(Arising out of Order‐in‐Original No. V/S‐II/HLC/HC/GTL/52/ passed by the Commissioner of Service Tax II, Mumbai)
Brief Facts of the case:
The appellant (Assessee Company) is a registered company under the category of Business Auxiliary Services. Chennai Network Infrastructure Ltd. (CNIL), having a registered office at Navi Mumbai and is engaged in providing similar services. Both the appellant and CNIL sought merger in the name of GTL Infrastructure Ltd.
Consequently, they filed petitions before the respective High Courts (Mumbai and Madras) seeking sanction of scheme of merger with the appellant. The Hon’ble Bombay High Court sanctioned the scheme of merger of CNIL with the appellant on 22.07.2011 whereas the petition filed before the Hon’ble Madras High Court is still pending for consideration of sanction of scheme of merger.
As the Hon’ble Bombay High Court sanctioned the scheme of merger, therefore, the appellant filed a consolidated service tax returns declaring the combined value of taxable services of both the appellant and CNIL . CNIL did not file returns for its services provided during the impugned period(Oct 2010 to Dec 2012).
Consequent to that, the appellant paid the liabilities of CNIL towards service tax amounting to Rs.79,92,56, 619/‐ by utilizing the CENVAT credit for the period October 2010 to March 2012. Some part of the service tax liability was paid by utilizing CENVAT credit lying in the account of CNIL. As the appellant got sanction of scheme of merger by the Hon’ble High Court of Bombay, presumed that the appellant and CNIL have merged. But the approval for scheme of merger was pending before the Hon’ble Madras High Court, therefore the appellant are not required to include taxable service of M/s. CNIL in their turnover and were not required to pay service tax there on this realization.
Realizing this overlook of the situation, CNIL filed a declaration under Voluntary Compliance Encouragement Scheme (VCES) disclosing its service tax liability to the tune of Rs.79,92,56,919/‐ and discharged the same on 22.11.2013. The designated authority issued a Discharge certificate (Form VCES-3) to CNIL under VCES scheme for the above said liability. CNIL informed the appellant that all service tax liability has been paid by them and they have no objection in the appellant taking credit of service tax paid on behalf of CNIL.
To be on safer side, the appellant approached the Hon’ble Bombay High Court in a writ petition to seek approval of the Hon’ble High Court to re‐credit the amount of service tax paid on behalf of CNIL, the Hon’ble Bombay High Court vide order dated 27.01.2014 directed the learned Commissioner to decide the matter by considering the said Writ Petition as a representation before the Commissioner. On 7.3.2014, the learned Commissioner directed the appellant to approach the proper officer for pursuing the remedy. The appellant has challenged the order of the learned Commissioner before this Tribunal. Tribunal has dismissed the appeal of the appellant against the impugned order holding that the same is not maintainable.
The said order of this Tribunal was challenged before the Hon’ble Bombay High Court and the Hon’ble Bombay High Court held that the Tribunal is competent to decide the appeal and should do so in accordance with law. Therefore, this appeal is before us.
Contention of the Assessee:
The authorized representative for the appellant submits that the learned Commissioner himself was competent to decide the issue as per Section 12E of the Central Excise Acts, 1944 read with Section 83 of the Finance Act, 1994.
As the CNIL obtained the discharge certificate of service tax liability therefore, the appellant is entitled to take CENVAT credit of the amount of service tax paid on behalf of CNIL by the appellant as CNIL and the appellant has not got the sanction of scheme of merger by the Hon’ble Madras High Court till yet.
Since the tax liability of CNIL was not required to be paid by the appellant and CNIL has paid their liability along with interest and discharge certificate has been obtained by CNIL under VCES , therefore, the appellant is entitled to re‐credit the said amount paid earlier by debiting their CENVAT credit account on behalf of CNIL.
It was also submitted that the Revenue cannot be permitted to retain the service tax on the same taxable service from two different persons. By not allowing the appellant to take re-credit of CENVAT credit, the revenue is unjustly enriching itself by recovering the amount twice.
It was further submitted that as per the provisions of Rule 6 (4A) of Service Tax Rules, 1994 where an assessee has paid any amount in excess of the amount required to be paid towards service tax liability, the assessee may adjust such excess amount paid by him against his service tax liability for the succeeding month. In the present case, it is an admitted that the appellant has paid service tax in excess of its own liability, therefore by applying the provisions of Rule 6(4A) of Service Tax Rules, 1994 the appellant will be well within their rights to claim credit of such amount.
He further submitted that when the department has accepted the duty liability discharged by CNIL, therefore, the amount paid by the appellant ceases to be in the nature of service tax and is merely an excess deposit by the appellant. Therefore, the said amount is refundable to the appellant without applying the limitation period of claiming refund as provided in Section 11B of the Central Excise Act, 1944.
Contention of the Revenue:
Revenue submitted that the learned Commissioner has not committed any error to direct the appellant to approach the proper officer because the proper officer is more competent to entertain the claim of the appellant as the quantification of the amount paid by the appellant is required to be examined by the proper officer.
He also submitted that the appellant is not entitled for re‐credit of the amount paid on behalf of CNIL as the same is barred by limitation. Admittedly, the service tax has been paid by the appellant on behalf of CNIL and sought to re‐credit the same after passing a period of one year, the period as prescribed under Section 11B of the Central Excise Act, 1944.Thus, the claim of appellant is barred by limitation period of 1year and thus, re-credit cannot be allowed.
Decision of the Tribunal:
The learned Counsel appearing for the Revenue took objection that the order by Commissioner was only a direction to the appellant to appear before the proper officer for examination of their refund claim but the appellant chose to file an appeal before this Tribunal is not correct. With this regard, since the Hon’ble Bombay High Court has intervened holding that the order of the Commissioner is for denial of re‐credit of the amount hence, this Tribunal is competent to decide the case on merit. Therefore, the contention of the learned Counsel is not acceptable.
The issue of limitation of claim under Sec 11B as raised by Revenue is also not maintainable because the amount paid by the appellant in excess of their service tax liability ceased to be in nature of service tax paid by them and is merely an excess deposit paid by the appellant. Therefore, such excess deposit paid by the appellant is refundable to the appellant and the provisions of Section 11B of the Central Excise Act, 1944 are not applicable to the facts of this case as held by the Hon’ble Delhi High Court in the case of Hind Agro Industries Ltd.
In these circumstances, it is held that the representation made by the appellant for re‐credit of service tax paid on behalf of CNIL is within time. In these circumstances, we remand the matter back to the adjudicating authority only for the limited purpose of quantification of the amount to be re‐credited which shall be done by the adjudicating authority within 15 days of receipt of this order.
(Analysed by our team member CA Saurabh Chokhra)