Dr. Sanjiv Agarwal

Refund under Rule 5B of Cenvat Rules

Rule 5B has been inserted in Cenvat Credit Rules, 2004 w.e.f. 01.07.2012 vide Notification No. 28/2012-CE(NT) dated 20.06.2012. Under Rule 5B, inserted w.e.f. 1.7.2012 vide Notification No. 28/2012-CE (NT) dated 20.6.2012, refund of Cenvat Credit will be allowed to service providers providing services on reverse charge basis. The service providers providing services specified in section 68(2) and being unable to utilize Cenvat credit availed on inputs and input services for payment of Service Tax on such output services shall be allowed refund of unutilized cenvat credit. For claiming such refund of credit, CBEC shall notify safeguards, conditions, procedures and limitations.

Government has now issued Notification No. 12/2004-CE(NT) dated 03.03.2014 for implementation of Rule 5B which provides for safeguards, conditions and limitations for claiming refund under rule 5B of Cenvat Credit Rules, 2004, alongwith application form / declaration to be submitted to the jurisdictional office of Central Excise.

CBEC has notified the procedure for filling refund application by service provider under Rule 5B of the Cenvat Credit Rules 2004 for claiming refund of unutilized Cenvat credit availed on inputs and input services received on and after July 1, 2012 in respect of only the following specified services under partial reverse charge mechanism:

a) renting of a motor vehicle designed to carry passengers on non-abated value, to any person who is not engaged in a similar business;

b) supply of manpower for any purpose or security services; or

c) service portion in the execution of works contract

How to claim refund of unutilized Cenvat credit

Refund of unutilized Cenvat credit taken on inputs and / or input services shall be claimed on a half yearly basis. Refund claims are required to be submitted in prescribed ‘Form-A’ to the jurisdictional Assistant / Deputy Commissioner of Central Excise, as the case may be, before the expiry of one year from the due date of filing of return for the half year. However, since the notification has been issued late, it has been provided that last date of filing of refund claim in ‘Form-A’ for the period commencing form 1st July 2012 to 30th September, 2012 shall be 30th June, 2014. No refund shall be admissible for the Cenvat credit taken on inputs or input services received prior to 1st July 2012.

Assessees should note that following conditions must also be complied with –

a) Only one refund claim should be submitted and assessee shall not submit more than one claim for every half year under this notification / rule 5B.

b) Filing of return is compulsory and refund shall be filed after filing Service Tax return. If no return is filed, no refund claim is allowed and if filed, may be rejected.

c) Half year would mean a period of six consecutive months with first half year beginning from 1st April every year and second half year beginning from 1st October every year.

d) If more than one return is required to be filed for any half year, the time limit of one year shall be ascertained from due date of filling of return for later period. Thus, where, say, two quarterly returns are required to be filed in any half year, one year shall be computed from end of due date of filing second quarter return.

e) Refund claim should be accompanied by copy of respective half yearly return for which refund is being claimed.

How to compute refund amount

For claiming refund under rule 5B of the Cenvat Credit Rules, 2004, amount shall be computed as under:

Unutilised Cenvat credit taken on inputs and input services during the half year for providing partial reverse charge services = (A) (B)


A = Cenvat credit taken on inputs and input services during the half year (*) turnover of output service under partial reverse charge during the half year
total turnover of goods and services during the half year
B = Service tax paid by the service provider for such partial reverse charge services during the half year;

 The refund amount shall be subject to following further conditions:

a) the refund of unutilised Cenvat credit shall not exceed an amount of service tax liability paid or payable by the recipient of service with respect to the partial reverse charge services provided during the period of half year for which refund is claimed;

b) the amount claimed as refund shall be debited by the claimant from his Cenvat credit account at the time of making the claim;

c) in case the amount of refund sanctioned is less than the amount of refund claimed, then the claimant may take back the credit of the difference between the amount claimed and the amount sanctioned;

Action on Application

The Assistant Commissioner or Deputy Commissioner to whom the application for refund is made may call for any document in case he has reason to believe that information provided in the refund claim is incorrect or insufficient and further enquiry needs to be caused before the sanction of refund claim. At the time of sanctioning the refund claim, the Assistant Commissioner or Deputy Commissioner shall satisfy himself or herself in respect of the correctness of the refund claim and that the refund claim is complete in every respect. After due verification and scrutinizing with records, refund shall be sanctioned and released. The refund claim may also be sanctioned partly and balance rejected.

Author Bio

Qualification: CA in Practice
Company: Agarwal Sanjiv & Company
Location: Jaipur, Rajasthan, IN
Member Since: 03 Oct 2019 | Total Posts: 343

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  1. Dr. Anil Suneja says:

    Dr. sanjeev, I have query. Electricity companies are paying input service tax on various services such as consultancy, man power etc sale of electricity generated or traded is not subject to Excise Duty. Input service tax makes the cost of electricity costly. Is there any notification which may make the company not to pay input service tax? Regards

  2. vikas khandelwal says:

    sir i have deposited 50% reverse charge of service tax for works contract(constraction co.) .
    and my real stat co. how to claim reverse charge of service tax

  3. Rajeev says:

    How to claim refund for service tax paid for income under exempt category – healthcare?
    The notification number 33/2012 dt 20.6.2012 is rejected by the web-proforma on the govt portal. It incorrectly shows a message that it has to be entered in ‘mmm/yyyy’ format. Month cannot be in 3 numbers!
    The help line on the webpage does not function. Email written to the department does not elicit any reply.

  4. M.M.Rajendra says:

    Dear sir,
    Whether this refund is admissible to the person who are eligible to avail the credit or all the persons liable for payment of Service Tax?
    Illustration – One manufacturer ‘X’ of dutiable goods like m v parts paid service tax under partial reverse charge under manpower supply service is eligible for credit but can not utilize the same because of having export clearances.
    And other manufacturer ‘Y’ of exempted goods like cotton yarn, paid service tax under partial reverse charge under manpower supply service is not eligible for credit but can not utilize the same because of nil duty on product.
    Whether BOTH X & Y are eligible for refund under rule 5B of CCR,2004?

  5. vswami says:

    It is noted that the expert Dr. has eloquently explained the aspects of govt. notification on refund to service provider a/c credit being allowed for offset- including in respect of service portion in the execution of works contract.However, from the viewpoint of serviced,it could have been usefully made clear whether he is entitled to eventually get the benefit of such refund in any manner, and if so, is there mechanism, foolproof at that, if any inbuilt, so as to take care of such concern.
    Dr. may care to throw light on the point of doubt already re4aised in another context herein itself; that is on the premise, as otherwise the service provider would be at an advantage, commonly known as ‘unjust enrichment’. Should one remember right,subject to a fresh look, a similar concern came to be adjudicated decades ago in respect of refund of excise duty to a manufacturer (was it Voltas’ case ?)in more or less like situation.

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May 2021