The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal in a recent matter granted relief to GAIL India Ltd. proclaiming that refund of Service Tax claimed cannot be rejected by Revenue Department if the Assessee has made adequate reparations to reimburse service tax amounts that were wrongly claimed by them from their customers.
The present Appeal was filed before the CESTAT following an Order passed by the Commissioner of Central Excise, Custom and Service Tax-Vadodara-I.
The Appellant company is engaged in providing services of transportation of goods through pipeline and leased circuit services. The charges for the services are levied on the basis of an Adjusted Price Mechanism while levying tax on the Services as per the provisions of the Finance Act, 1994.
The issue at hand arose when the Appellant company introduced ‘additional service charge’ on transportation of goods. The additional charges were levied under auxiliary service charges and levied on its Customers.
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The Ministry of Petroleum and Natural Gas observed that such levy of additional charges are in contravention of an Order by the Ministry determining that the Appellant is not permitted to levy such additional charges without prior approval of the Ministry.
Upon being apprehended by the Ministry via official letter, the Appellant proceeded to issue refunds for the additional charges levied by them, in the form of Credit Notes that can be availed by their Customers for subsequent transactions.
Subsequently, the Appellant filed for a refund claim of Rs.88,47,107/- of the additional service tax from the Revenue Department in light of the charges levied on and later reissued to the customers of the Appellant Corporation.
The refund claim of the Appellant was rejected by the Corporation citing the Appellant’s prior recovery of the disputed Amount from its Customers.
Counsel for the Appellant contended that the Department has grossly erred in disallowing the Refund claim sought by the Appellant, as the Appellant has already reversed the additional service charge in the form of credit notes, hence entitling the Appellant to receive refund of the additional service tax paid by them to the Government.
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The two-member Bench of the Ahmedabad CESTAT comprising Somesh Arora, Judicial Member and C.L. Mahar, Technical Member laid reference to the decision of the Mumbai Tribunal in Piramal Enterprises Limited vs. CST (2016), where it was observed that multiple financial adjustments can occur between two commercial enterprises that trade with each other; certain considerations may be transferred by way of credit notes and the same is permitted as per applicable law.
The Tribunal further observed that the Appellant had not claimed CENVAT credit on the additional service tax paid by them on the additional service charge that was levied on the Appellant’s customers.
In light of the above observations, the Tribunal allowed the Appeal reaffirming the Appellant’s eligibility to claim refund of the service tax paid on the additional charges that were levied on the Customers and later reimbursed via credit notes.
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