CESTAT Rules Department Cannot Reopen Final Refund Order Without Statutory Authority, Sets Aside Recovery against Ahluwalia Construction Group [Read Order]

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) set aside the order passed by the Commissioner (Appeals-II), which had upheld the recovery of ₹9,13,413 and held that once the earlier refund order had attained finality, the department could not reopen or modify it without statutory authority.

The appellant, Ahluwalia Construction Group, registered for providing works contract services, had undertaken construction of a hostel building for Jamia Hamdard University, New Delhi, during the Financial Year ( FY ) 2012-13.

The service tax was deposited under the category of “commercial or industrial construction services.” Later, Jamia Hamdard University informed that construction for educational institutions was exempt from service tax under Notification No. 12/2012. The appellant filed a refund claim of ₹66,44,351 on 29 March 2013.

The refund was rejected entirely by Order-in-Original dated 30 May 2014, but on appeal, the Commissioner (Appeals) vide Order-in-Appeal dated 15 December 2015 set aside the rejection and allowed the refund and held that the construction was for an educational purpose and exempt from service tax. The department did not challenge this order, and it thus attained finality.

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However, instead of disbursing the full refund, the department passed a fresh Order-in-Original dated 26 September 2017, sanctioning ₹55,53,938 and rejecting ₹9,13,379 as time-barred and ₹1,77,034 on the ground of unjust enrichment.

Later, the Principal Commissioner reviewed the order and directed recovery of ₹9,13,413, treating it as hit by unjust enrichment. The Commissioner (Appeals) upheld the recovery, leading the appellant to approach the Tribunal.

The Single bench consisting Dr. Rachna Gupta (Judicial Member) observed that the order of 15 December 2015 had already accepted that the construction activity was exempt and the amount deposited could not be termed as “tax.”

The tribunal noted that since no appeal was filed by the department, that order had attained finality. The Assistant Commissioner, therefore, committed a “blatant error” in passing the subsequent order dated 26 September 2017 without statutory power. Such an order, the Tribunal held, was a nullity, and any proceedings flowing from it had no importance.

The Bench held that once an order granting refund attains finality, any subsequent proceeding contrary to it is not sustainable in law by relying on Commissioner of CGST, New Delhi v. Santee Exim Pvt. Ltd. (2019) and the Supreme Court’s decision in Collector of Central Excise v. Flock (India) Pvt. Ltd. (2000).

Accordingly, the CESTAT set aside the impugned order, held the recovery proceedings impermissible under law, and allowed the appeal, confirming that the refund order dated 15 December 2015 had attained finality and remained binding.

The assessee was represented by Sukriti Das and Dhruv Anand, while Kuldeep Rawat appeared for the Revenue.

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