2021-TIOL-857-HC-GUW-CX
Topcem India Vs UoI
CX - Petitioners have challenged the Demand-cum show cause notices issued by the Central Excise Authority directing the petitioner to show cause as to why the amount of Education Cess and Secondary and Higher Education Cess, which were refunded to the petitioners should not be recovered under the Provisions of Section 11A(i) of the Central Excise Act, 1944 and further as to why interest should not be charged and realized in terms of Section 11AA of the Act - The SCNs were issued in view of the Judgment and Order of the Apex Court in M/s Unicorn Industries = 2019-TIOL-528-SC-CX-LB holding that when a particular kind of duty is exempted, other types of duty or cess imposed by a different legislation cannot be said to have been exempted and whereby an earlier Judgment of the Apex Court, namely, SRD Nutrients Pvt. Ltd. = 2017-TIOL-416-SC-CX have been declared to be per incuriam - According to the Department, the refunds sanctioned to the petitioners earlier were made pursuant to the Judgment of the Apex Court in SRD Nutrients Pvt. Ltd. (supra) and the said Judgment having been held to be "per incuriam" by the Apex Court in the recent Judgment of M/s Unicorn Industries, the refunds earlier granted to the petitioners on the strength of the Judgment in M/s SRD Nutrients (supra) have become "erroneous refunds" and, therefore, the same are sought to be recovered from the petitioners by way of impugned show cause notice.
Held:
++ The question which falls for consideration in the present proceeding is whether refunds granted earlier pursuant to the Judgment of the Apex Court in "M/s SRD Nutrients Private Limited" (supra) can be considered to be refunds erroneously granted in view of the subsequent Judgment of the Apex Court in "M/s Unicorn Industries" (supra) wherein the earlier Judgment of "M/s SRD Nutrients Private Limited" (supra) was held to be "per incuriam" and whether the same can be recovered under the provisions of Section 11A of the Central Excise Act as sought to be done by the Department.
++ The further question is whether an order passed by the Quasi Judicial Authority under the Central Excise Department granting refunds earlier can be revisited by another co-lateral authority of the same Department in exercise of their powers under the Central Excise Act. [para 45]
ERRONEOUS REFUND
++ The provisions of section 11A in the context of the present proceedings have been invoked by the Department by treating the refunds granted earlier to the petitioners to have been granted "erroneously".
++ The term erroneous has not been defined anywhere. In this context, it is relevant to refer to the Judgment of this Court rendered in Rajendra Singh(supra) wherein by referring to the Black's Law Dictionary, it was held that "erroneous" means involving error; deviating from law. In the said judgment, it is held that an order cannot be termed as erroneous unless it is not in accordance with law. It is held that if an officer acting in accordance with law makes certain assessment and determines the turnover of dealer, the same cannot be branded as erroneous.
++ In another matter, the Division Bench of this Court in Victor Cane Industries vs. Commissioner of Taxes and ors, reported in 2001 SCC Online Gau 216 : (2002) 2 GLR 69 , held that simply because the law has changed or earlier law laid down has been reversed, it would not entitle the revisional authority to reopen the earlier assessments. [para 46]
++ The term "erroneous" means any error deviating from law. A change of law subsequently would not make an action taken earlier by Quasi Judicial Authority in terms of law as it stood then, to be held to be erroneous so as to enable the Departmental Officer to invoke powers under Section 11A of the Central Excise Act. [para 52]
++ The Department proceeded to issue the impugned demand-cum-show cause notices on the premise that once the judgment on the basis of which the refunds were granted have been held to be per incuriam , the refunds sanctioned/granted earlier will become unavailable to the petitioners because of the change in law and, therefore, the same will be an erroneous refund enabling the Department to invoke its statutory powers under Section 11A read with Section 11AA of the Central Excise Act, 1944.
++ What cannot be lost sight of is that the Department sanctioned the refunds demanded/claimed by the petitioners on the basis of the Judgment in SRD Nutrients without any demur.
++ The contention of the departmental that the refunds sanctioned become erroneous by virtue of the Apex Court holding the judgment of SRD Nutrients to be rendered per incuriam as the still earlier Judgments of the Apex Court rendered in Modi Rubber(supra) and Rita Textile(supra) were not considered, cannot accepted. It is not disputed that pursuant to the judgment of the SRD Nutrients, a review application was filed by the Department and which was dismissed on 10.07.2018. [para 53]
++ The refunds were granted by the Department in terms of the Judgment in "M/S SRD Nutrients Private Limited" (supra). As discussed above, the Department accepted the Judgment of the Apex Court in "M/s SRD Nutrients Private Limited (supra)" and sanctioned the refunds. As such, the contention of the Department that the refunds granted earlier were erroneous and could be recovered under Section 11A cannot be accepted. The grounds urged by the Department supporting impugned show cause notices do not satisfy the requirements of Section 11A(4).[para 54]
Binding effect of a Judgment and Principle of Res Judicata
++ It is also not disputed that in respect of the some of the petitioners since the refunds were not granted, writ petitions were filed before this Court and this Court by orders on different dates held that the petitioners were entitled to refunds claimed in terms of the judgment of the Apex Court in "M/s SRD Nutrients Private Limited" (supra).
++ There is no appeal or review filed in respect of these orders also which have been since attained finality. Accordingly, the refunds which were granted by the Department were pursuant to judicial proceedings before the Apex Court and/or the Gauhati High Court, the refunds sanctioned/released were on the basis of orders passed by the Apex Court and/or the Gauhati High Court.
++ Consequently, once a judgment or judicial order is passed by a Court of law against the Department, the remedy available to the Department is by way of an appeal to a higher Court or review. Since, the review filed before the Supreme Court were dismissed and since no further appeal and/or review was passed against the different orders passed by the Gauhati High Court, the lis between the parties, namely, the petitioners and the Department of Central Excise has attained finality in respect of the issues which are now sought to be reopened by way of the demand-cum-show cause notice impugned in the present proceedings.
++ Such a procedure sought to be invoked by the Department is completely alien in law as established by the constitution as well as the law laid down by the Apex Court in a catena of judgments. [para 55]
++ Once a Court renders a judgment on the issues vis-a-vis the rights of the parties, such a judgment can only be re-visited by the established judicial norms, namely, a review or an appeal or revision in some cases. Unless, the findings of a Court arrived at by way of legal proceeding is sought to be reopened in the manner discussed above, the operative portions in the judgment viz-a-viz parties will attain finality.
++ A subsequent change in law arrived at by a Court by way of the separate judicial proceeding, wherein the earlier law laid down has been held to be not a good law or that the earlier law will cease to have precedential value, will not ipso facto reverse the position of the party vis-a-vis their rights which were declared and concluded by way of an earlier judicial proceedings. [para 57]
++ Apex Court held that since the rights of applicants were determined in duly constituted proceedings, which determination has attained finality, a subsequent judgment of the Court or a tribunal taking a contrary view will not adversely affect the applicant in whose cases the orders have attained finality. [ A.R. Antulay vs. R.S. Nayak &Anr, (1988) 2 SCC 602&Madras Telephone SC & ST Welfare Association, (2006) 8 SCC 662 refers. [para 58, 59]
++ The Department contends that the law declared by the Apex Court will not have prospective overruling unless it is so indicated in the particular decision i.e. it must be accepted that it will have retrospective effect. If that interpretation is accepted then the law which was declared by the Apex Court earlier by the judgments of Modi Rubber(supra) and Rita Textile(supra) will continue to be applicable even at a time when the refunds were made by the Department following the judgment of the Apex Court in SRD Nutrients (supra).
++ The contentions urged by the Department, if accepted, will be self-defeating inasmuch as the refunds were granted earlier in terms of the Apex Court in "M/s SRD Nutrients Private Limited" (supra). From the pleadings, it is evident that even in the writ petitions filed before this Court, the Department accepted that the Apex Court in "M/s SRD Nutrients Private Limited" (supra) held that the Education Cess and Secondary and Higher Education Cess paid along with the excise duty were required to be refunded. The Department accepted the Judgment in "M/s SRD Nutrients Private Limited" (supra) and refunded the Education Cess and Secondary and Higher Education Cess notwithstanding the contrary view of the Apex Court in "M/s Modi Rubber Limited" and "Rita Textiles Pvt. Ltd". [para 63]
++ The respondents have not disputed the position that the refunds claimed by the petitioners have since been granted and presently there is no refund application pending with the Department insofar as the present petitioners are concerned. Under the circumstances, the directions of the Apex Court as well as the Gauhati High Court having been complied with, a finality of the issue inter-party has been arrived at. No appeal or review by the Department has been filed in respect of the refunds granted earlier. It is also evident from a perusal of the impugned show cause notices that there is no other ground on which the refunds have been treated to be erroneous except that the law under which the refunds were granted earlier has been held to be "per incuriam" by a later Judgment of the Apex Court rendered in "M/s Unicorn Industries" (supra). [para 66]
++ The orders passed by the Department Officers being in exercise of Quasi Judicial powers cannot be co-laterally revoked/reviewed except when permitted under the Statute. It is seen that against sanction orders passed by the concerned officers, the statute does not provide for any review of such order passed. However, under Section 35, there is a provision for appeal, which however has not been resorted to by the Department seeking revocation/recall of orders already passed sanctioning the refund in terms of "M/S SRD Nutrients (supra)". The refund orders passed cannot be unilaterally revoked by application of Section 11A unless the requirements of sub-Section (4) of Section 11A are satisfied. This will amount to impeaching collaterally a finding rendered by a quasi judicial authority. [para 67]
++ In view of the above discussions, this Court holds that the refund granted/sanctioned earlier in terms of the Judgment of the Apex Court rendered in "M/S SRD Nutrients Private Limited" (supra) as well as in terms of orders passed by this Court directing such refunds of Education Cess and Secondary and Higher Education Cess in terms of "M/S SRD Nutrients Private Limited" (supra), cannot be revoked co-laterally by a Quasi Judicial Authority of the Department without taking recourse to the statutory and/or judicial remedies available to the Department.
++ Such actions initiated by issuance of the impugned show cause notices, if permitted, will amount to revoking the earlier orders passed by the departmental officers exercising Quasi Judicial powers unilaterally and which action cannot be permitted in view of the law laid down by the Apex Court in "Abdul Kuddus" (supra). [para 68]
Department Circulars - Binding on Department Officers.
++ It is contended by the petitioners that the actions of the department impugned in the present proceeding are contrary to departmental circulars/instructions issued by the department on 09.01.2020 whereby the field officers and department officers have been instructed to contest by filing Statutory Appeals/ Writ Appeals or Review Petitions or forward proposals for filing SLP to the Board in view of the judgment of the Apex Court of M/S Unicorn Industries (Supra), it is seen that the circular vide Circular No. F. No. 276/187/2018- CX.8A part, has been issued by the legal cell of the Central Board of Indirect Taxes and Customs, Department of Revenue, Ministry of Finance, Government of India and the same is disputed by the departmental counsel. [para 69]
++ It will not be open to the Revenue to raise a contention contrary to the circular issued by CBEC. When the circular remains in operation, the Revenue is bound by it and it cannot be allowed to take the plea that it is not valid or that it is contrary to the terms of the statute.[para 70]
Judicial Review in Show Cause Notice
++ The Writ Court in exercise of judicial review can interfere with the show cause notices when the same is issued wholly without jurisdiction and/or wrong usurpation of power.
++ In the facts of the present case, there is no dispute that the refunds granted earlier to the petitioners were in pursuance to judicial orders passed by the Apex Court in "M/s SRD Nutrients Private Limited" (Supra) and/or orders passed by this Court in writ applications filed by some of the petitioners. As held by the Apex Court as discussed above, declaration of judgment to be rendered "per incuriam" by latter judgment will not upset the binding effect of the judgment between the litigating parties.
++ As the department sanctioned the refunds in terms of such orders passed in judicial proceedings between the assessees and the department, the same having attained finality cannot be reopened except by way of the Department taking recourse to available judicial remedies. Unless, such remedies are availed of, attempting to re-open orders passed by Department officers by collaterally by taking recourse to Section 11A cannot be permitted. [para 71]
++ The show cause notices issued are required to be held to have been issued without any jurisdiction and by wrong interpretation of the powers under Section 11A read with Section 11AA and therefore, the same are required to be set aside - writ petitions are accordingly allowed.[para 72, 73]
- Writ petitions allowed : GAUHATI HIGH COURT
2021-TIOL-856-HC-MAD-ST
Cuddalore Municipality Vs JCGST & CE
ST - Municipalities have challenged the impugned Show Cause Notices and the impugned Orders-in- Original passed by the respondent proposing and levying service tax on the services provided by the petitioners under the provisions of the Finance Act, 1994.
Held:
Dispute pertaining to the period prior to July 2012:
++ From the category of service and income generated from the petitioner, it appears that the petitioner was renting out the shops in bus stand and other areas where it was having immovable properties. [para 25]
++ Service Tax on Renting of Immovable Property Service was introduced in 2007 vide 65(105)(zzzz) of the Finance Act, 1994. The expression of renting of immoveable property was defined in Section 65 (90a) of the Finance Act, 1994. [para 26]
++ Definition of Taxable Service of "renting of immovable property" in Section 65(105)(zzzz) of the Finance Act, 1994 - To any person, by any other person, by renting of immovable property or any other service in relation to such renting, for use in the course of or furtherance of, business or commerce. [para 29]
++ There is no doubt that the petitioner municipality was renting immovable property to various person in the course of or furtherance of, business or commerce of the lessee as defined in Section 65(90a) of the Finance Act, 1994 as it stood during the period between April 2012 and June 2012. However, merely because there was renting of immoveable property by itself was not sufficient to attract the levy. [para 31]
++ To attract levy under Section 65(105) (zzzz) of the Finance Act 1994 there should be renting of immovable property or provision any other service in relation to such renting, for use in the course of or furtherance of, business or commerce to "any person". Only if service was provided by "any other person", i.e. by a person other than the owner, such service was liable to service tax. [para 32]
++ The expression "any other person" can only mean any other person other than the owner of the property. Therefore, owner of the immoveable property is not liable to pay tax under Section 66 of the Finance Act, 1994 for the period up to 30.06.2012. [para 33]
++ An owner can be held liable to pay tax for renting of immoveable property service only if there was an appropriate notification issued under Section 68(2) of the Finance Act, 1994 read with Rule 2(1)(d) of the Service Tax Rules, 1994.[para 34]
++ If the legislature intended to include both owner and a person other than the owner of the property in Section 65(105)(zzzz) of the Finance Act, 1994, the legislature would have simply adopted a wider expression such as "any person" instead of "any other person". The expression "any other person" restricts the scope of exposure to levy of service tax to a different class of service providers. It is perhaps for this purpose, the expression any other service in relation to such renting has been used in the Section to indicate service tax has to be charged only where there is a value addition. [para 35]
++ Since the interpretation given for the expression "any other person" in this order may have a large scale ramification, it is therefore made clear the interpretation given in this order for the expression "any other person" qua Section 65(105)(zzzz) cannot be uniformly applied to other provisions of the Finance Act,1994 unless they are examined separately and individually on case to case basis for the other services. [para 37]
++ In my view, service tax was payable only if such services were provided "by any other person" other than the owner, to any person by such renting, for use in the course of or in furtherance of, business or commerce. [para 38]
++ As the owner of the immovable property who rents out the property simpliciter was not in contemplation in the definition of taxable service of "renting of immovable property" in Section 65(105(zzzz) of the Finance Act, 1994, demand against the petitioner was without jurisdiction.[para 39]
++ Since the petitioner municipality is the owner of property, question of it being made liable to pay service tax for any service in relation to such renting of immoveable property does not arise even if it had rented out its immoveable property for use in the course of or for furtherance of, business or commerce of the person who was renting it. [para 40]
Dispute pertaining to the period post 1 st July 2012:
++ Under Section 66B of the Finance Act, 1994 no tax was payable for the services specified in the negative list. The expression "negative list" is defined in Section 65B(34) of the Finance Act, 1994 as those services specified in Section 66D of the Act. [para 47]
++ Most services provided by the Central or State Government or local authorities are in the negative list. Section 66D of the Finance Act, 1994 gives list of 17 services which were grouped under the "negative list". [para 48]
++ Petitioner Municipalities can be held liable to pay service tax only for service specified in Sub-Clauses in ( i ), (ii) and (iii) of Clause (a) of Section 66D of the Finance Act, 1994. [para 57]
++ As far as renting of immoveable property is concerned, though under Rule 2(1)(d)(E) of the Service Tax Rules, 1994, service tax is payable by the service provider, it has to be held that if such services are provided by a Government or Local Authority, they are exempted under Section 66D(a) of the Finance Act, 1994 as amended and as in force from 01.07.2012. Only ancillary service provided by a third party towards renting of immoveable property of a non-governmental or local body will be liable to pay service tax like any other service provider. Therefore, service tax is payable by the service provider himself. [para 58]
++ That apart, it is seen that some of the services provided are also exempted under the Mega Exemption Notification No. 25/2012-ST dated 20.06.2012 vide Sl. Nos. 38 and 39. [para 59]
++ Thus, there is no jurisdiction in the impugned Show Cause Notices / Orders-in-Originals issued by the respondent. [para 60]
- Petitions allowed :MADRAS HIGH COURT
2021-TIOL-855-HC-P&H-CUS
Genpact India Pvt Ltd Vs UoI
Cus - Denial of refund - The impugned orders passed by Adjudicating Authority/Appellate Authority, are cryptic and non-speaking and the reasons assigned for holding the petitioners to be intermediaries, do not sustain as they do not pass the test of law as has been laid down in the judgments - The impugned orders are hereby quashed - Since the matter needs to be remanded back to the lower Authority for fresh decision, the court have not referred to the merits of the case, lest prejudice is caused to any of the parties: HC
- Writ petitions disposed of :PUNJAB & HARYANA HIGH COURT
2021-TIOL-208-CESTAT-DEL
JK Cement Works Vs CCE & CGST
CX - Interest on delayed refund - Admittedly, the amount under dispute was reversed under protest and the same became pre-deposit within the meaning of Section 35 F ipso facto, by operation of law - In the preceding order of this Bench as held in the case of Hitesh Industries Ltd. 2021-TIOL-05-CESTAT-DEL relying on the ruling of Apex Court in Sandvik Asia Ltd. 2006-TIOL-07-SC-IT , that interest is payable to the assessee - On-going through the provisions of both Income Tax Act, 1961 and Central Excise Act, 1944, the interest on delayed refund is payable after expiry of 3 months from the date of granting refund or from the date of communication of order of appellate authority, which are pari-materia - Therefore, the decision of Apex Court in case of Sandvik Asia Ltd. is law of land, in terms of Article 141 of Constitution of India which is to be followed by Tribunal - As the Apex Court has answered the issue holding that the assessee is entitled to claim interest from the date of payment of initial amount till the date of its refund, therefore, the assessee is entitled to claim interest on delayed refund - Further, the interest on refund shall be payable @ 12% per annum as held by Kerala High Court in case of Sony Pictures Networks India Pvt. Ltd. 2017-TIOL-1102-HC-KERALA-CUS - As the provisions of section 243 of Income Tax Act, 1961 and section 35FF of Central Excise Act, 1944, are pari-materia - Therefore, following the decision of Sandvik Asia Ltd. and Sony Pictures Networks India Pvt. Ltd., it is held that the assessee is entitled to claim interest from the date of payment of initial amount till the date its refund @ 12% per annum: CESTAT
- Appeal allowed: DELHI CESTAT
2021-TIOL-207-CESTAT-BANG
Tektronix India Pvt Ltd Vs CCT
ST - The appellant is providing services under category of Information Technology Software Services - During audit, it was observed that the appellant had wrongly availed service tax credit on services not used for providing output service - It is not disputed that appellant reversed the cenvat credit on impugned services on being pointed out by Department before the issuance of SCN - The appellant has not utilized the said credit and had sufficient balance during the relevant period in their cenvat credit account which was reversed and the Department was informed vide its letter regarding the reversal of said credit - Further, the Division Bench of this Tribunal in case of YCH Logistics (India) Pvt. Ltd. 2020-TIOL-605-CESTAT-BANG has considered the aspect of imposition of penalty under Section 78 and has dropped the penalty after considering the various decisions relied upon by appellant - The Karnataka High Court in Vilax Industrial Fabrics Survey 2018-TIOL-1363-HC-KAR-CX has also upheld the decision of Tribunal dropping the penalty - By following the ratio of said decisions, the imposition of penalty under Section 78 is not sustainable, same is set aside: CESTAT
- Appeal allowed: BANGALORE CESTAT
2021-TIOL-206-CESTAT-BANG
Kirloskar Ferrous Industries Ltd Vs CCT & CE
CX - The appellant is a manufacturer of pig iron and un-machined castings and has been availing CENVAT credit on inputs, capital goods and input services under provisions of CCR, 2004 - The department entertained a view that the credit availed by appellant is ineligible in terms of Rule 9(1)(bb) of CCR, 2004 and consequently, issued SCN demanding CENVAT Credit along with interest and also proposed penalty - Admittedly, no proceedings have been initiated against service provider Shri K. Basavaraj by issuing any notice and there is no adjudication order against the service provider who paid the service tax on the advice of jurisdictional Superintendent and issued the supplementary invoices and the appellant on the basis of the said supplementary invoices has taken the CENVAT credit - The SCN, adjudication order and the O-I-A have not mentioned anything regarding the issuance of SCN by Proper Officer for recovery of service tax from the service provider Shri K. Basavaraj by invoking the proviso to Section 73(1) of FA, 1994 - It has been consistently held by Tribunal in the various decisions that in the absence of SCN and determination that the additional amount of duty or tax become recoverable, the tax amounts paid by the service provider cannot be denied on the ground that provisions of Rule 9(1)(bb) of CCR, 2004 are attracted - The allegations of adjudicating authority that the appellant have violated the provisions of Rule 4A(1) of CCR, 2004 and Rule 3 of Point of Taxation Rules, is also erroneous because the said Rules are applicable to service provider and not to service recipient - The CENVAT credit paid voluntarily by the service provider on the strength of supplementary invoices is admissible to the appellant as credit in terms of Rule 9(1)(bb) of CCR, 2004 - Hence, the impugned order is set aside: CESTAT
- Appeal allowed: BANGALORE CESTAT
2021-TIOL-205-CESTAT-CHD
Om Udyog Vs CC
Cus - The appellant is in appeal against impugned order wherein their refund claim filed under Notification No. 102/2007-Cus. has been rejected on the ground that the imported goods were sold prior to issuance of out of charge order by the Customs - The said issue has been settled in case of Ashwin Corporation , therefore, it is held that merely because the goods were sold prior to issuance of out of charge order by the Customs, the refund cannot be rejected: CESTAT
- Appeal allowed: CHANDIGARH CESTAT
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