CENVAT Credit Refund Can’t Be Denied For Want Of Nexus Between Input Services And Exported Output Services: CESTAT

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai Bench, has allowed substantial service tax refund claims filed by Tech Mahindra Limited, holding that refund under Rule 5 of the CENVAT Credit Rules, 2004 cannot be denied on the ground of lack of nexus between input services and exported output services when the availment of CENVAT credit itself was never disputed. The bench of S.K. Mohanty (Judicial Member) and M.M. Parthiban ( Technical Member), observed that the department had not initiated any proceedings under Rule 14 of the CENVAT Credit Rules to question the availment or utilization of CENVAT credit at the time it was taken. Tech Mahindra, registered as a Software Technology Park of India (STPI) unit and functioning as an Export Oriented Unit (EOU), was engaged in providing voice-based call centre services (ITES) to mobile operating companies in the U.K., Ireland, and Australia. Since the output services were entirely exported, the company claimed refund of unutilized CENVAT credit on input services under Rule 5 of the CENVAT Credit Rules, 2004, read with Notification No. 27/2012-CE (NT) dated June 18, 2012. The company filed 18 refund applications aggregating ₹56.15 crore. While part of the claims were allowed by the adjudicating authority and the Commissioner (Appeals), refund of ₹6.44 crore was rejected on various grounds, prompting the present appeals before the Tribunal. The Commissioner (Appeals) had denied refund primarily on the grounds that there was a ack of nexus between disputed input services and exported output services; belated debit entries in the CENVAT credit ledger; non-reflection of credit in ST-3 returns; absence of documentary evidence; invoices not bearing the company’s name or PAN-based registration details; service tax paid on property tax being ineligible; and withdrawal of part of the refund claim by the appellant. It held that once credit had been validly availed and not disputed, refund under Rule 5 could not subsequently be denied on the ground of absence of nexus. The Bench relied on the simplified refund scheme introduced through substitution of Rule 5, which dispensed with the requirement of one-to-one correlation between exports and input services. The Tribunal emphasized that refund under Rule 5 can only be questioned if the prescribed formula is not complied with. Since there was no dispute regarding formula compliance and the output services were undisputedly exported, denial on the ground of nexus was held unsustainable. Accordingly, refund of ₹92.08 lakh denied on this ground was allowed. Belated Debit Entry Is Procedural Lapse On the issue of delayed debit entries in the CENVAT ledger amounting to ₹5.14 crore, the Tribunal held that once the debit was eventually made in compliance with Notification No. 27/2012-CE (NT), the delay constituted only a procedural lapse. Relying on precedent, the Bench ruled that substantive refund benefits cannot be denied for procedural irregularities. The entire amount of ₹5.14 crore was therefore allowed. Refund of ₹24.57 lakh was denied on the ground that the relevant CENVAT credit was not reflected in ST-3 returns. The Tribunal accepted the appellant’s contention that the particulars were subsequently reflected in returns covering the relevant period and that statutory compliance had been substantially met. Since there was no dispute regarding export of services, the Tribunal held that refund could not be denied on this technical ground. Similarly, refund of ₹21,793 denied due to invoice discrepancies, including absence of PAN-based registration and incorrect service category, was allowed, as no show cause notice had been issued at the stage of credit availment. However, with respect to ₹11.69 lakh denied for lack of documentary evidence proving use of input services in export of output services, the Tribunal upheld the importance of documentary verification. Observing that refund under Rule 5 requires proper substantiation, the Bench remanded this portion to the original authority for fresh verification of records and invoices. The authority was directed to grant refund if satisfied that the services were used in relation to exported output services and were in conformity with the CENVAT framework. The Tribunal noted that ₹1.63 lakh had been voluntarily withdrawn by the appellant and held that refund of this amount would not be permissible. Case Details Case Title: M/s. Tech Mahindra Limited Versus Commissioner of Central Excise & Service Tax Mumbai West Citation: JURISHOUR-118-CESTAT-2026(Mum) Case No.: Service Tax Appeal No. 86171 of 2018 Date: 24.02.2026 Counsel For Appellant: Puloma Dalal, Chartered Accountant Counsel For Respondent: S. Varalaxmi, Authorized Representative Click Here To Read Order Read More: Whether HC Can Remit GST Order After Expiry of S. 107 Appeal Limitation? Madras HC Allows Fresh Adjudication on 50% Pre-Deposit

CENVAT Credit Refund Can’t Be Denied For Want Of Nexus Between Input Services And Exported Output Services: CESTAT

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