The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai, has held that the limitation period for claiming a refund of accumulated CENVAT credit on the export of services must be computed from the end of the quarter in which the Foreign Inward Remittance Certificate (FIRC) was received, where refund applications are filed quarterly.

The bench of Dr. Suvendu Kumar Pati (Judicial Member) consequently allowed the appeal filed by an advertising agency service provider and directed the tax department to refund ₹4,99,521 along with applicable interest within two months from the communication of the order.

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The appellant/assessee had filed two applications seeking a refund of accumulated CENVAT credit amounting to ₹5,03,878 for two quarters. The refund related to 18 FIRCs received between January 1, 2017 and June 30, 2017.

The adjudicating authority treated the claims as time-barred, except for an amount of ₹4,357 relating to one FIRC. It rejected the balance refund on the ground that the applications had been filed beyond one year from the respective dates on which the foreign remittances were received.

The Commissioner (Appeals) upheld the rejection. The appellate authority distinguished the Larger Bench ruling of the Tribunal in Span Infotech Pvt. Ltd. on the ground that it dealt with the legal position under Notification No. 27/2012-CE (NT), whereas the appellant’s refund claims pertained to the period after the introduction of Notification No. 14/2016-CE (NT).

Before the CESTAT, the appellant argued that Rule 5 of the CENVAT Credit Rules, 2004 provided a formula for calculating the refund for the relevant period, while Clause 2 of Notification No. 27/2012-CE (NT) permitted only one refund claim to be filed for each quarter.

Relying on the Larger Bench decision in Span Infotech, the appellant submitted that, in cases where refund applications are filed quarterly, the relevant date for determining limitation must be taken as the end of the quarter in which the FIRC was received.

The department defended the orders passed by the lower authorities. It contended that Notification No. 14/2016-CE (NT) amended Notification No. 27/2012-CE (NT) and that refund claims relating to FIRCs received more than one year before the filing of the applications had rightly been rejected.

Rejecting the department’s position, the Tribunal observed that computing limitation separately from the date of receipt of each FIRC would conflict with the mechanism permitting only one refund application during a quarter.

The CESTAT noted that certain FIRCs may be received close to the end of a quarter. If the limitation period were calculated independently from each date of receipt, the period available to claim the refund could effectively be compressed, despite the quarterly filing framework.

The Tribunal further found that the Commissioner (Appeals)’ conclusion that the ruling in Span Infotech applied exclusively to transactions undertaken before March 1, 2016 was not factually sustainable.

Referring to the Larger Bench ruling, the CESTAT stated that the relevant date for determining the time limit under Rule 5 of the CENVAT Credit Rules could be taken as the end of the quarter in which the FIRC was received when refund applications were filed on a quarterly basis.

The Tribunal also recorded the appellant’s declaration that it was engaged in exports as well as supplies to the domestic market and filed its returns quarterly.

Accordingly, the CESTAT held that the Larger Bench principle—that limitation must be determined with reference to the end of the relevant quarter—remained unaltered even after Notification No. 14/2016-CE (NT) came into effect.

The Tribunal set aside the Order-in-Appeal dated June 28, 2019 to the extent it rejected the refund of ₹4,99,521 and granted consequential relief.

It directed the department to pay the refund along with applicable interest within two months from the communication of its order.

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