FEBRUARY 22, 2011

Demand for Remand by Commissioner (Appeals) & Refund of Cess

By A Netizen

SOMETIMES I come across some strange headnotes in TIOL. It goes like this “ Commissioner (Appeals) has no power to remand after 11.5.2001. However, matter remanded to original authority”– CESTAT”. Final result is the same. Matter stands remanded to the original authority albeit through the Tribunal. I am yet to come across a case where the Tribunal would set aside the remand by Commissioner (Appeals) and remand the matter to “the Commissioner (Appeals)” to decide the matter on merits.

It is not known what is the objective behind such move, but it has created enough confusion and corresponding disputes. While there are case laws on either side on the power to remand, experience over a decade has proved that this amendment did not in anyway stop the Commissioners (Appeals) remanding, department filing appeals and Tribunal remanding the matter to the original authorities. In the process only precision time of Tribunal was lost over the past 10 years.

In one case (2011-TIOL-103-CESTAT-MAD) Hon'ble Member, faced with this tricky issue in an appeal by the department against remand order of the Commissioner (Appeals) expressed that this is indeed a controversy and got over the situation without giving any findings on the power to remand by holding that:

Without going into the above controversy, I find the reason for which the Commissioner (Appeals) has sent the matter to original authority deserves to be appreciated. No doubt, that the Commissioner (Appeals) could have taken up the role of an adjudicator and called for the documents, examined the issue and passed a final order. He has chosen to sent it for ‘de novo' consideration by the original authority. Now, the options before the Tribunal are that the matter can be withdrawn from the original authority and entrusted to the Commissioner (Appeals) for fresh decision or, as final fact finding authority, the Tribunal itself can take up the issue after getting the evidence to be produced from both sides. I deem it appropriate to entrust this work to the original authority himself.

And if the Commissioner (Appeals) remands a case, who is benefitted? Of course, the revenue. But why does a Committee of Commissioners whichreviews the orders of the Commissioner (Appeals) not realise this and file appeals against such orders? Wondered another Hon'ble Member in another case (2011-TIOL-200-CESTAT-MAD), wherein he explained that:

In the instant case, where the principles of natural justice were not followed by the original authority, the Commissioner (Appeals) had two choices before him: (i) either to set aside the order of the original authority on the ground of violation of principles of natural justice and allow the appeal of the respondents herein; or (ii) to remand the matter for fresh decision. If he had merely set aside the order, the Public Revenue would have been a loser as the demand of service tax, interest and penalty levied under the Order-in-Original, collectively amounting to several lakhs of rupees would have become irrecoverable. The Commissioner (Appeals) has chosen the second alternative to remand the matter for fresh decision by the original authority. It is inexplicable how the Committee of Commissioners can be aggrieved by the order of the Commissioner (Appeals), who has chosen the second option of remanding the matter instead of setting aside the demand of tax and levy of interest and penalty.

Instead of realising that the remand orders by the Commissioner (Appeals) were only in the interest of revenue, the Board is rather adamant in accepting the reality and has gone to the extent of directing the Commissioner (Appeals) not to remand the cases vide Circular F. No. 275/34/2006-CX. 8A, dated 18-2-2010. When this Circular analyses all the relevant case laws in great length, it defies logic they have totally forgotten the elementary principle that Board cannot interfere in quasi-judicial proceedings of the Commissioners (Appeals).

This needs to be put to rest. Since the experience has proved the amendment made in 2001 became purposeless, to avoid such controversies, the position existing before 2001 should be restored. This reminds me a childhood anecdote. A beggar knocks the door of a house. The daughter-in-law asks him to get out. As the beggar leaves, mother-in-law calls him back. Thanking his lucky stars, he comes back. Now, mother-in-law asks him to get out. The shocked beggar asks “That's what your daughter-in-law told me in the first place”. Mother-in-law replies – “True, But I am supreme in the house. No one else has the power to ask you to get out”.

Amend Notification No 17/2009 ST to allow refund of education cesses also.

Notification No 17/2009 ST dated 07.07.2009 ( Previously Notification 41/2007-Service Tax, Dt 6.10.2007) exempts certain taxable services received by an exporter and used for export of goods from the whole of the service tax leviable thereon under section 66 and section 66A of the Finance Act, 1994. The exemption operates through refund route. First, the exporters have to pay the service tax and the file claims for refund of the service tax paid.

The intention behind this refund facility has been explained in the Letter F. No. 341/15/2007-TRU, dated 17-4-2008 as follows:

The Annual Supplement to the Foreign Trade Policy, 2004-09 announced on 19-4-2007 stated that service tax on services rendered and utilised by exporters would be exempted/remitted and the remission mechanism would be institutionalised after working out the modalities.

Unfortunately, both the notifications mention only about exemption / refund of service tax and nothing has been mentioned about the Education Cess and Secondary Educations Cess. The issue of whether the exporters can be allowed refund of education cesses under Notification No 41/2007 ST dated 6.10.2007 and the Tribunal in a recent case 2010-TIOL-1659-CESTAT-KOL held that:

The education cess was imposed under Section 91 and 93 of the Finance. (No.2) Act, 2004. There is no notification exempting the education cess by way of Refund under the Finance Act under which the education cess was levied. Similar issue has come before the Tribunal for numerous appeals e.g. C.CEx. Vs. Jindal Drugs Ltd. & Others vide Final Order No.900A to 1143A/2009 EX (DB) dated 12.8.2009 (2009-TIOL-2562-CESTAT-DEL where the contention of appellant was that Notification No.56/02 dated 14/11/2002 provides exemption by way of refund of Central Excise Duty and the education cess is also a Central Excise Duty and is covered under the Notification No.56/02-CE. This contention was rejected and it is held that in absence of any Notification granting exemption of the education cess, the refund in respect of education cess is not admissible. There is no infirmity in the impugned orders.

If the intention is to make the exports tax free and globally competitive, it defies logic as to why the education cesses should not be allowed as refund when the service tax is allowed. May be all the refund / exemption notifications need a re-look in the light of the above ruling.