Claim for Refund of CENVAT Credit cannot be Denied In Absence of Reviewing or Reassessing of Self-Assessed Return: Delhi HC [Read Order]

The Delhi High Court has held that a claim for a refund of cenvat credit cannot be denied in the absence of reviewing or reassessing self-assessed returns.

BT(India) Private Limited, the petitioner impugned the order passed by the second respondent in terms of which its applications for refund of unutilized CENVAT credit have come to be negatived. The refund claims were lodged in respect of the quarters from October 2014 to December 2014, January 2015 to March 2015 and April 2015 to June 2015.

These applications which were dated 29 September 2015, 23 December 2015 and 29 March 2016 respectively were made on the ground of the input services having been utilized by the petitioner in connection with “export of services”. The services in question are Broadcasting, Business Support, IT Software and Management, and Maintenance or Repair services.

In terms of the impugned order dated 04 October 2021, the second respondent has come to conclude that the services rendered by the petitioner would not fall within the ambit of the expression “export of services” as contemplated under Rule 6A of the Service Tax Rules, 1994.

The second respondent holds that for Broadcasting services, even though the ordering company was an entity based out of Mauritius, the customer operation details as provided would indicate beneficiaries of service being present in India and that even the satellite services offered by the petitioner being in respect of channels broadcasted in India.

The second respondent holds against the petitioner additionally upon it coming to conclude that in terms of Section 2(105) of the Finance Act, 1994 read with Section 2(16), the services rendered to a Head Office would also imply services being provided to a Branch Office or representative in India and thus falling outside the net of “export of service” as contemplated under the Act and the 1994 Rules.

Since the petitioner had failed to submit any agreement or invoice for such services being provided to clients outside India. While dealing with IT Software Service, the second respondent negatived the claim for refund by observing that merely because the address of the customer is outside India, the same would not necessarily mean that those services had been exported out of the country.

Proceeding then to consider the Business Support Service component of the activities undertaken by the petitioner, the second respondent notes that while the petitioner had agreed with its parent company, the service itself was provided to international customers of the parent company or its group entities and that such customers were possibly present in India. It also took into consideration the fact that payment terms, as settled in favour of the petitioner, appeared to indicate that it was being paid on a commission and a cost-plus markup basis and that no invoices appear to have been raised upon the international customers.

The second respondent went on to hold that the services rendered by the petitioner would fall and qualify as “intermediary services” as defined under the Place of Provision of Services Rules, 2012, and for this reason, the applications for refund were liable to be rejected.

In view of the aforesaid, the respondents contended that a conjoint reading of Section 11B of the Excise Act and Rule 5 of the CCR Rules would lead one to the irresistible conclusion of a power of determination inhering in the competent authority even at the stage where an application for refund may be made.

It was then lastly contended that the second respondent has recorded detailed and cogent reasons in support of its conclusion that the services rendered by the petitioner did not qualify as “export of services” coupled with the ultimate conclusion which came to be recorded by the said respondent, who on due consideration of facts found that the petitioner was liable to be viewed as an “intermediary” in terms of the provisions contained in Rule 2(f) read with Rule 9 of the PoPS Rules.

The petitioner, on the other hand, contended that the extent of the power which is available to be exercised by an authority while considering a claim for refund is no longer res integra and stands concluded in light of the judgments rendered by the Supreme Court in Flock(India), Priya Blue Industries and ITC limited.

A division bench of Justice Yashwant Varma and Justice Dharmesh Sharma observed that more particularly in Section 11B (2), a refund is granted by the competent authority upon it being satisfied that the whole or any part of the duty paid is refundable.

While Section 17 of the Customs Act enables an importer or an exporter, as the case may be, to self-assess and pay the duty leviable on goods, the said provision further empowers the proper officer to verify the self-assessed return that may be submitted. In terms of Section 17(4) of the said enactment, if the proper officer on verification, examination or testing of the goods concludes that the self-assessment is incorrect, it becomes entitled to reassess the duty leviable on goods. It is in extension of the aforesaid power that sub-section (5) of Section 17 speaks of reassessment and the obligation of the proper officer to pass a speaking order in support of the exercise of reassessment.

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. 

Since the liability or otherwise of the petitioner to pay service tax would flow and rest only upon the assertions made in the self-assessed return, the various issues which have been gone into by the second respondent while passing the impugned order would be an exercise beyond the jurisdiction which could otherwise be recognised to exist at the stage of consideration of a refund claim. We thus find that the impugned order is rendered unsustainable on this score and is liable to be set aside for the aforesaid reasons.

While allowing the writ petition, the court quashed and set aside the impugned order.

To Read the full text of the Order CLICK HERE

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