Kkalpana Industries India Limited Vs C.C.E. & S.T. (CESTAT Ahmedabad)
The appeals arose from an audit of the appellant’s records concerning service tax paid on Ocean freight. According to the audit’s contention, Ocean freight was liable to service tax and the appellant accordingly paid the service tax. The appellant subsequently filed a refund claim on the ground that although it was entitled to CENVAT credit, it was not in a position to utilise the credit due to the GST regime and therefore sought refund.
The Adjudicating Authority rejected the refund claim on the ground that the service tax on Ocean freight had been paid on the insistence of audit and, therefore, there was suppression of fact. It held that under Rule 9(1)(bb) of the CENVAT Credit Rules, 2004, the appellants were not entitled to CENVAT credit and consequently were not entitled to refund. The Commissioner (Appeals) concurred with the view taken by the Lower Authority and upheld the Order-in-Original, leading to the present appeals.
For the appellants, Shri S J Vyas submitted that the alleged charge of suppression of fact had not been decided. Consequently, there was no established suppression on the basis of which CENVAT credit could be denied under Rule 9(1)(bb). Reliance was placed on Swami Construction Vs. C.C.E. & S.T.-Vadodara-I, Wellknown Polyester Ltd. Vs. C.C.E. & S.T.-Daman and M/s Columbia Machine Engineering India Pvt. Ltd. Vs. C.C.E. & S.T. Vadodara-I. The appellant also submitted that the Adjudicating Authority and Commissioner (Appeals) had held that cash refund of CENVAT credit was not available under Section 11B and contended that Section 11B was not applicable to the present case.
The Revenue reiterated the findings of the impugned orders. Shri Tara Prakash, Learned Assistant Commissioner (Authorized Representative), appeared for the Revenue in the matter of KKALPANA INDUSTRIES INDIA LIMITED, while Shri R P Parekh, Learned Superintendent (Authorized Representative), appeared for the Revenue in the matter of NILKAMAL LTD.
The Tribunal found that, although the appellant had paid service tax on Ocean freight on the instruction of audit, no Show Cause Notice had been issued for demanding such service tax. In the absence of proceedings concerning the demand of service tax, the Tribunal held that the charge of suppression of fact did not exist for the purpose of holding that the appellant had suppressed facts. The Tribunal considered it necessary that such charge be adjudicated through issuance of a Show Cause Notice and the adjudication process. Since that process was absent, the finding of the Lower Authorities regarding suppression was held to be based only on assumption and presumption and was therefore not sustainable.
On that basis, the Tribunal held that there was no suppression of fact and, consequently, Rule 9(1)(bb) was not applicable. The appellants were therefore entitled to CENVAT credit.
The Tribunal separately considered the claim for cash refund. It observed that although there was no provision under Section 11B, the special provision contained in Section 142(3) of the CGST Act applied and the appellant was prima facie entitled to cash refund.
The Tribunal also noted that the issue of taxability of Ocean freight had subsequently been decided in M/s. SAL Steel Limited Vs. Union of India by the Gujarat High Court, reported at 2020 (37) GSTL 3 (Guj.). Since that judgment was passed after the orders of the Lower Authorities and was therefore not available before them, the Tribunal kept the issue of taxability open and granted the appellant liberty to raise that issue before the Adjudicating Authority.
Accordingly, the Tribunal set aside the impugned orders and allowed the appeals by way of remand to the Adjudicating Authority.
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Cases Discussed
- Swami Construction Vs. C.C.E. & S.T.-Vadodara-I — 2022 (6) TMI 820 — CESTAT Ahmedabad.
- Wellknown Polyester Ltd. Vs. C.C.E. & S.T.-Daman — 2021 (6) TMI 948 — CESTAT Ahmedabad.
- M/s Columbia Machine Engineering India Pvt. Ltd. Vs. C.C.E. & S.T. Vadodara-I — 2018 (12) TMI 1098 — CESTAT Ahmedabad.
- M/s. SAL Steel limited Vs. Union of India — 2020 (37) GSTL 3 (Guj.).
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The brief facts of the case are that during the audit of the appellant’s records, it was observed that the appellant have availed the service of Ocean freight. As per the audit’s contention such Ocean freight is liable to service tax, accordingly, the appellant have paid the service tax on the Ocean freight and subsequently, they filed a refund claim for the reason that though they were entitled for the Cenvat Credit but due to GST regime they were not in-position to avail the Cenvat Credit, hence, they filed a refund claim. The refund claim was rejected by the Adjudicating Authority on the ground that since the Service Tax on Ocean freight was paid on insistence of audit, therefore, there is a suppression of fact. In terms of Rule 9(1)(bb) of Cenvat Credit Rules, the appellants are not entitled for the Cenvat credit, consequently they are also not entitled for refund. The appellant being aggrieved by the Orders-In-Original filed appeal before the Commissioner (Appeals), who also conquering with the views taken by the Lower Authority upheld the Order-In-Original. Therefore, the present appeals filed by the appellant.
2. Shri S J Vyas, and Shri Rahul Gajera appeared for the appellants. Shri S J Vyas Learned Counsel submits that in this case the charge of suppression of fact has not been decided, therefore, there is no suppression of fact, on that account the Cenvat credit cannot be denied in terms of Rule 9(1)(bb) of Cenvat Credit Rules,2004. He placed reliance on the following judgments:-
- Swami Construction Vs. C.C.E. & S.T- Vadodara-I- 2022(6)TMI 820- Cestat-Ahmedabad
- Wellknown Polyester Ltd. Vs. C.C.E & S.T.-Daman- 2021 (6) TMI 948- Cestat Ahmedabad
- M/s Columbia Machine engineering India Pvt. Ltd. Vs. C.C.E & S.T. Vadodara-I- 2018 (12) TMI 1098-Cestat Ahmedabad.
He further submits that the Adjudicating Authority as well as the Commissioner (Appeals) held that the appellant are not entitled for cash refund claim of Cenvat Credit in terms of Section 11B, hence, the Section 11B is not applicable in the present case.
3. Shri Tara Prakash, Learned Assistant Commissioner (Authorized Representative) appeared on behalf of the Revenue in the matter of KKALPANA INDUSTRIES INDIA LIMITED and Shri R P Parekh, Learned Superintendent (Authorized Representative) appeared for the Revenue in the matter of NILKAMAL LTD, they reiterate the findings of the impugned order.
4. I have carefully considered the submission made by both the sides and perused the records. The Cenvat credit was denied by the Lower Authorities on the ground that since there is a suppression of fact in terms of Rule 9(1)(bb), the appellant are not entitled for Cenvat credit and consequential the refund. In this regard, I find that though the appellant have paid the Service Tax on Ocean freight on the instruction of audit, but no Show Cause Notice was issued for demand of such Service Tax. In absence of any proceedings with respect to the demand of Service Tax, the charge of suppression of fact does not exist, for holding that there is a suppression of facts on the part of the appellant. It is necessary that the said charge is adjudicated by issuing a Show Cause Notice and adjudication process, which is absent in the present case. Therefore, the contention of the Lower Authorities that there is a suppression of fact is only based on assumption and presumption, hence, the same is not sustainable. Since, there is no suppression of fact, Rule 9(1)(bb) is not applicable as held in the judgment cited by the Learned Counsel, accordingly, the appellants are entitled for the Cenvat credit. As regard, the cash refund of the said amount, even though there is no provision under Section 11B but as per special provision under Section 142(3) of CGST Act,he appellant are prima facie entitled for cash refund. Moreover, the issue of taxability on Ocean freight has now been decided in the case of M/s. SAL Steel limited Vs. Union of India by Hon’ble Gujarat High Court reported at- 2020 (37) GSTL 3 (Guj.). Since this judgment was not available before the Lower Authority as this judgment was passed after the orders in this case passed by the Lower Authorities, the issue of taxability is also kept open and the appellant has liberty to raise this issue also before the Adjudicating Authority.
5. Accordingly, the impugned orders are set aside, appeals are allowed by way of remand to the Adjudicating Authority.
(Dictated & Pronounced in the open court)
