CENVAT Credit Refund for 100% EOU: CESTAT Chennai Clarifies Treatment of Car Parking, Rent-a-Cab and Turnover Computation

The Chennai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in Cargotec India Pvt. Ltd Vs Commissioner of GST & Central Excise has delivered an important ruling on refund of unutilized CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004. The decision is particularly relevant for 100% Export Oriented Units (EOUs) claiming refund of accumulated input service credit under Notification No. 05/2006-CE (NT).

The dispute focused on three main aspects:

  1. Eligibility of CENVAT credit on:
    • Car parking / rent, and
    • Rent-a-cab services
  2. Computation of total turnover for the purposes of the Rule 5 refund formula
  3. Application of the Point of Taxation Rules, 2011 to export of services for determining the relevant turnover

The Tribunal ultimately set aside the order of the Commissioner (Appeals), allowed the assessee’s appeal and directed grant of consequential relief.

Background of the Case

Nature of the Assessee and Refund Claim

  • The assessee, Cargotec India Pvt. Ltd, is a 100% Export Oriented Unit (EOU).
  • It had no domestic or local sales during the relevant period.
  • For the period October 2011 to December 2011, the assessee filed a refund application dated 30.07.2012 claiming refund of Rs. 4,91,416/- under:
    • Rule 5 of the CENVAT Credit Rules, 2004, read with
    • Notification No. 05/2006-CE (NT) dated 14.06.2006

Action by the Adjudicating Authority

Upon scrutiny of the application, the Adjudicating Authority:

  • Partly sanctioned the refund claim, but
  • Rejected a portion of the claimed amount on the following grounds:
    1. CENVAT credit on car parking / rent deemed inadmissible
    2. CENVAT credit on rent-a-cab service denied
    3. Alleged incorrect valuation of total turnover in applying the refund formula

Appeal Before Commissioner (Appeals)

  • The assessee challenged the partial rejection before the Commissioner (Appeals).
  • Vide Order in Appeal No. 382/2016 (STA – I) dated 30.06.2016, the Commissioner (Appeals) confirmed the denial and dismissed the appeal.
  • Aggrieved by this, the assessee carried the matter in further appeal to CESTAT Chennai.

Arguments Advanced by the Assessee

1. Allowability of CENVAT Credit on Car Parking / Rent and Rent-a-Cab

The authorised representative for the assessee argued that:

  • Denial of CENVAT credit on car parking / rent and rent-a-cab services runs contrary to a long line of decisions where CESTAT has allowed such credits as eligible input services.
  • Various Benches, including the Chennai Bench, have consistently held these services to have nexus with business activities in several refund and credit disputes.

The assessee therefore contended that the lower authorities had ignored binding precedents, and the rejection on this ground was unsustainable.

2. Dispute on Computation of Total Turnover

A major point of challenge related to how the total turnover was computed in applying the Rule 5 refund formula.

The assessee submitted that:

  • The Adjudicating Authority had taken the value of export invoices raised during the quarter October 2011 to December 2011 as the basis for total turnover.
  • However, Point of Taxation Rules, 2011 were not applied, particularly Rule 7 dealing with export of services.

The assessee emphasised: