In a recent case, the Chennai bench of the Customs, Excise & Service Tax Appellate Tribunal( CESTAT ) remanded matter on denial of refund claim on service tax rendered for Special Exonomic Zone ( SEZ).The bench held that “ the issue regarding the denial of refund on payment of service tax beyond the relevant quarter is not there as decided in the impugned order and would hence be applicable to the earlier periods also and the matter hence stands remanded on the same terms in all such cases. “
The appellant Powergear Ltd. filed refund claims under Notification No. 40/2012ST dated 20.6.2012 [superseded by Notification No. 12/2013-ST, dated 01/07/2013] for the services rendered to SEZ. The entire refund claims were rejected by the adjudicating authority on the ground of time-bar. The eligibility of refund claims is based on the guidelines provided, stipulations given in the said notification. The appellants preferred appeals before Commissioner (Appeals). The Appellate Commissioner vide the impugned orders partially rejected the claims and partially remanded the matter back to the adjudicating authority.
Shri S. Venkatachalam appeared for the appellant and Shri M. Selvakumar Authorized Representative appeared for the respondent.
The Advocate stated that they have filed refund claims for service tax suffered on the specified services used for the authorized operations of the SEZ. The Counsel stated that they have claimed the refund after lapse of one year due to change in their administration department, they could not apply in time. The refund claims were rejected by the Asst. Commissioner and aggrieved by the same, the appellants filed two appeals before the Commissioner (Appeals) who after due process of law rejected the first appeal as time bar and in respect of second appeal partly allowed the appeal relating to payment of service tax beyond the relevant quarter but rejected the refund claim of Rs.95,877/- on grounds of time-bar.
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The Counsel stated that the person in their office dealing with tax matters was ailing and was having many health issues and was on leave frequently which resulted in the non-filing of refund claim in time. The new staff on seeing the pendency immediately took action in filing refund. It is settled position of law that substantive benefit should not be denied for procedural infraction. The Advocate submitted that the notification itself provides for extension of time for filing refund by proper authority. He further submitted that non-fulfillment of formalities can only be treated as a procedural lapse and the substantive benefit cannot be denied for procedural infraction.
Counsel stated that it has been alleged that payment for certain invoices were made by the appellants beyond the relevant quarter. He submitted that there is no such issue raised in the show cause notice. Further there is no provision in the said Notification to the effect that payment has to be made within the relevant quarter. Incidentally, the appellants have made all the payments to the service providers and the bank statement proof was given in respect of the serial numbers mentioned in the order-in-original. In the subsequent order the learned Commissioner (Appeals) agreed to the said position.
Further with regard to the time limit for filing the claim, in Clause 3(iii)(e) of the Notification No. 12/2013-ST dated 01.07.2013 it is clearly mentioned as “or such extended period as the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise as the case may by, shall permit”. Therefore, the averment in the impugned order that the appellants have violated the conditions mentioned in the show cause notice is not sustainable in as much as the Notification itself allows extension of period beyond one year. Further it is to be noted that the appellants are SEZ and hence entitled for exemption.
A single bench of Shri M. Ajit Kumar, Member (Technical) found that neither the issue of violation to para 3(III) (f) has been raised in the show cause notice, nor the issue of specified services marked is raised in the Show cause notice; and therefore, the findings that the impugned order are beyond the charges cast in the show cause notice; and therefore liable to be dropped.
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The respondent has denied the refund of Rs.6214/- for invoices on which no STC available. The appellant during the time of personal hearing has provided the STC of the service provider. This issue is also remanded back to the respondent for reverification. Needless to say that personal hearing may be given to the appellant to explain his case/present the documents.
It was observed that the respondent ought to have taken this aspect into consideration as the appellant is eligible for refund on this count for the period May 2014 and Jun 2014 with consequential relief, if any. The impugned Order-in-Original No.36/2016 (Refund Cell), dated 27.04.2016 is set aside to that extent. The issue regarding the denial of refund on payment of service tax beyond the relevant quarter is not there as decided in the impugned order and would hence be applicable to the earlier periods also and the matter hence stands remanded on the same terms in all such cases.
While admitting the delay in filing the refund claims within the normal has pointed to the fact that clause 3(iii)(e) of
Notification No. 12/2013-ST, allows the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise to extend the time limit however no decision was rendered to their request for extension. When a discretionary power is conferred on an Authority, the power must be exercised in a reasonable, transparent and rational manner free from whims, vagaries and arbitrariness. It is a part of the Authority’s public duty to do so.
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“In case any part of the refund is found ineligible, the Original Authority shall follow the principles of natural justice and afford a reasonable and time bound opportunity to the appellant to state their case both orally and in writing if they so wish, before issuing a speaking order in the matter. The appellant should also co-operate with the adjudicating authority in completing the process expeditiously and in any case within ninety days of receipt of this order.”, the bench held.
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