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.

It also considered the principle that quasi-judicial orders cannot be collaterally reviewed except in accordance with the statutory mechanism. The Tribunal further relied on the reasoning in BT (India) Private Limited, holding that an assessment or self-assessment must first be questioned or modified through the prescribed statutory procedure before consequential refund proceedings can be used to challenge it. On the issue of nexus between input and output services, the Tribunal held that eligibility of input services for CENVAT credit and correctness of refund under Rule 5 are distinct matters and that nexus could not be questioned in the refund proceedings in the manner adopted by Revenue.

It also accepted the respondent’s contention that Notification No. 5/2006 did not require submission of original FIRCs and that procedural lapses should not defeat an otherwise available substantial refund benefit. The Tribunal ultimately held that the show cause notices issued under Section 73 were legally unsustainable because the sanctioned refund orders had not been reviewed under Section 84 and the notices were issued beyond the prescribed two-year period. It further held that the other objections raised by Revenue were not sustainable and dismissed the appeal.

Cases Discussed

• Topcem India v. Union of India, 2021 (376) E.L.T. 573 (Gauhati High Court)
• RNB Carbides & Ferro Alloys Pvt. Ltd., 2021 (378) E.L.T. 474 (CESTAT Kolkata)
• BT (India) Private Limited, W.P.(C) 13968/2021 (Delhi High Court)
• CCE, Delhi and Delhi-III Vs M/s Convergys India Services Pvt. Ltd., 2016 (10) TMI 485 – CESTAT Chandigarh

FULL TEXT OF THE CESTAT CHANDIGARH ORDER

The appeal is filed by Revenue against the impugned order-in- original dated 22.01.2008.

2. Brief facts of the case are that M/s colt Technologies Services India Pvt. Ltd. (the Respondent) are engaged in rendering output services, i.e. business auxiliary services, on behalf of their overseas clients under an agreement with Colt Telecom Group Ltd. U.K. The appellants have availed various input services and have taken Cenvat credit of the same. The respondents filed two refund claims for the periods January-March 2007 and April-June 2007. The refund applications were processed in terms of Notification No. 5/2006-CE (NT) dated 14.03.2006 and CBEC circular No. 828/05/2006-CX dated 20.04.2006 and 80% of the refund was sanctioned. On a review of the refund orders, Revenue issued two show cause notices, dated 26.12.2008 and 31.01.2008, proposing to demand the refund already sanctioned; deny the balance of the refund on the ground that there was no nexus between the input services and output services, nature of output services is not indicated in the invoices, FIRCs did not contain reference to export invoices, original copies of the FIRCs were not submitted and the services were rendered in India.

2.1 Learned Commissioner (Adjudication), dropped the demands raised in the show cause notices on the grounds that prior to 19.08.2009, there was no provision to review the refund orders in terms of Section 84 of Finance Act, 1994 and that the orders sanctioning refund were not appealed against. Committee of Chief Commissioners reviewed the order and accordingly, directed the

Commissioner to file an appeal in terms of Section 86 (2) of Finance Act, 1994 on the grounds that:

(i) Learned Commissioner erred in dropping the demand on the premise that the provisions of Section 84 were not prevalent during the relevant time.

(ii) Learned Commissioner ignored the fact that the show cause notices issued under Section 73 (1) of Finance Act, 1994 which provides for demand of erroneously refunded amount.

(iii) Bombay High Court in the case of Indian Dyestuff Industries Ltd. 2003 (161) ELT 12 (Bomb.) and Tribunal in the cases of Ogilvy & Mather Pvt. Ltd 2010 (18) STR 502; Orissa Cement 1996 (81) ELT 154 (Tribunal) held that Section 73 (1) can be invoked for recovering erroneously granted refund.

3. Shri Harish Kapoor, Learned Authorised Representative for the Revenue reiterates the grounds of appeal and relies on Indian Dyestuff Industries Ltd (supra). He submits that:

•  The respondents did not indicate the exact nature of output service in the invoices
•  FIRCs do not contain reference to export invoices
•  There is no co-relation between FIRCs and invoices
• Date of payment was not shown in the Cenvat Register
•  Export figures were differently shown in Form-A, ST-3 returns and FIRCs.

Learned AR relies on India Dyestuff Industries Ltd. – MANU/MH/0125/2002, Ogilvy and Mather Pvt. Ltd. – MANU/CB/0064/2010 and Maize Products – MANU/CM/0301/2004.

4. M/s Krati Singh, Learned Counsel for the Respondent submits that the impugned order had correctly declared the SCNs as bad in law; during the Relevant Period, the Commissioner of Central Excise had no power to examine the legality or propriety of the orders or decisions passed by an officer subordinate to him otherwise than the power prescribed under Section 84 of the Act; further as per Section 84 of the Act, no order can be passed after the expiry of two years from the date on which the order sought to be revised has been passed; the SCNs issued after a period of two years are bad in law and the same needs to be set aside; moreover, the Order in Original dated 22.01.2008 was never challenged; provisions under Section 73 can be invoked only in a case where it has been found that the refund has been ‘erroneously’ granted; orders dated 22.01.2008 is not overturned or reversed in any manner known to law, it cannot be said that the amount has been “erroneously refunded”. She relies on

• Topcem India 2021 (376) E.L.T. 573 (Gau.)
•  Narbada Industries 2022 (5) TMI 1361 (J&K)
•  RNB Carbides & Ferro Alloys Pvt Ltd 2021 (378) E.L.T. 474 (Tri. – Kolkata)
•  Tripura Ispat 2021 (1) TMI 753-(Tripura)
•  Bridgestone India Private Limited 2022 (9) TMI 675 CESTAT New Delhi
•  Eureka Forbes Ltd 2018 (8) TMI 1288-CESTAT Bangalore
•  CCE v. Jellalpore Tea Estate 2011 (3) TMI 11-Gauhati High Court
• Bharat Box Factory Limited 2018 (5) TMI 1346-CESTAT Chandigarh

5. Learned Counsel submits also that without prejudice to the above, respondent had fulfilled the conditions prescribed under export rules read with the notification; the services rendered by the Respondent qualifies as export of services under Export Rules; refund claim was duly filed in accordance with Export Rules read with Notification; it was never disputed by department that the services rendered by the Respondent do not qualify as export of services, on earlier occasions; 100 % refund was sanctioned after examining all the conditions prescribed under the Export Rules and the Notification. She submits that it is a settled principle of law that the department cannot take different stands for different tax periods in respect of same facts and circumstances as held in Birla Corporation 2005 (186) ELT 266 (SC) and Genpact India Private Limited 2023 (68) GSTL 3 (P & H).

6. Learned Counsel submits further that the respondent fulfilled all the conditions prescribed under Rule 3(2)(b) of the EOS Rules as such service was provided from India and used outside India, payment for such service was received in convertible foreign exchange. She submits that the multiplexer of the Respondent which is located in Gurgaon, India is connected to the multiplexer, located in UK through a network link; entire gamut of services comprising of data input, data processing, data reporting, data analysis and data reporting to render the services under the Agreement, are provided by the Respondent to its client located outside India through this network link only. She relies on Arcelor Mittal Stainless (1) P Ltd 2023 (8) TMI 107-CESTAT Mumbai LB and Carrier Airconditioning Refrigeration Ltd 2023 (12) TMI 380-CESTAT Chandigarh.

7. Learned Counsel submits in addition that the Respondent has claimed the refund of the CENVAT credit in respect of input services like outdoor catering, real estate agent service and pandal & shamiana services as the same are used for providing the output service; it is incorrect to allege that the said services do not have nexus with the output service; a bare perusal of the definition of „input‟, it is clear that input services included all the activities which are relating to business. The input services availed by the Respondent are nothing but the activities relating to the business; the Respondent being an 100% EOU, the said services are used in rendering the output services; it was held, in the following, that that one-to one correlation is not required between input services and output services for claiming refund of CENVAT credit, as held in the following.  M/S Convergys India Services Pvt Ltd. 2016 (10) TMI 485- CESTAT Chandigarh  M/s Verizon Data Services India Private Limited 2022 (8) TMI 1105 CESTAT Chennai  DBOI Global Services Pvt Ltd 2016 (11) TMI 521 CESTAT Mumbai [affirmed by High Court 2018 (12) TMI 171- Bombay High Court]  M/S Hyundai Motor India Engineering Pvt Ltd Versus 2019 (12) TMI 854 CESTAT Hyderabad.

• Axis Bank Ltd 2018 (12) TMI 1479-Bombay High Court

8. Learned Counsel submits furthermore that the department has wrongly alleged that original copies of the FIRC’s were not submitted by the Respondent; Notification nowhere provides that the FIRCs to be submitted in original form along with the refund application; Notification only prescribes for submission of a certificate from the bank certifying the realization of export proceeds. She submits that allegation that co-relation of output service vis-à-vis output invoice is not established or FIRC’s do not contain the reference of the invoices etc., are not correct; services rendered by the Respondent qualify as export of services under Rule 3(2) of the Export Rules; Respondent is entitled to claim refund of the unutilised credit of tax paid on the input services so utilised for rendering such output services under Rule 5 of the Export Rules; for earlier periods the refund claim of the Respondent was duly sanctioned by the department after proper verification and scrutiny on the basis that the services rendered by the Respondent qualify as export of services. She submits that even if there are procedural lapses, substantial benefit cannot be denied as held in Samsung R&D Institute India Bangalore Pvt Ltd 12019 (7) TMI 1418-CESTAT Bangalore and Robert Bosch Engineering and Business Solutions Limited 2017 (12) TMI 836-Cestat Bangalore.

9. Heard both sides and perused the records of the case. Issues in brief that need to be addressed in the instant case are as to whether:

• The Revenue was correct in taking recourse to Section 73 of the Finance Act, 1994 when the provisions of Section 84 did not exist.
•  The Department was right in issuing a show cause notice to recover the refund, already granted to the appellants after due verification, terming the same to be “erroneous refund”
•  The input services availed by the appellants can be alleged to have no nexus with the output services while issuing a show cause notice for recovery of “erroneously refunded” amount.  Procedural infirmities are enough to deny the substantial benefit.

10. We find that learned Commissioner has set aside the impugned show cause notices findings as follows:

2.7 Sub section (5) of Section 84, before it was substituted w.e.f. 19.08.2009, had provided that no order under Section 84 shall be passed after the expiry of two years from the date on which the order sought to be revised had been passed. The present proceedings are deemed to be the proceedings as if Section 84 had not been substituted. Accordingly, no order can be issued to revise the Orders-in-Original sought to be revised under the aforesaid SCN, as more than two years have passed since the Order-in-Original were issued by the competent officer.

2.8 As regards the second SCN No. 178/Ref/2007 dated 26.12.2008 issued by the Joint Commissioner, it is pertinent to mention that the Centre Board of Excise and Customs reviewed the practices being followed by the field formations regarding the sanction and pre-audit of refund rebate claims. The Board then issued a Circular, No. 809/6/2005-Cx dated 01.03.2005 and ordered the field formations to issue Order-in- Original to sanction all refunds where amount involved was above Rs. 50,000/-. The relevant para of the Circular dated 01.03.2005 is reproduced below.

“3. The matter has been examined by the Board with the twin purpose of ensuring uniformity in procedure and to enable effective monitoring of sanction of refund/rebate claims. Accordingly, it has been decided that all refund/rebate sanction orders must necessarily be issued as an Order-in-Original. A separate series with suffix ‘R’ for numbering of Orders-in- Original issued for sanction of refund/rebate claims may be used. However, in terms of risk to revenue, a monetary limit of Rs. 50,000/- has been fixed below which O-In-O may not be issued if the rebate is sanctioned in full. This shall also enable the department to focus on the cases where the amount sanctioned is higher than Rs. 50,000/-.

2.9 Once an Order-in-Original has been issued then the only way to assail the order is by way of appeal before the next higher authority or by way of action under the Section 84 of the Act 94. In context of the refunds under Central Excise Act, 1944, the position has been made clear by the CBEC in Circular No. 869/7/2008-CX dated 16.05.2008, Para 2.1 & 2 2 of the aforesaid circular are reproduced below.

2.1 All refund/rebate sanction orders must necessarily be issued as an Order-in-Original. A separate series with suffix ‘R’ for numbering of Orders-in-Original issued for sanction of refund/rebate claims may be used. However, in terms of risk to revenue, a monetary limit of Rs. 50,000/- has been fixed below which O-In-O may not be issued, if the rebate is sanctioned in full. This shall also enable the department to focus on the cases where the amount sanctioned is higher than Rs. 50,000/-.

2.2 All refund/rebate claims involving an amount of Rs. 5 lakh or above should be subjected to pre audit at the level of Deputy/Assistant Commissioner (Audit) in the Commissionerate Headquarter Office. In such cases, a suitable Order-in-Original shall be passed by Deputy/Assistant Commissioner of Central Excise. The Orders-in-Original passed in this regard shall be subjected to review proceedings by the Commissioner as per the provisions of Section 35-E of the Central Excise Act, 1944″

2.10 All orders passed by the Deputy/Assistant Commissioner for refund of duty are subject to review proceedings by the Commissioner oner as per the provisions of Section 35-E of the Central Excise Act. 1944. The same logic shall be applicable to the proceedings under the Act 94. The Orders-in-Original passed by the AC shall be subject to review/revision by Commissioner under Section 84 of the Act 94. The Joint Commissioner had no power to hold that the Order-in-Original issued by the AC was not legal or proper, even if the Order-in-Original was very apparently illegal or improper. The right course was to put the Order-in-Original before the Commissioner to examine the legality or proprietary of the Order- in-Original. The Show Cause Notice no. 178/Ref/07 dated 26 12 2008 is, therefore, bad in law ab initio.

11. The appellants argue that they are a 100% EOU and have filed refund claims as per Notification No.05/2006-CE (NT) dated 14.03.2006 and CBEC Circular dated 20.04.2006 issued in this regard; 80% of the refund claimed was sanctioned by issuing OIOs; after a lapse of two years, Revenue issued show cause notices to recover the refunds granted under Section 73 concluding that it is an erroneous refund; Revenue had to take recourse to the provisions of Section 84 within two years rather than issuing notices under Section 73; refunds which have been granted after due verification cannot be termed to be erroneous without the authority of law as the refunds sanctioned were never appealed against and no competent authority has decided that the orders are erroneous. The appellants also argues that it is incorrect to say that the input services have no nexus with the output services and that if it all there are procedural infractions, benefit of refund cannot be denied.

12. We find that Hon‟ble Guwahati High Court in the case of Topcem India (supra) has discussed a similarly placed issue and held that:

45. The question which falls for consideration in the present proceeding is whether refunds granted earlier pursuant to the Judgment of the Apex Court in “M/s. SRD Nutrients Private Limited” (supra) can be considered to be refunds erroneously granted in view of the subsequent Judgment of the Apex Court in “M/s. Unicorn Industries” (supra) wherein the earlier Judgment of “M/s. SRD Nutrients Private Limited” (supra) was held to be “per incuriam” and whether the same can be recovered under the provisions of Section 11A of the Central Excise Act as sought to be done by the Department. The further question that has arisen for consideration in the present proceedings is whether an order passed by the Quasi-Judicial Authority under the Central Excise Department granting refunds earlier can be re- visited by another co-lateral authority of the same Department in exercise of their powers under the Central Excise Act. ………..

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46. “Erroneous Refund” The provisions of Section 11A in the context of the present proceedings have been invoked by the Department by treating the refunds granted earlier to the petitioners to have been granted “erroneously”. A perusal of the provisions of Central Excise Act and the Rules framed thereunder reveals that the term erroneous has not been defined anywhere. In this context, it is relevant to refer to the Judgment of this Court rendered in Rajendra Singh (supra) wherein by referring to the Black‟s Law Dictionary, it was held that “erroneous” means involving error; deviating from law. In the said judgment, it is held that an order cannot be term as erroneous unless it is not in accordance with law. It is held that if an officer acting in accordance with law makes certain assessment and determines the turnover of dealer, the same cannot be branded as erroneous. In another matter, the Division Bench of this Court in Victor Cane Industries v. Commissioner of Taxes and Ors., reported in 2001 SCC Online Gau 216: (2002) 2 GLR 69, held that simply because the law has changed or earlier law laid down has been reversed, it would not entitle the revisional authority to reopen the earlier assessments. …..

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52. From the Judgments discussed above, it is seen that the term “erroneous” any error deviating from law. A change of law subsequently would not make an action taken earlier by Quasi Judicial Authority in terms of law as it stood then, to be held to be erroneous so as to enable the Departmental Officer to invoke powers under Section 11A of the Central Excise Act. On perusal of Section 11A reveals that the power under Section 11A for recovery of duties not levied or not paid or short levied or short paid or erroneously refunded will be available to the departmental Officer only on the decisions mentioned in sub-section (4) unless the concerned departmental Officer is satisfied that the refund granted earlier was because of any or all of the conditions mentioned under sub-section (4), the refunds cannot be treated to be erroneous. The mandate of section requires the departmental Officer to apply its mind and only upon satisfaction of the conditions mentioned under sub-section (4) of Section 11A can any refund granted earlier be treated to have been erroneously.

53. The Department proceeded to issue, the impugned demand-cum-show cause notices on the premise that once the judgment on the basis of which the refunds were granted have been held to be per incuriam, the refunds sanctioned/granted earlier will become unavailable to the petitioners because of the change in law and, therefore, the same will be an erroneous refund enabling the Department to invoke its statutory powers under Section 11A read with Section 11AA of the Central Excise Act, 1944. What cannot be lost sight of is that the Department sanctioned the refunds demanded/claimed by the petitioners on the basis of the Judgment in SRD Nutrients without any demur. The contention of the departmental counsel that the refunds sanctioned become erroneous by virtue of the Apex Court holding the judgment of SRD Nutrients to be rendered per incuriam as the still earlier Judgments of the Apex Court rendered in Modi Rubber (supra) and Rita Textile (supra) were not considered, cannot accepted. It is not disputed that pursuant to the judgment of the SRD Nutrients, a review application was filed by the Department and which was dismissed on 10-7-2018.

…..

67. The Officers of the Central Excise Department exercise Quasi judicial functions. The orders passed by the Department Officers being in exercise of Quasi Judicial powers cannot be co- laterally revoked/reviewed except when permitted under the Statute. It is seen that against sanction orders passed the concerned officers, the statute does not provide for any review of such order passed. However, under Section 35, there is a provision for appeal, which however has not been resorted to by the Department seeking revocation/recall of orders already passed sanctioning the refund in terms of “M/s. SRD Nutrients (supra)”. The refund orders passed cannot be unilaterally revoked by application of Section 11A unless the requirements of sub-section (4) of Section 11A are satisfied. This will amount to impeaching collaterally a finding rendered by a quasi-judicial authority. The Apex Court in “Abdul Kuddus” reported in (2019) 6 SCC 604 has very succinctly laid down the law regarding impermissibility of collateral impeachment of orders passed by Quasi-Judicial bodies.

13. We find that Tribunal in the case of RNB Carbides & Ferro Alloys Pvt. Ltd. (supra) followed the above decision and held as follows:

21. Looking from a perspective altogether different from the case of valuation of excisable goods, the entire proceedings in the instant case mainly relate to the recovery of amount already refunded claiming the same to be a case of “erroneous refund” under Section 11A of the Act. The whole basis of the Revenue that freight amount is not includible in the assessable value, as has subsequently been held by the Supreme Court in Ispat Industries (supra), to state that the buyer‟s place can never be said to be place of removal. In our view, the refund already sanctioned by relying on the judicial legal precedents holding the field then as well as the clarifications issued by the Board, the same cannot be termed as “erroneous refund”. In this regard, it would be worthwhile to take support from the recent decision of the Hon‟ble Gauhati High Court in the case of Topcem India v. UOI – 2021 (376) E.L.T. 573. In that case also, refund was sanctioned of the cess amount along with the basic excise duty in terms of the exemption notifications issued in the north-eastern States. The said notifications provided for exemption by way of refund of the duty paid through account current (PLA). By a subsequent decision of the Supreme Court in Unicorn Industries, it was held that the previous decisions of the Supreme Court in S.R.D. Nutrients case which upheld exemption of the cess amount was held to be per incurium. As a result thereof, the Department proceeded to recover the cess amount refund of which was already sanctioned by terming the said refund to be “erroneous”. The Gauhati High Court clarified the position that refund already sanctioned by taking the support of the legal precedents holding the field then cannot be termed as erroneous merely because of the change in legal position subsequently.

14. We find that Hon‟ble Delhi High Court while dealing with similarly placed issue regarding the assessment, in the case of BT (INDIA) PRIVATE LIMITEDin W.P.(C) 13968/2021 held that assessment requires to be revised by competent authority before taking executionary action. We are of the considered opinion that the same principle applies to the present case where show cause notices have been issued to recover the refunds sanctioned to the appellants by invoking the provisions of Section 73, without a competent authority determining that the refunds were erroneous. Hon‟ble High Court held as follows:

62. Both these decisions and the views expressed therein came to be specifically noticed and reaffirmed by three learned Judges of the Supreme Court in ITC Limited. The decision of the Supreme Court in ITC Limited assumes added significance, insofar as the present case is concerned, in light of it having found that a self- assessment return, even in the absence of a formal order dealing with the same, would nonetheless amount to an assessment. We had in this regard and in the preceding parts of this decision noticed the definition of the expression „assessment‟ as contained in Rule 2(b) of the 1994 Rules which includes a self-assessment of service tax and thus being evidence of a position similar and akin to that which obtains under the Customs and Excise Acts.

63. Their Lordships in ITC Limited categorically held that notwithstanding a self-assessed Bill of Entry having been merely endorsed by the competent authority, the same would nonetheless amount to an „assessment‟. It was in that backdrop that it was held that once a self- assessed return had been duly accepted, the same could not be modified or varied by an authority while considering an application for refund.

64. It becomes pertinent to note that the appellant before the Supreme Court in that case, had sought to press the claim for refund asserting that it had due to inadvertence failed to submit a self-assessment return taking into consideration an exemption notification. It was this claim which came to be ultimately negatived by the Supreme Court and which held that a claim for refund cannot be entertained unless the order of assessment, and which would include a self- assessment return, is modified in accordance with the procedure prescribed in the statute. In our considered opinion, it is these principles enunciated in Flock (India), Priya Blue Industries and ITC Limited, which compel and convince us to observe that the impugned order is clearly rendered unsustainable.

65. Undisputedly, the petitioner had submitted self-assessment returns proceeding on the basis that the output services rendered by it would qualify as an „export of service‟ and thus it being not exigible to service tax. The aforesaid self- assessment returns remained untouched and had not been questioned by the respondents either in terms of Sections 72 or 73 of the Act. The application for refund of CENVAT credit was founded on the petitioner assessing that it was not liable to pay service tax on services so exported. The accumulation of CENVAT credit came about in light of the various input services received by the petitioner and it having availed credit of service tax paid thereon in terms of Rule 3 of the CCR Rules. It was in respect of the accumulated CENVAT credit that the application for refund came to be made.

66. In our considered view, unless the self- assessed return, as submitted had been questioned, re-opened or re-assessed and the assertion of the petitioner of the services rendered by it qualifying as an „export of service‟ questioned or negatived in accordance with the procedure prescribed under the Act, its claim for refund could not have been negated. As was observed by the Supreme Court in ITC Limited, a self-assessed return also amounts to an „assessment‟ and unless it is varied or modified in accordance with the procedure prescribed under the relevant statute, the same cannot possibly be questioned in refund proceedings. As the Supreme Court had held in the decisions aforenoted, the authority while considering an application for grant of refund neither sits in appeal nor is it entitled to review an assessment deemed to have been made. In fact, the Supreme Court in ITC Limited had described refund proceedings to be akin to execution proceedings.

67. We thus come to the firm conclusion that in the absence of the self-assessed return having been questioned, reviewed or re-assessed, the claim for refund of CENVAT credit could not have been denied by the respondents. When confronted with the application for refund, all that the respondents could have possibly examined or evaluated was whether the provisions of Rule 5 read along with the various prescriptions contained in the notification dated 18 June 2012 had been complied with. The respondents, at this stage of the proceedings, could not have doubted, questioned or undertaken a merit review of the self-assessed return which had been submitted.

15. Further, on the point of questioning lack of nexus between the input services and the output services, we find that Tribunal in a number of decisions held that nexus cannot be questioned while deciding a refund and the correct course of action would be to decide the eligibility of various input services for credit and thereafter in the refund proceedings decides the correctness of the claim in terms of the provisions of the Rule 5. We find that this Bench in the case of CCE, Delhi and Delhi-III Vs M/s Convergys India Services Pvt. Ltd. (supra) held that:

3. Provisions of Rule 2(l) defined “input service” as any service, –

(i) used by a provider of taxable service for providing an output service; or

(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal”.

The definition has a main clause which states services used by provider of taxable service for providing an output service and further in the inclusion clause various specific services used by the output service provider. The admitted facts are that the respondent did avail these various input services and discharged Service Tax on them. The dispute is eligibility of such credit for the purpose of refund under Rule 5. First of all, we note that the eligibility of certain input services for credit purposes is being disputed and denied by the Original Authority during the course of processing the refund claim under Rule 5. The correct course of action would be to decide the eligibility of various input services for credit and thereafter in the refund proceeding decide the correctness of the claim in terms of the provisions of Rule 5 read with the relevant notification. We find that such process has not been followed in the present cases. In any case, we are examining the respondents‟ eligibility for these credits as upheld by the Appellate Authority.

4. The outdoor catering service is availed by the respondents for the catering facility rendered to the employees in order to provide round the clock uninterrupted export service to the foreign recipients. In such scenario, it is necessary to examine the context of input service and its nexus with the output service. The respondents are engaged in providing service to clients located in different countries and different time zones. In such situation we find that in a continuous operation as undertaken by the appellant relating to IT enabled services such employee related services are to be considered as eligible for credit. Similarly, Mandap Keeper service is in connection with recruitment of manpower in various cities. This has direct nexus to the activity of provisions of output Service by the respondent. The event management service are in connection with business activities. The employees are brought in one platform for interaction. The interior decorator service is availed to modernize and design the office premises engaged in providing output services, as such, they have direct nexus with the output service. The erection commissioning service is with reference to installation of IT equipments and maintenance of infrastructure which are very essential for providing IT enabled services by the respondents. We also note that Board vide its circular dated 19-1-2010 clarified that there cannot be two yardsticks, one for availing credit and another for granting refunds. One way to interpret the eligibility of credit is to check whether the absence of such input services would adversely impact the quality and efficiency of the exported service. If the answer is in affirmative the input service should be held as eligible for credit. On perusal of the impugned orders, we find learned Commissioner (Appeals) examined each one of the input services and recorded his finding about their eligibility. We find in the grounds of appeal, the Revenue contended that services like outdoor catering, Mandap Keeper, interior decoration are not connected to export of services and the link is farfetched. The appeal filed by the Revenue further states that the reliance placed by the Commissioner (Appeals) on the CESTAT final order dated 15-5-2009 is not appropriate as the said order has not reached the finality. We find such reasoning cannot be legally sustainable. The Revenue has not placed any evidence or case law in support of their contention that the services in dispute are not falling within the scope of input services and as such are not eligible for refund. We also note that the Hon‟ble Punjab & Haryana High Court in respondent‟s own case reported in 2010 (20) S.T.R. 166 (P&H) upheld the Appellate Authority‟s order to the effect that “…Any service cannot be disqualified on the basis that the same has only peripheral connection with the output service as long as it is proven the same has been used in providing export services. Once it is established that the said services have been used for providing the output service, rebate claim becomes admissible subject to verification of the payment of Service Tax on the said services …..”.

16. Regarding the submissions like non-production of original FIRCs, non-mentioning of output service in the invoices and discrepancies in the figures etc., we are in agreement with the submissions of the learned Counsel for the respondents that procedural lapses, if any, should not come in the way to extend the substantial benefit available to the respondents.

17. In view of the above, we find that Revenue has clearly erred in issuing the show cause notices under Section 73 of the Finance Act. We find that during the impugned period, Commissioner of Central Excise has no power to examine the legality or propriety of the orders passed by lower authorities save otherwise than by invoking the provisions of Section 84. In this case, no such power has been exercised. Further, in contravention of the provisions of Section 84, the show cause notice has been issued beyond the expiry of two years. We are of the considered opinion that such an action in issuing the show cause notices for recovery of amounts claimed to have been erroneously refunded under Section 73 of the Finance Act, 1994. The show cause notices were issued without reviewing the orders of the lower authority sanctioning the refunds under the provisions of Section 84. Such an act would defeat the very purpose of Section 84 and directly proceeding to recover the refunds granted, under Section 73, would defeat the purpose of Section 84. Therefore, in view of the legal position and in view of the case laws cited above, the impugned show cause notices cannot be sustained. We also find that the other contentions raised in the appeal are not acceptable. We find that the nexus between the input and output services cannot be decided during the course of grant or rejection of refund, for which statutory provisions otherwise exist. We also find that the Notification No.05/2006 does not specify that original copies of FIRCs need to be submitted and therefore, the assessee‟s contention are acceptable. In view of the discussion, we find that the impugned order is sustainable and the appeal is liable to be dismissed. Accordingly, the same is dismissed.

(Order pronounced in the open court on 26/03/2025)