Substantive benefit of refund claim cannot be denied on technical reasons

The CESTAT, New Delhi in M/S Vaibhav Global Limited v. Commissioner, CGST, Customs & Central Excise, Jaipur (Rajasthan) [Service Tax Appeal No. 51118 of 2019-SM dated January 18, 2022] set aside the order passed by the Revenue Department rejecting the appeal filed for refund claim by the assessee. Held that, the refund claim of input services under GST cannot be denied solely on technical reasons.

Facts:

M/s Vaibhav Global Limited ("the Appellant") is a 100% EOU situated at Jaipur, engaged in the manufacture of stone studded gold jewellery and silver jewellery etc. falling under Chapter 71 of the Schedule to the Central Excise Tariff Act, 1985 ("the Central Excise Tariff Act"). The Appellant has taken CENVAT credit on input services & inputs and under the provision of Rule 5 of CENVAT Credit Rules, 2004 ("the CENVAT Rules") read with Notification No. 27/2012 -Central Excise (NT) dated June 18, 2012 ("NN 27/2017- CE(NT)").

The Appellant filed ER-2 return for the month of June, 2017, the CENVAT credit for input service taken during the month which was erroneously declared as INR 65,88,446/- instead of the correct amount of INR 96,39,777/- as per the books of account. The said amount was considered while declaring the closing balance of credit on June 30, 2017, as INR 1,14,42,750/-, instead of the correct credit amount of INR 1,44,42,750/-. However, the discrepancy was not noticed while filing the monthly return for April, 2017 and May, 2017. The said mistake was noticed by the Appellant at the time of preparing of the refund claim in last week of August. However, by that time the time for filing of revised return was over in terms of Notification No. 8/ 2016- Central Excise (NT) dated March 1, 2016 ("NN. 8/2016- CE(NT)") and according to which, the return could be revised only till the end of the month in which the original return was filed. Thus, the Appellant brought the error to the notice of the Revenue Department praying therein that during the month of June, 2017 the balance of credit taken should be read as INR 1,44,42,750/- instead of INR 1,14,42,750/. Thereafter, the Appellant filed refund claim for INR 1,44,42,750/- on the basis of actual credit taken during the quarter April to June, 2017, and the closing unutilised CENVAT credit as on June 30, 2017.

The refund claim was rejected vide Order-in-Original ("the OIO") passed by the Assistant Commissioner, wherein the amount of INR 1,06,59,940/- was sanctioned and the amount of INR 30,19,866/- was held non-admissible, as per the erroneously ER-2 return filed for the month of June, 2017. Subsequently, an appeal was filed against the same, before the Commissioner (Appeals) ("the Respondent"), who, vide Order-in-Appeal ("the Impugned Order") rejected the appeal of the Appellant and upheld the OIOpassed by the Assistant Commissioner.

Being aggrieved, this appeal has been filed.

Issue:

Whether the refund claim filed by the Appellant of unutilised input service tax credit under Rule 5 of CENVAT Credit Rules have been rightly rejected in part, for INR 30,19,866/-?

Held:

The CESTAT, New Delhi in Service Tax Appeal No. 51118 of 2019-SM dated January 18, 2022 held as under:

• Relied on the judgment of the Hon’ble Supreme Court of India and CESTAT Allahabad in the case of Mangalore Chemical & Fertilizers Ltd. [Civil Appeal No. 3235 of 1991 dated August 2, 1991] and M/s Cenveo Publisher Services India Ltd. v. Commissioner of Customs, C.E. & S.T., [Order No.- ST/A/70908-70909/2017-CU[DB] dated January 17, 2017] respectively and observed that, it is a settled law that the substantive benefit cannot be denied on such highly technical reasons. Further, no part of rebate can be rejected on the ground that in the declaration or intimation filed by appellant, amount mentioned is different from actual claim.
• Held that, denial of refund claim in part, solely on the basis that the same was to be given in respect of closing balance of credit as declared in the return for the Month of June 2017, is not legal and proper, as substantive benefit cannot be denied on technical reasons, when there was no such condition in the 8/2016- CE(NT).
• Set aside the impugned order passed by the Respondent
• Directed the Respondent, to sanction the balance refund claim of INR 30,19,866/- along with interest from 3 months after the date of filing of refund claim, till the date of sanction of refund, within 45 days.