Timing Difference In Availment Of CENVAT Credit Not A Ground To Deny Export Refund: CESTAT Chennai

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) on 1 July, held that refund of accumulated CENVAT credit on export of services cannot be denied merely on the ground that input service credit was availed after the date of the last export invoice of the relevant quarter, so long as the credit is otherwise admissible and remains unutilised.

Technical Member Rajeev Tandon allowed all four appeals filed by Andritz Technologies Private Limited and set aside the order of the Commissioner (Appeals), holding that the denial of refund on a timing basis under Notification No. 5/2006-CE (NT) was unsustainable. He observed:

“The issue raised in these appeals relates to denial of refund of accumulated CENVAT credit on the ground of timing of availment of credit within the quarter.”

Andritz Technologies Private Limited, had claimed refund of unutilised CENVAT credit for four quarters between October 2009 and September 2010. The refund was initially sanctioned, but the Department later sought recovery of a portion of the amount on the ground that certain input service credits had been availed after the last export invoice of the relevant quarter and were therefore ineligible under Notification No. 5/2006-CE (NT).

Rejecting the Department's stand, the Tribunal held that the relevant consideration is the total unutilised CENVAT credit available at the end of the quarter, and not the exact date of availment of admissible credit within that quarter. It observed that denying refund on the basis of a timing mismatch would introduce an artificial restriction not contemplated under the scheme.

It further held that Notification No. 5/2006-CE (NT) is a beneficial provision intended to ensure that exports are not burdened with domestic taxes and must therefore be interpreted in a manner that furthers its objective. It noted that a strict interpretation based solely on the timing of credit availment would defeat the legislative intent of making exports effectively zero-rated.

Emphasising this position, Member Tandon observed:

“I am of the view that a mere timing difference in availing admissible cenvat credit within the same quarter would not become a reason for denial of the refund as long as the admissibility of such cenvat credit is not disputed. This is more so as refund in terms of the said Notification 5/2006-CE(NT) is considered on a quarterly basis and not on the basis of each singular export event. What is material and what is germane to the scheme, is the ascertainment of the total unutilized ITC available at the end of the quarter.”

Accordingly, the CESTAT set aside the order of the Commissioner (Appeals) and allowed all four appeals filed by the appellant.

Appearance for the Appellant: CA. Jatin Harshed Sanghvi, Consultant

Appearance for the Respondent (Revenue): Shri N. Satyanarayana, Authorized Representative (AR)