2015 (10) TMI 2096 - AT - Service Tax

Tribunal overturns service tax refund denial due to procedural unfairness

M/s. Vippy Industries Ltd. Versus C.C.E., Indore

The Tribunal invalidated the impugned Order-in-Appeal disallowing a service tax refund for input services used in exporting goods. The conflict arose as ... Validity of order-in-appeal to deny the refund claim – Review order was passed by the same officer who has passed the OIO - Held That:- Exercise of appellate jurisdiction by the same officer who passed the review order and had recorded therein a clear conclusion that the primary order was unsustainable is a clear travesty of established principles of natural justice, of that great principles that none should be judge in his own cause nor, one who has pre-judged on issue should sit in judgement as an appellate authority. The impugned order is in exercise of an appellate power, which requires an independent, unprejudiced exercise of mind, which is not available in the facts and circumstances of the case. - Order-in-Appeal quashed. The appropriate appellate Commissioner may however hear and dispose of the appeal afresh, pursuant to the Review Order dated 27.04.2010, in accordance with law. – Decided partly in favor of assessee. Issues:- Appeal against Order-in-Appeal disallowing refund of service tax for input services used in export of goods- Review Order directing appeal against primary adjudicating authority's decision- Allegation of same officer passing impugned order and review order- Violation of principles of natural justice in appellate jurisdictionAnalysis:1. The appeal was filed against the Order-in-Appeal disallowing the refund of service tax for input services used in exporting goods. The primary adjudicating authority had initially sanctioned a refund of &8377; 3,52,556 out of the claimed &8377; 3,68,786. However, a Review Order was passed under Section 84(1) of the Finance Act, 1994, directing the primary authority to appeal against their own decision. The reviewing Commissioner found the original order unsustainable due to certain grounds specified, leading to the appeal.2. The crux of the matter was the allegation that the same officer who passed the impugned order also passed the Review Order, indicating a conflict of interest. This raised concerns regarding the violation of established principles of natural justice, specifically the rule against being a judge in one's own cause or pre-judging an issue. The independence and impartiality required in appellate jurisdiction were compromised due to this overlap in decision-making.3. The Tribunal acknowledged the breach of natural justice principles and deemed the impugned order invalid. Consequently, the Order-in-Appeal was quashed, and the case was remanded for fresh consideration by an appropriate appellate Commissioner. The decision to set aside the impugned order was solely based on the incompetence of the officer involved, without delving into the merits of the refund claim. The Tribunal emphasized the need for an unbiased and fair appellate process, free from any taint of pre-judgment or conflict of interest.