It is unfortunate that law enforcing/implementing agency chooses to ignore law; somehow deny refund, without even considering legal options
THE assessee is a 100% EOU. They filed 4 refund claims for the period from October 2005 to September 2007 totally amounting to Rs. 6,42,052/-. The refund claims have been filed under Notification No. 05/2006-CE (NT) dated 14.03.2006 under Rule 5 of Cenvat Credit Rules 2004. The refund claims were rejected by the original authority by orders dated 28.03.2008. On appeal, the Commissioner (Appeals) allowed the refunds. No appeal was filed by the Revenue against this order.
The Original Adjudicating authority did not follow the orders of the Commissioner (Appeals) and issued another notice to the assessee to produce certain records. This time also the refund was rejected. On appeal, now the Commissioner (Appeals) upheld the lower authority's order and rejected the refund claim. The assessee claimed that the first order passed by the Commissioner (Appeals) had attained finality, but this aspect was not dealt with by both the authorities in the second round.
And the appeal reached the CESTAT. The Tribunal observed,
- While issuing show-cause notice, only ground taken by the Revenue in the first round of litigation was that appellant was not at all eligible for the credit of service tax paid on GTA service as a receiver of service. No other ground was taken. Normal presumption in such cases, is that, when a claim is received, the claim is examined, verified and if the rejection is to be made all the grounds which are required to be considered before rejection should be considered and all the grounds which can cause rejection of refund claim should be enumerated in the show-cause notice.
- Unfortunately in this case even at the beginning itself, by failing to issue a detailed show-cause notice covering other grounds, the opportunity to refuse portion of refund was lost. The show-cause notice was limited to only one ground and this was covered by the original authority and the Commissioner (Appeals) order dated 13.05.2009. Commissioner has considered the issue properly by getting the documents submitted before him verified and getting the verification report by the original authority and after satisfying himself based on the verification report, he allowed the appeals.
- The Revenue had an opportunity to rectify the mistakes at least at this stage since litigation is a mixed question of law and facts and probably this could have been considered by the Tribunal if appeal was to be filed.
- Whether this could have been done or not is not relevant since another opportunity was lost by not filing the appeal against the order of Commissioner (Appeals).
- Thereafter the officers committed another mistake by issuing another show-cause notice after 9 months in March 2010. This show-cause notice could not have been issued at all. Only option available was to file appeal rather than issuing a show-cause notice. Taking note of the fact that before the Tribunal, there is no limit for condonation of delay, there was time available to rectify the defects and file appeal even at this stage which was also lost.
- The legal process adopted in this case shows that opportunities to proceed properly on the part of the Revenue in this case were missed/lost.
- Now the question arises because of these missed opportunities, whether the second round of litigation initiated by the Revenue by issue of a fresh show-cause notice in 2010 culminating in the impugned order should be held as sustainable? The answer has to be ‘no'. Once the order-in-appeal passed on 13.05.2009 attained finality, the only option available to any appellate forum is to say so and any other option, if exercised, would be illegal.
- It is unfortunate that law enforcing/implementing agency chooses to ignore the law and just because assessee became entitled to refund, proceeded to somehow deny refund, without even considering legal options.
- The second round of litigation initiated itself was unwarranted and probably has to be held void. In any case allowing the appeal with consequential relief and holding the proceedings ab initio void have the same consequences. Therefore appeal is allowed with consequential relief to the appellants.
At this stage even though strictly speaking it is not required, as a measure of caution, the Tribunal mentioned that appellant would be eligible for interest after 3 months from the date of filing the claim in this case so that another round of litigation is not initiated by not granting the interest by the original authority.
Let us hope the refund is given at least now.