Sanctioned CENVAT Refund Cannot Be Collaterally Recovered Under Section 73: CESTAT Chandigarh

Commissioner of Service Tax Vs Colt Technologies Services India Pvt. Ltd. (CESTAT Chandigarh)

The CESTAT Chandigarh dismissed the Revenue’s appeal and upheld the order dropping show cause notices issued to recover CENVAT refunds already sanctioned to Colt Technologies Services India Pvt. Ltd. The respondent, engaged in rendering business auxiliary services to overseas clients, had availed input services and filed refund claims for January-March 2007 and April-June 2007 under Notification No. 5/2006-CE (NT) dated 14.03.2006 and the applicable CBEC circular.

Eighty per cent of the refund was sanctioned. Revenue subsequently sought recovery of the sanctioned amounts under Section 73 of the Finance Act, 1994, alleging, inter alia, absence of nexus between input and output services, deficiencies in invoices and FIRCs, non-production of original FIRCs and discrepancies in export figures.

The Tribunal examined whether Revenue could invoke Section 73 when the statutory revision mechanism under Section 84 was applicable during the relevant period. It noted that the Commissioner had held that, before substitution of Section 84 with effect from 19.08.2009, an order under Section 84 could not be passed after two years from the order sought to be revised. The Tribunal relied substantially upon the principles discussed in RNB Carbides & Ferro Alloys Pvt. Ltd. and Topcem India, observing that a refund duly sanctioned by a quasi-judicial authority cannot simply be treated as an “erroneous refund” through collateral proceedings merely because Revenue subsequently takes a different view.