CESTAT Allows Refund Claims: Holds Procedural Lapses Can't Deny Exemption Benefits [Read Order]

In a significant ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in Chennai has allowed refund claims of a taxpayer, holding that procedural lapses cannot deny exemption benefits.

The case involved two excise appeals filed by Signal and Systems India Pvt. Ltd, challenging the rejection of their refund claims under different exemption notifications. The appellant had paid over 2 Lakh in excise duty in March 2013 after being directed by the jurisdictional superintendent, despite claiming exemption under the notification. They later sought a refund, arguing that their goods met the conditions for exemption under Sl.No.336 of the notification.

However, both the original and appellate authorities rejected their claim, stating that the assessee had not fulfilled Condition 41 of the notification. This condition required that the goods be exempt from customs duties under a corresponding customs notification.

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The tribunal found that the appellate authority had erroneously applied a proviso inserted into Condition 41 by Notification No. 12/2015-C.E., which was not applicable during the relevant period (March 2013). At that time, Condition 41 only required the existence of a customs exemption notification, which was satisfied by Sl.No.507 of Notification No.12/2012-Cus.

The tribunal also noted that the taxpayer provided sufficient documentation to prove that their goods were supplied against ICB and met all other requirements for exemption under Sl.No.336. Additionally, the tribunal accepted a Chartered Accountant's certificate confirming that the duty burden had not been passed on to customers, thus overcoming the bar of unjust enrichment.

Consequently, the tribunal ruled in favor of the taxpayer and allowed their refund claim. In the second appeal, the taxpayer challenged the rejection of their refund claim under Notification No.108/95-C.E., which exempts goods supplied for projects financed by international organizations like the Asian Development Bank (ADB).

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The tribunal noted that while the appellant had cleared goods for an ADB-financed project and were eligible for exemption under the given Notification, they could not produce certificates from ADB or other required documents at the time of clearance due to procedural delays.

Two Member Bench composed of Vasa Seshagiri Rao(Technical Member) and Ajayan T V(Judicial Member), emphasized that amendments to conditions cannot be retroactively applied to deny benefits for earlier periods. The ruling also underscores the importance of timely submission of required certificates to claim exemptions under specific notifications.

In conclusion, the CESTAT's decision is a welcome move and provides relief to taxpayers who have been denied exemption benefits due to procedural lapses. The ruling is also a reminder to the revenue authorities to follow the principles of natural justice and not deny benefits to taxpayers on technical grounds.

To Read the full text of the Order CLICK HERE

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