ST - Refund admissible of tax paid under reverse charge on ‘Clearing and Forwarding Agent service' during period 16.10.1998 to 01.09.1999: HC
By TIOL News Service
NEW DELHI, MAY 15, 2017: BETWEEN 16th July 1997 and 30th September 1999, the Appellant received "Clearing and Forwarding Agent Service" from various services providers. In terms of the provisions that existed during the relevant period, the Appellant paid service tax of Rs.35,42,021/- under the category of "Clearing and Forwarding Agent Service" on the services so received.
The Supreme Court in Laghu Udyog Bharti = 2002-TIOL-162-SC-ST, by its judgment dated 27th July, 1999 held that the person who is receiving services cannot be made responsible for filing returns and paying tax.
To overcome this judgment, Notification No.7/1999-ST was issued w.e.f 1st September 1999.
On 18th November, 1999, following the judgment of the Supreme Court in Laghu Udyog Bharti (supra), the Appellant filed refund claim of the service tax paid during the period 16th July, 1997 to 30th September, 1999.
However, the Assistant Commissioner rejected the refund claim on account of unjust enrichment.
By the Finance Act, 2000 a retrospective amendment was made to the FA, 1994 to overcome the effect of the decision of the Supreme Court in Laghu Udyog Bharti (supra).
In view of the above, the Commissioner (Appeals) dismissed the Petitioners appeal.
Later, by the Finance Act, 2003, the levy of service tax on recipients of service with effect from 16th July 1997 to 16th October 1998 was validated.
A challenge to the constitutional validity of the amendments was rejected by the Supreme Court by its judgment dated 17th March 2005 = 2005-TIOL-53-SC-ST in a batch of cases which included WP (C) No.539/2000 filed by the Appellant. Later,on 3rd February 2006, the Supreme Court directed substitution of the words "beyond 01.09.1999" with the words and figures "beyond 16.10.1998" occurring in the penultimate paragraph of the decision dated 17th March 2005.The net effect of the said change was that there could be no service tax liability on user of the services of clearing and forwarding agents beyond 16th October 1998.
The Union of India did not challenge this order dated 3rd February 2006.
Incidentally, the appellant had challenged the order-in-appeal before the CESTAT but the appeal was rejected = 2017-TIOL-220-CESTAT-DEL .
And this is how the appellant is before the Delhi High Court.
The High Court observed -
"13. In the light of the above decision of the Supreme Court as clarified by its order dated 3rd February 2006, there can be no manner of doubt that the Appellant would be entitled to refund of the service tax for the period beyond 16th October, 1998. Since there is no ambiguity in the order of the Supreme Court and the Union of India has not sought any further clarification, the law as explained by the Supreme Court in its judgment dated 17th March, 2005 read with its order dated 3rd February 2006 has to be strictly applied."
On the submission of the Revenue that the Appellant ought to have appealed against the dismissal of its appeal and not straightway approached the High Court with the petition under Article 226 of the Constitution, the High Court noted that the Petitioner was before the Supreme Court with its petition under Article 32 of the Constitution, which was a remedy available to the Petitioner and rightly availed by it.
It was also observed - Merely because it did not choose to exhaust a statutory remedywhich was also available, does not preclude the Appellant from seeking legal redress by filing a writ petition directly in the Supreme Court.
In view of the discussion as above, as for the present appeal, the High Court held -
"…CESTAT erred in upholding the denial of refund claim by the Appellant for the period 16th October, 1998 to 1st September, 1999 in respect of service tax paid by it on the clearing and forwarding services availed by it. The impugned orders of the Commissioner (Appeals) and CESTAT are hereby set aside. The appeal is allowed in the above terms but in the circumstances with no orders as to costs.
17. The Respondent will now refund to the Appellant the refund amount due for the period 16th October, 1998 to 1st September 1999, together with the interest due thereon, within a period of four weeks…."
(See 2017-TIOL-914-HC-DEL-ST)
