Refund claim u/s 11B filed beyond one year from relevant date is not maintainable

Arshiya Rail Infrastructure Ltd Vs Commissioner of Central GST & Central Excise (CESTAT Mumbai)

CESTAT Mumbai held that refund claim under section 11B filed beyond the period of one year from the relevant date is not maintainable. Here, relevant date was date on which appellant has voluntarily paid the short payment of service tax.

Facts- The appellants are engaged in the activity of providing services under the category of ‘Cargo Handling Service’ etc. to their clients. The appellants are also holding Category-I license as Container Train Operator and are running container traffic across Indian Railway Network on pan India basis.

During the disputed period i.e., October 2012 to March 2013, the appellants have allegedly provided ‘cargo handling service (loading and unloading)’ for rice by way of transportation by Rail, from one place in India to another. The appellants have paid service tax with interest and penalty on various dates in respect of cargo handling charges provided for rice as instructed by the Directorate General of Central Excise Intelligence (DGCEI), Chennai Zonal Unit, Chennai during the course of an investigation.

Subsequently the appellant claimed that they were exempted from payment of service tax against cargo handling services provided for rice and claimed for refund of service tax paid by them by filing a refund claim and also requesting for recredit of Cenvat account for an amount of Rs.1 crore. The original authority on scrutiny of the refund claim intimated the appellant about the discrepancies found in the refund application by issue of show cause notice.

The original authority passed an order rejecting the refund claim. The first appellate authority also rejected the refund claim by upholding the order of the original authority. Being aggrieved, the present appeal is filed.

Conclusion- Held any person claiming refund is required to file the refund application in the prescribed manner and within one year from the relevant date as provided under the Explanation clause (B). It is not the case of the appellant that the service tax was paid under protest, in which case the one year time limit does not apply. The relevant date for the purpose of this case, in which the appellant have voluntarily paid the short payment of service tax, is the date of payment of duty/ tax. In the present case, since the refund claim has been filed for the total payment of service tax of Rs. 1,06,62,609/- which covers the payment made on 25.03.2014, 29.03.2014, 25.11.2014, we find that the refund claim filed on 23.02.2016 for these payments were beyond the prescribed period of one year. Further, there is/are no separate refund application(s) with breakup detail in respect of payments made on 07.04.2015, 01.09.2015, 11.09.2015 and 01.10.2015 for entertaining these as having been filed within one year time period. Hence, on the limited angle of time limit, the refund application is not maintainable in terms of Section 11B of the said Act as made applicable in relation to Service Tax.

FULL TEXT OF THE CESTAT MUMBAI ORDER

This appeal has been filed by M/s. Arshiya Rail Infrastructure Limited, Mumbai, herein referred to as ‘appellant’, against the Order-in-Appeal No. NVK/152/RGD/2018 dated 31.05.2018 (referred to as ‘impugned order’). Learned Commissioner of Central GST & Central Excise, Raigad, Navi Mumbai in the impugned order had held that the refund application filed by the appellant is time barred and the refund is not eligible on merits, by upholding the order of the original authority. Aggrieved against this order the appellant had filed this appeal before the Tribunal.

2. The brief facts of the case are that the appellants holding Service Tax Registration No. AAGCA9648BST001 and are engaged in the activity of providing services under the category of ‘Cargo Handling Service’ etc. to their clients. The appellants are also holding Category-I license as Container Train Operator and are running container traffic across Indian Railway Network on pan India basis. During the disputed period i.e., October 2012 to March 2013, the appellants have allegedly provided ‘cargo handling service (loading and unloading)’ for rice by way of transportation by Rail, from one place in India to another. The appellants have paid service tax with interest and penalty on various dates in respect of cargo handling charges provided for rice as instructed by the Directorate General of Central Excise Intelligence (DGCEI), Chennai Zonal Unit, Chennai during the course of an investigation. The total service tax of Rs.1,52,85,442/- demanded by DGCEI investigation was paid by the appellants through Cenvat Credit for an amount of Rs.1 crore and further Rs. 52,85,442/- was paid through cash deposit. Further, an amount of Rs.30,70,631/- was paid towards interest and Rs.23,06,536/- was paid towards applicable penalty. Subsequently the appellant claimed that they were exempted from payment of service tax against cargo handling services provided for rice and claimed for refund of service tax paid by them for an amount of Rs. 1,06,62,609/- by filing a refund claim on 23.02.2016 and also requesting for recredit of Cenvat account for an amount of Rs.1 crore. The original authority on scrutiny of the refund claim intimated the appellant about the discrepancies found in the refund application by issue of show cause notice. The original authority on obtaining written submission dated 29.04.2016 from the appellants and after giving a personal hearing on 03.05.2016 passed an order rejecting the refund claim on the ground that the refund application has been filed after a period of more than 22 months thus becoming time-barred, and that the exemption from payment of service tax for handling, storage and warehousing of rice, as claimed by the appellant is not eligible inasmuch as such an exemption was issued under notification No. 04/2014-ST dated 17.02.2014 and it applies prospectively and the same is not applicable retrospectively covering the disputed period of October 2012 to March 2013, for which service tax has been paid by the appellants. The original authority has also stated that the appellant has discharged the service tax liability on a voluntary basis upon which the investigation initiated by DGCEI was considered as closed. Accordingly he rejected the refund claim of the appellants vide Order-in-Original No. Refund/KS/21/2016 dated 12.05.2016. Upon filing an appeal by the appellants, the Commissioner of CGST & Central Excise, Raigad in terms of CBIC order No. 17/2017 – Service Tax dated 28.11.2017 issued in pursuance of Notification No. 26/2017 – C.E. (N.T.) dated 17.10.2017 allotting their case for the purpose of passing an order-in-appeal as the first appellate authority had rejected the refund claim by upholding the order of the original authority dated 12.05.2016, and dismissed the appeal filed by the appellants by issue of impugned order.

3. Learned Advocate appearing for the appellants claimed that CBIC circular No.177/03/2014-Service Tax dated 17.02.2014 had clarified that transportation of rice by a rail or a vessel is exempt under existing notification No.25/2012-Service Tax dated 20.6.2012 which is applicable to their case, and hence there are eligible for a refund of service tax paid by them. He also claimed that the last tranche of service tax was paid on 01.10.2015 and thus they have filed refund application on 25.02.2016 which is well before one year from the last date of payment i.e., 30.09.2016, and hence their case is not hit by time bar.

4. Learned AR appearing for Revenue reiterated the findings of the learned Commissioner in the impugned order and highlighted that both on time limit and on merits the refund application of the appellants cannot be entertained.

5. Heard both sides and perused the records of the case.

6. From the records placed before us, we find that an investigation was initiated against the appellants by DGCEI, Chennai Zonal Unit under summons proceedings during 20.02.2014, 25.02.2014, 08.05.2014, 02.06.2015, 24.06.2015, 02.09.2015. On the basis of the appellants’ request letter dated 25.5.2015 for waiver of issue of show cause notice in the investigation proceedings, the DGCEI had issued a letter dated 23.09.2015 requesting the appellants to pay the short paid service tax of Rs.1,52,85,442/- along with interest of Rs.30,70,631/- and penalty for an amount of Rs.22,92,816/-. The short payment of service tax have been made good by the appellants during the investigation of the case by DGCEI, through payment of service tax on different dates by various electronic payment challans dated 25.03.2014, 29.03.2014, 25.11.2014, 07.04.2015, 01.09.2015, 11.09.2015 and the last payment was made on 01.10.2015. On the basis of the voluntary compliance and on the request made by the appellants vide their letter dated 05.10.2015, the DGCEI have closed the investigation proceedings initiated in the case in terms of legal provisions under clause (i) of Second Proviso to Section 78 of the Finance Act, 1994, clearly intimating the appellants that the investigation proceedings initiated in the case are deemed to be concluded. Such conclusion of the investigation proceedings was issued after approval by the competent authority i.e., the Additional Director General, DGCEI. Chennai Zonal Unit vide their office letter in F. No. INV/DGCEI/CHZU/ST/41/2015 dated 27.10.2015. The present appeal filed by the appellants is regarding the claim for refund of such payment of service tax along with interest and penalty.

7. We find that all cases of refund of Service Tax is to be dealt with in terms of the statutory provisions of section 11 B of the Central Excise Act, 1944 as the said provision has been made applicable in relation to service tax through Section 83 of the Finance Act, 1994. The said legal provisions specify the period within which any refund application is required to be filed and how the refund application would be dealt with. The concept of ‘relevant date’ has also been explained in the said legal provisions. The relevant portion of the above legal provisions is extracted below:

SECTION 11B. Claim for refund of duty and interest, if any, paid on such duty. — (1) Any person claiming refund of any duty of excise and interest, if any, paid on such duty may make an application for refund of such duty and interest, if any, paid on such duty to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise before the expiry of one year from the relevant date in such form and manner as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of duty of excise and interest, if any, paid on such duty in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty and interest, if any, paid on such duty had not been passed on by him to any other person:

Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) substituted by that Act:

Provided further that the limitation of one year shall not apply where any duty and interest, if any, paid on such duty has been paid under protest.

(2) If, on receipt of any such application, the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise is satisfied that the whole or any part of the duty of excise and interest, if any, paid on such duty paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund :

(3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder or any other law for the time being in force, no refund shall be made except as provided in sub-section (2).

Explanation. — For the purposes of this section, –

(A) “refund” includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;

(B) “relevant date” means, –

(a) in the case of goods exported out of India where a refund of excise duty paid is available in respect of the goods themselves or, as the case may be, the excisable materials used in the manufacture of such goods, –

(i) if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India, or

(ii) if the goods are exported by land, the date on which such goods pass the frontier, or

(iii) if the goods are exported by post, the date of despatch of goods by the Post Office concerned to a place outside India;

(b) in the case of goods returned for being remade, refined, reconditioned, or subjected to any other similar process, in any factory, the date of entry into the factory for the purposes aforesaid;

(c) in the case of goods to which banderols are required to be affixed if removed for home consumption but not so required when exported outside India, if returned to a factory after having been removed from such factory for export out of India, the date of entry into the factory;

(d) in a case where a manufacturer is required to pay a sum, for a certain period, on the basis of the rate fixed by the Central Government by notification in the Official Gazette in full discharge of his liability for the duty leviable on his production of certain goods, if after the manufacturer has made the payment on the basis of such rate for any period but before the expiry of that period such rate is reduced, the date of such reduction;

(e) in the case of a person, other than the manufacturer, the date of purchase of the goods by such person;

(ea) in the case of goods which are exempt from payment of duty by a special order issued under sub­section (2) of section 5A, the date of issue of such order; (eb) in case where duty of excise is paid provisionally under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof;

(ec) in case where the duty becomes refundable as a consequence of judgment, decree, order or direction of appellate authority, Appellate Tribunal or any court, the date of such judgment, decree, order or direction;

(f) in any other case, the date of payment of duty.

The plain reading of the above legal provisions amply makes it clear, that any refund of excise duty/service tax can be entertained only in terms of sub-section (1) of Section 11B and any refund shall be made strictly in terms of sub-section (2) of Section 11B of the said Act. Accordingly, any person claiming refund is required to file the refund application in the prescribed manner and within one year from the relevant date as provided under the Explanation clause (B). It is not the case of the appellant that the service tax was paid under protest, in which case the one year time limit does not apply. The relevant date for the purpose of this case, in which the appellant have voluntarily paid the short payment of service tax, is the date of payment of duty/ tax. In the present case, since the refund claim has been filed for the total payment of service tax of Rs. 1,06,62,609/- which covers the payment made on 25.03.2014, 29.03.2014, 25.11.2014, we find that the refund claim filed on 23.02.2016 for these payments were beyond the prescribed period of one year. Further, there is/are no separate refund application(s) with breakup detail in respect of payments made on 07.04.2015, 01.09.2015, 11.09.2015 and 01.10.2015 for entertaining these as having been filed within one year time period. Hence, on the limited angle of time limit, the refund application is not maintainable in terms of Section 11B of the said Act as made applicable in relation to Service Tax.

8.1. We find that the actual service provided by the appellants for which short payment of service tax was demanded has not been discussed in detail either in the letter providing deemed conclusion of investigation proceedings or in the order issued by the original authority, as well as in the order issued by the first appellate authority. From the Concession agreement dated 09.05.2008 entered by the appellants with the Railways Administration, Government of India, it is seen that appellants had the right to undertake the business of collecting, storing and loading onto Wagons, consignments of rice or other goods from any third party for transportation of such rice or other goods across railway network for authorized category of routes.

8.2. The legal provisions of sub-sections (23) and (105) to Section 65 of the Finance Act, 1994 deal with the “cargo handling service” and “taxable services” as below:

“(23) “cargo handling service” means loading, unloading, packing or unpacking of cargo and includes,—

(a)cargo handling services provided for freight in special containers or for non containerised freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport, and cargo handling service incidental to freight; and

(b) service of packing together with transportation of cargo or goods, with or without one or more of other services like loading, unloading, unpacking, but does not include, handling of export cargo or passenger baggage or mere transportation of goods;

(105) “taxable service” means any service provided or to be provided,-

(zr) to any person, by a cargo handling agency in relation to cargo handling services;

(zzzp) to any person, by any other person, in relation to transport of goods by rail, in any manner;”

Thus we find that the services provided by the appellants in loading, unloading, storing and transportation of rice or other goods in container/wagons across rail is covered under the scope of taxable services specified under Sub-sections (zr) and (zzzp) of Section 65 (105) of the Finance Act, 1994. We further find that Notification No. 25/2012-Service Tax dated 20.06.2012, interalia, provided exemption from payment of whole of service tax leviable on the following:

“20. Services by way of transportation by rail or a vessel from one place in India to another of the following goods –

(a) petroleum and petroleum products falling under Chapter heading 2710 and 2711 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);

(b) relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap;

(c) defence or military equipments;

(d) postal mail or mail bags;

(e) household effects;

(f) newspaper or magazines registered with the Registrar of Newspapers;

(g) railway equipments or materials;

(h) agricultural produce;

(i) foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages; or

(j) chemical fertilizer and oilcakes;”

Central Board of Indirect Taxes and Customs had issued a circular No.177/03/2014-Service Tax dated 17.02.2014, clarifying that services by way of transportation of rice by rail or a vessel from one place in India to another is exempt as ‘foodstuff’ includes “rice”. Hence, we find that the services provided for transportation of rice by rail is exempt from 26.06.2012 and the same has been clarified in the above referred circular issued subsequently. We find that in addition to this, one more exemption entry was inserted vide Notification No. 04/2014-Service Tax dated 17.02.2014 extending exemption from whole of service tax on the following:

“40. Services by way of loading, unloading, packing, storage or warehousing of rice.”.

Thus we find that the exemption from payment of service tax on services of loading, unloading, packing, storage or warehousing of rice was provided only with effect from 17.02.2014. Thus we find that the taxable services under the head cargo handling services were not exempt during the disputed period. The Commissioner of CGST & Central Excise, Raigad in the impugned order has discussed these aspects before coming to a conclusion at paragraphs 18, 19 and 22, which we find is the correct interpretation of the law.

9.We also find that in order to encourage voluntary compliance various provisions have been made for enabling the tax payers to pay service tax that were found to have been short paid etc., during any proceedings, either before issue of show cause notice as under sub-section (3) to Section 73 or after issue of notice with prescribed penalty under Section 78, if the short payment of service tax is made good within the prescribed time limit. We find that the DGCEI had accepted the request of the appellants made vide their letter dated 05.10.2015 for conclusion of the proceedings on the basis of voluntary payments made on different dates and thus approved the investigation proceedings in respect of service tax, interest and penalty as deemed to have been concluded. Hence, we find that the service tax short paid as has been identified in the DGCEI investigation proceedings, which was voluntarily paid by the appellants, have been specifically closed at the request of the appellants. Hence it is not feasible to reopen the completed proceedings particularly when the same has attained deemed conclusion of the demand proceedings in respect of service tax, interest and penalty under section 78 of the Finance Act 1994.

10. In view of the above we find that both on time limit and on merits the appeal filed by the appellants does not sustain. We find that there are no grounds made by the appellants for interfering with the order passed by the first appellate authority. Hence we are not inclined to interfere with the impugned order passed by the Commissioner of Central GST & Central Excise, Raigad, Navi Mumbai in the case.

11. Therefore, we do not find any justification to interfere with the impugned order passed by the learned Commissioner of Central GST & Central Excise, Raigad. In view of above, the appeal filed by the appellant is dismissed.

(Order pronounced in open court on 13.07.2023)