Rule 5 refund cannot be denied when Cenvat credit availment remains unchallenged under Rule 14.

The appellant, a 100% export-oriented unit, provided Business Support Services and Information Technology Software Services to its overseas group entities under specific service agreements. These services were exported without payment of service tax under the Export of Service Rules, 2005.

The original authority rejected refund amounting to ₹78,79,939 in respect of General Insurance Services, Works Contract Services, and Commercial or Industrial Construction Services, holding that the services lacked nexus with the exported output services. The Commissioner (Appeals) upheld the rejection by order dated 24 February 2015, leading to the present appeal.

1. Whether refund of CENVAT credit under Rule 5 could be denied on the ground that the input services lacked nexus with the exported output services when the Department had not previously disputed or reversed the availment of such credit under Rule 14 of the CENVAT Credit Rules, 2004?

2. Whether General Insurance Services, Works Contract Services, and Commercial or Industrial Construction Services qualified as input services and were eligible for refund of unutilised CENVAT credit during the relevant period?

The Tribunal applied Rule 5 of the CENVAT Credit Rules, 2004, governing refund of unutilised CENVAT credit attributable to exported services, along with Rule 14, which provides for recovery or reversal of wrongly availed or utilised credit.

Relying on the authorities cited by the appellant, including Qualcomm India Pvt. Ltd. v. Commissioner of Customs, Central Excise & Service Tax, affirmed by the Telangana High Court, Commissioner of Service Tax v. HCL Comnet System & Services Ltd., and subsequent CESTAT decisions, the Tribunal applied the principle that where the Department has not challenged availment of CENVAT credit under Rule 14, it cannot deny refund of that credit under Rule 5 on the same eligibility or nexus ground.

The Tribunal found that the refund was rejected solely because the adjudicating authorities considered the disputed services to lack a nexus with the exported output services. However, the Department had not earlier challenged the appellant’s availment of the relevant CENVAT credit under Rule 14.

Applying the settled distinction between availment, utilisation, and refund of credit, the Tribunal held that Rule 5 proceedings could not be used to reopen the eligibility of credit that had not been questioned under Rule 14.

It further observed that, during the relevant period, the definition of “input service” was expansive and that each of the disputed services had been recognised in judicial precedents as an eligible input service.

It also held that General Insurance Services, Works Contract Services, and Commercial or Industrial Construction Services were eligible input services during the relevant period. The impugned order dated 24 February 2015 was set aside, the appeal was allowed, and consequential relief was granted in accordance with law.