulting in increased sales and better returns is concerned, the same is not disputed. However, the point of dispute is that whether they are entitled to refund of service tax paid on Advertisement/promotion of a particular brand (HCL) which includes several companies of the HCL group manufacturing Hardware as well. I have gone through the invoices of the services providers who have provided the advertisement services to M/s HCL Technologies and no where it has been found mentioned that the service in question pertained to promotion/sale of Software or IT Enabled services which the exporter is providing. Therefore, I am of the view that the exporter is not entitled to refund of service tax paid on such service which has been used for not just their own service but for the services/products of the other group Companies as well. Since the purpose of sponsorship service is also for the brand promotion of HCL they are not entitled for refund of service tax paid by them for sponsoring events in lieu of advertising their brand HCL which includes other group Companies as well. I therefore, disallow them refund of Rs.236559/-/- and Rs 1063135/-/- pertaining to Sponsorship service and Advertisement service respectively.

8.10 The exporter is therefore not entitled to refund of credit of Rs. 20,75,533/- on the above lines in addition to the amount of refund of Rs. 53,005/- which has been withdrawn by the exporter. Thus total amount of refund of credit to which, the exporter is not entitled is Rs.21,28,538/- (Rs. 20,75,533/- + Rs. 53,055/-).”

4.3 The aforesaid paras have challenged before the Commissioner (Appeals) and the Commissioner (Appeals) by the impugned order disposed of the appeal as indicated in para-1 above.

4.4 Rule-5, as amended in 2012, does not require the refund claim filed by the appellant, to be examined determining admissibility of credit against which refund claim is filed. It only requires examination of the refund claim vis-à-vis the whole credit availed during the quarter and the total turnover and the export turnover having on the basis of such examination even after allowing certain amounts inadmissible for refund Assistant Commissioner has in the present case concluded the entire amount of refund claim of Rs.19 Crores is admissible to the appellant and has allowed the same. It cannot be that the order do not decide the admissibility of credit which could have been questioned only by way of a show cause notice in terms of Section 14 as has been held by various decisions referred in submissions of the Counsel.

4.5 However, in the present case even after considering that amounts to be ineligible for refund. Assistant Commissioner by applying the formula as prescribed by Rule 5 has concluded that admissible refund to the appellant is same as the refund claimed by the appellant and has allowed the refund of entire amount as claimed by the appellant. The relevant paras of the order in original are reproduced below:

“8.10. …. The admissibility of the refund claim amount is calculated as under:-

8.10.1 As per verification of the Statutory auditor in Attachment V total turnover during period January 2012 to March 2012 has been shown as Rs. 8,39,94,01,356/- Export Turnover as Rs 7,60,00,42,632/-. The amount of Cenvat Credit taken during this period is Rs 38,80,51,596/- out of which the credit utilized is Rs 9,28,83,498/-. After further deducting amount of Rs 21,28,538/- from the Cenvat Credit taken during the month the maximum eligibility of refund as per formula prescribed in the Notification No.05/2006-CE(NT) dated 14.03.2006 shall be as under:

It is observed from Attachment I certificate of statutory auditor that out of total export turnover of Rs. 7,60,00,42,632/-, the exporter has not realized Rs 34,68,42,796/-. The unrealized invoices against export billings are outstanding for a period of less than one year from the date of invoice and have been included as part of export turnover billing. The exporter believes that this would be collected within the time limit prescribed. Hence the amount of Rs. 34,68,42,796/- is required to be excluded from the export turnover, since no FIR Cs have been enclosed by the exporter.

Maximum eligibility of refund in terms of the notification

5/2006-CE = 385923058 × (7600042632-346842796)

(8399401356-346842736)AX

=385923058 × 725319836

8052558560

=Rs 34,76,14,375

8.10.2 However, exporter has applied for refund of Rs. 19,00,00,000/- only which is less than closing balance of CENVAT Credit as well as as admissibility as per formula prescribed vide Notification No.05/2006-CE(NT) dated 14.03.2006 as discussed above.

9. Vide their letter dated 08.05.2013 exporter have also informed about the debit of an amount of Rs. 19,00,00,000/- which is equal to refund claimed, from their Cenvat Credit Account. In support they have submitted a copy of relevant accounting document no 5000235991 dated 27.12.2012 in compliance to Notification No 27/2012-CE (NT) dated 18.06.2012.”

4.6 We do not find any reason to interfere with the order of the Original Authority whereby the refund amount of Rs.19,00,00,000/- (rupees Nineteen Crores only) as claimed by the appellant has been allowed. As the amount of refund allowed is equal to the amount as claimed by the appellant, the appellant could not have been aggrieved by the order of the Assistant Commissioner.

4.7 In absence of any proceedings under Rule 14 of Cenvat Credit Rules, 2004 observations recorded by the Assistant Commissioner in above paras 8.1 to 8.10 of the order in original reproduced earlier are only in nature observation cannot be taken as denial of the credit. Even Assistant Commissioner has nowhere said so she only find this amount to ineligible for refund, but even after holding them to be ineligible for refund has allowed the refund claim filed by the appellant in toto.

4.8 Appellant filed an appeal before the Commissioner (Appeals) not against the order of the Assistant Commissioner but against these observations made in the discussions and findings of the order. Commissioner (Appeals) modified these findings without any change in order portion which in any case was in accordance with the claim made by the appellant.

4.9 Revenue has not filed any appeal either before Commissioner (Appeals) or before this Tribunal for seeking modification of the refund of Rs.19,00,00,000/- (rupees Nineteen Crores only) allowed by the Assistant Commissioner.

4.10 We find that appeal lies against the order and not some findings recorded in the Order-in-Original which may be relevant or irrelevant for the matter. Accordingly, we do not find any merits in the appeal

filed before either Commissioner (Appeals) or before us. It is the submission of the appellant that the refund claim for the amount filed by them has been allowed by the Assistant Commissioner, there cannot be any reason to be aggrieved by the same. In any case if this appeal was to be allowed then it would be allowing the refund claim of the appellant beyond what has been claimed by the appellant in their application for refund dated 27.12.2012.

4.11 As the show cause notice issued involved in this appeal has not invoked the provision of Rule 14, therefore, any finding regarding admissibility of CENVAT credit in the impugned Order-in-Original, the impugned Order-in-Appeal or in this Final Order will not have any effect on any proceedings, if any, regarding the admissibility of Cenvat credit.

4.12 Appellants have claimed interest as per Section 11BB. As per Section 11BB interest is to be paid after expiry of three months from the date of filing the claim to the date of claim. In the present case refund claim was filed on 27.12.2012 the period of three months will be over on 26.03.2013. They would be entitled to the interest for the period beyond 26 March, 2013 to the date of payment i.e. 21.05.2013, which is about 55 days. To that extent appeal is allowed in favour of the appellant.

5.1 Appeal is partly allowed for grant of interest for 55 days as indicated hereinabove in para 4.12. Other parts of the appeal are not maintainable.

(Pronounced in open court on- 20/10/2023)