By TIOL News Service

ALLAHABAD, JULY 18, 2014: THE Revenue is in appeal against the order of the Tribunal 2014-TIOL-118-CESTAT-DEL raising the following two questions of law -

"I. Whether the Hon'ble CESTAT has erred in allowing the refund, without considering provisions of limitation provided in Section 11B of the Central Excise Act, 1944?

II. Whether the Hon'ble CESTAT has erred in allowing the refund, without considering provisions of unjust enrichment provided in Section 11B of the Central Excise Act, 1944?"

The facts of the case are -

+ The appellant was supplied natural gas through pipeline, by M/s Reliance Gas Transportation Infrastructure Ltd. (RGTIL). This supply was a taxable service under the provisions of the 1994 Act. The transmission charges payable to RGTIL was subject to an approval by the statutory authority, the Petroleum & Natural Gas Regulatory Board. The taxable service under Section 65(105)(zzz) of the 1994 Act was provided by RGTIL to the appellant during April 2009 to May 2010. RGTIL raised invoices on the appellant on the basis of the initial tariff notified by the Statutory Regulatory body.

+ By an order dated 09.06.2010, the Regulatory body provisionally approved the initial tariff with retrospective effect and this resulted in a downward revision of the tariff. As a consequence RGTIL had collected excess charges from the appellant for the supply of natural gas. The difference was credited by RGTIL to the account of the appellant by raising credit notes. RGTIL had remitted service tax on the initial tariff collected by it.

+ Since the tariff was eventually determined by the Regulatory body at a rate lower than the initial rate collected by RGTIL, RGTIL advised the appellant to apply for refund of the proportionate excess service tax remitted (by RGTIL and borne by the appellant), on the taxable "transport of goods other than water through pipeline and other conduit" service.

+ Consequently, the appellant,a cooperative society,filed an application for refund of service tax of Rs.16,99,714/-, under Section 11B of the CEA, 1944 with the authorities at Navi Mumbai.

+ By the order dated 05.04.2011, the Assistant Commissioner, Service Tax Division-V rejected the refund claim on the ground that the application for refund should be made before the Commissionerate within whose jurisdiction the applicant operates, on the principle that the person who has borne the incidence of duty was required to file a refund claim, before its jurisdictional officer.

+ Thereafter the claim for refund application was preferred before the Assistant Commissioner, Bareilly. By the order dated 23.12.2011 the Assistant Commissioner, Bareilly sanctioned the refund as sought.

+ Revenue preferred an appeal which was allowed by the Commissioner (Appeals), Meerut by the impugned order dated 16.04.2012. The appellate Commissioner reversed the order of the adjudicating authority on the singular ground that the refund claim was filed by the recipient of the service and not the provider M/s RGTIL; and that the word 'any person" in Section 11B of the 1944 Act does not include the recipient of a service, on whom the burden of remittance of service tax does not fall under the provisions of the Act. The decision of the Supreme Court in Mafatlal Industries Ltd. vs. Union of India - 2002-TIOL-54-SC-CX, relied upon by the appellant to support its claim for refund was brushed aside by the appellate authority by simply observing that the facts and circumstances of the Mafatlal case were different from the facts and circumstances presented by the appellant.

+ Against this order, the appellant filed an appeal before the CESTAT and the Bench observed thus -

"8. We find that the order of the Commissioner (Appeals), in brushing aside the contention of the petitioner to support its claim for refund by reference to the law declared by the Constitution Bench in Mafatlal Industries, is perverse and in total non-application of mind . The ld. Commissioner (Appeals) distinguished the clearly applicable law declared in Mafatlal Industries , as to the scope of Section 11B of the 1944 Act, without any analysis whatsoever of either the facts, the circumstances or the ratio of the judgment of the Constitution Bench. We are constrained to record our strong disapproval of such irrelevant and inappropriate conduct of statutory authorities, particularly when exercising quasi-judicial jurisdiction, in disregarding the clearly declared law, which is a binding precedent, in particular in the context of Article 141 of the Constitution. As a consequence of such vagrant analysis by the ld. Commissioner (Appeals), the appellant herein has been put to avoidable litigation trauma in preferring this appeal to this Tribunal and an unwarranted appellate burden as well."

+ While quashing the order and allowing the appeal the Bench also directed that cost of Rs.1000/- was payable to the appellant.

As mentioned, the Revenue is in appeal.

The High Court observed -

++ The record would indicate that the finding of the adjudicating authority to the effect that the claim was within the limitation was not challenged by the revenue in the first appeal which was filed before the Commissioner (Appeals). That being the position, it would not be open to the revenue to now assert to the contrary and to urge a point which was not raised in the grounds of appeal filed by the revenue while assailing the order of the adjudicating authority sanctioning the refund.

++ In our view, once the finding of the adjudicating authority that the claim for refund was filed within the period of limitation of one year under Section 11B was not challenged by the revenue before the first appellate authority, such a ground cannot be urged for the first time in an appeal before this Court. As a matter of fact, the ground was not even urged in the form of a cross objection before the Tribunal.

++ On the second question of law, it would be necessary to note that a finding of fact was entered by the Assistant Commissioner, Bareilly to the effect that the final product urea which is manufactured by the assessee, which was the recipient of the service, is exempted from payment of excise duty and the value of the fertilizer is fixed by the State. Hence, it has been held that the burden of duty had been borne by the assessee as a service recipient and the question of unjust enrichment did not arise.

++ The grounds of appeal before the Commissioner (Appeals) would indicate that the principle, if not the sole contention of the revenue, was that the assessee was the recipient of service and the service recipient is not entitled to file a refund claim under Section 11B. This submission is clearly in the teeth of the law laid down by the Supreme Court in Mafatlal Industries Ltd. (supra).

++ The Tribunal was clearly, in our respectful view, correct and justified in following this principle. The assessee is the recipient of the taxable service provided by RGTIL and had borne the incidence of service tax. Hence, the assessee is entitled to claim a refund of excess service tax paid consequent upon the downward revision of the transmission charges payable by the assessee to RGTIL in terms of the determination made by the Regulatory Board. The entire record would indicate that the only objection of the revenue was to the maintenance of the refund application at the behest of the assessee. The fact that the assessee has not passed on the burden has been amply established in the order of the adjudicating authority. This finding was not challenged by the revenue in the grounds of appeal before the first appellate authority or for that matter in the form of cross objections before the Tribunal. The finding of fact of the first appellate authority to the effect that the prices of urea are prescribed by the Government and that the final product manufactured by the assessee is exempted from the payment of excise duty and there would be no occasion for unjust enrichment has not been questioned.

In fine, the Revenue appeal was dismissed.

(See 2014-TIOL-1157-HC-ALL-ST)