Department cannot reassess refund claim sanctioned vide Appellate Order without challenging the same

CA Bimal Jain

We are sharing with you an important judgement of the Hon’ble CESTAT, Delhi, in the case of TT Ltd. Vs. CST, Delhi [2015 (5) TMI 109 – CESTAT NEW DELHI] on following issue:

Issues:

1. Whether the Adjudicating Authority is allowed to reassess/ re-quantify the amount of refund claim sanctioned vide the Appellate Order without challenging the same?

2. Whether the Adjudicating Authority is allowed to re-examine the refund claim on new and afresh ground which was neither alleged in SCN, original Adjudicating Order and the Appellate Order?

3. Whether the Appellant is entitled for refund claim of the services availed prior to amendment in the notified services in the Notification No. 41/2007-ST dated October 6, 2007?

Facts & Background:

TT Ltd. (“the Appellant” or “the assessee”) filed six refund claims for Rs. 47,77,492/- for Service tax paid on Input services used for export of goods under Notification No. 41/2007-ST dated October 6, 2007 (“the Notification”). 5 Show Cause Notices were issued in respect of refund claims on various grounds. Thereafter, an Adjudication Order (“OIO 1”) was passed rejecting the refund claims on grounds namely:

• Refund claims pertaining to quarter ending June, September and December, 2007 are filed beyond the period of limitation.
• Some invoices do not contain requisite details as prescribed in Rule 4A of the Service Tax Rules, 1994
• No evidence of payment made against the invoices on which refund was sought.

The OIO 1 was challenged before the Ld. Commissioner (Appeals), wherein it was held that refund filed for the period June and September, 2007 are barred by limitation and the Appellant is entitled for rest of the refund claims subject to verification of certain documents by the Adjudicating Authority (“OIA 1”). Later on, OIA 1 was accepted by the Committee of Commissioners.

However on approaching the Adjudicating Authority for sanctioning of refund claims as per OIA 1, the Adjudicating Authority sanctioned the refund claim of Rs. 8,48,422/- only out of the total refund claim sanctioned and rejected the refund claim of Rs. 34,95,654/- on new and afresh ground that specified services were received by the assessee prior to the date when these services were notified under the Notification (“OIO 2”).  On appeal before the Ld. Commissioner (Appeals), OIO 2 was upheld (“OIA 2”). Being aggrieved, the Appellant preferred an appeal before the Hon’ble CESTAT, Delhi.

CA Bimal Jain, the Learned counsel for the Appellant submitted as under:

• In earlier round of litigation, the order of sanctioning refund claim has been accepted by the Department. Therefore, without challenging the said Order, the Adjudicating Authority has no right to raise new and afresh issue to reject the refund claims – as held by the Hon’ble Apex Court in the case of Commissioner of C. Ex., Chennai-I Vs I.T.C Ltd. [2006(204) ELT 363 (S.C)];
• The Adjudicating Authority cannot re-assess and re-quantify the amount of refund as per Appellate Order without challenging the same – as held by the Hon’ble High Court of Allahabad in the case of Commissioner of Customs & Central Excise Vs. Samtel Color Ltd. [(2014) 49 taxmann.com 238 (Allahabad)];
• The refund claims were rejected on new and afresh ground, which was neither alleged specifically in the SCN nor there was specific finding in the Adjudication Order as well as in the Appellate Order. Hence the same is not sustainable – as held by the Hon’ble Tribunal, Delhi in the case of Dhampur Sugar Mills Ltd. Vs. Commissioner of C. EX., Meerut-II [2010 (260) E.L.T. 271 (Tri. – Del.)];
• Refund claims cannot be denied merely on the ground the services availed by the Appellant prior to the date of the Notification as there is no condition as such in this regard in the Notification – as held by the Hon’ble CESTAT, Mumbai in the case of WNS Global Services (P) Ltd. Vs. Commissioner Of C. Ex., Mumbai [2008 (10) S.T.R. 273 (Tri. – Mumbai)] which has been affirmed by Hon’ble Bombay High Court in [2011 (22) STR 609 (Bom)].

On the other hand, the Department argued that OIA 1 has not simply sanctioned the refund claim but has directed the Appellant to produce certain documents and thereafter the Adjudicating Authority has every right to examine those documents and deny the refund claim. It was also submitted that the conditions of the Notification are required to be fulfilled as held by Hon’ble High Court of Allahabad in the case of Addi Industries Ltd. [2014 46 GST 204] (“Addi case”).

Held:

The Hon’ble CESTAT, Delhi upheld all the contentions of the Appellant and held as under:

• As the Commissioner (Appeals) has directed to verify certain documents, in that case, if those documents were not produced by the Appellant or found deficient then the refund claim can be rejected to that extent. But the refund claim cannot be examined afresh;
• The Adjudicating Authority has taken the new ground to adjudicate the refund at the time of verification of certain documents which is also not permissible in law. OIA 1 has attained finality against which Revenue has not preferred any appeal, thus the Adjudicating Authority has no right to re-examine the refund claim but only can verify the documents as directed by the Commissioner (Appeals);
• In the Notification, there is no condition that if the services availed prior to the date of Notification, the Appellant are not entitled to refund claim;
• In Addi case, the condition of the Notification was that refund claim is to be filed within the prescribed time but there is no condition in the Notification that if the services availed prior to its insertion, refund is not admissible. Therefore reliance on Addi case is not acceptable.

Accordingly, the Hon’ble Tribunal decided the matter in favour of the Appellant and directed the Adjudicating Authority to sanction the refund claim on verification of the documents as directed by the Commissioner (Appeals) vide OIA 1 within a period 90 days.