2025 (2) TMI 626 - AT - Service Tax

CESTAT directs refund of Rs 18,30,182 CENVAT credit for exported services after 14-year delay

CESTAT Bangalore allowed the appeal for refund of unutilized CENVAT credit on input services used for exported services. The original refund claim filed ... Refund of unutilized CENVAT credit paid on input services used for the services exported - non-submission of relevant documents as prescribed under Notification No.05/2006 CE (NT) dated 14.03.2006 - hit by limitation of time in terms of Section 11B of the Central Excise Act, 1944 read with section 83 of the Finance Act, 1994 - violation of principles of natural justice - HELD THAT:- The original refund claim filed on 31.12.2010 continues to languish 14 years later. It is found that the Original Authority in denovo proceedings at para 5.7 of his order dated 15.05.2020, had as per the appellate directions proceeded to examine as to whether the input services are eligible for availment of CENVAT credit and found that the eligible credit worked out to Rs 18,30,182/- as against Rs 19,39,818/- claimed. He only rejected the same for non-submission of documents which he had not specified or called for and which was against the principles of natural justice. No purpose will be served in sending the matter back and the ends of justice would require that the appellant be allowed to succeed in his appeal to this extent. The impugned order is set aside and the appeal is allowed for the monetary refund of eligible credit worked out as Rs 18,30,182/- by the Original Authority. ISSUES PRESENTED AND CONSIDERED 1. Whether a refund portion denied by the original order can be legitimately rejected in denovo proceedings for non-submission of documents when those documents were previously submitted and the Appellate Authority remanded the matter for fresh consideration. 2. Whether a fresh refund claim made after long inaction by the adjudicating authority is time-barred under limitation provisions applicable to refund claims (Section 11B of the Central Excise Act read with relevant provisions), when the remand by the Appellate Authority required fresh adjudication. 3. Whether principles of natural justice were violated by the adjudicating authority in denovo proceedings by not specifying missing documents, not affording an opportunity to cure defects, and disposing of the remanded matter after inordinate delay. 4. Whether the Appellate Authority's remand that ostensibly set aside the entire original order could be treated as exceeding jurisdiction and whether the adjudicating authority may limit its reconsideration to the specific contested portion. ISSUE-WISE DETAILED ANALYSIS - 1. Rejection for non-submission of documents on remand Legal framework: Refund claims under Rule 5 of the CENVAT Credit Rules, read with the Notification prescribing documents, require production of requisite documentary evidence; appellate remand directs fresh adjudication in accordance with law and principles of natural justice. Precedent Treatment: No precedents were applied as binding authority on this factual point in the impugned decision; the Tribunal examined the remand terms and prior adjudication record. Interpretation and reasoning: The Court construed the remand order as directed to re-examine the specific contested issue (nexus between input services and exported output), not as an across-the-board reopening to permit fresh objections unrelated to the remand scope. The record showed that the requisite documents had been called for and examined in the original adjudication and that the Appellate Authority explicitly required the original authority to 'take due note and cognizance' and to follow natural justice. The adjudicating authority's blanket finding of non-submission without specifying what was missing or calling for missing items ran counter to the remand's purpose and to the prior record indicating submissions had been received and partly accepted. Ratio vs. Obiter: Ratio - where an appellate remand confines reconsideration to a specific issue and records indicate prior submission and examination of documents, the adjudicating authority must specify any additional documentary deficiencies before rejecting a claim; blanket rejection for non-submission without specification violates the remand and is unsustainable. Obiter - general observations on standards of document scrutiny in refund adjudications. Conclusions: The rejection for non-submission of documents was improper; the adjudicating authority ought to have specified any missing documents in accordance with the remand and permitted their production. The portion of refund found eligible on merits should not have been denied on that ground. ISSUE-WISE DETAILED ANALYSIS - 2. Applicability of limitation (time-bar) to the refund claim in denovo proceedings Legal framework: Limitation for refund claims is prescribed by statute; where a refund arises as a consequence of adjudication/appellate process, limitation provisions may apply to claims crystallized by final orders; however, the effect of a remand for denovo consideration differs from a final appellate determination. Precedent Treatment: Authorities cited by Revenue were distinguished. Those cases dealt with appellate orders that finally determined rights and liabilities and thereby gave rise to a limited period for consequential refund claims. They did not concern remand situations where entitlement remained to be examined and crystallized by the original authority on fresh consideration. Interpretation and reasoning: The Court reasoned that the remand did not constitute a final determination that would start any statutory limitation period for consequential refund; instead, the adjudicating authority was directed to re-adjudicate the matter. Further, delay in action by the adjudicating authority (more than two years) undermined any contention that the claimant's later request for refund commenced an independent limitation period against the claimant. The claimant's interim letter seeking the refund was filed as a response to the prolonged inaction; it could not be treated as the initiating event rendering the claim time-barred where the adjudicating authority had a statutory duty to act promptly on the remand. Ratio vs. Obiter: Ratio - where an appellate order remands a matter for denovo adjudication, statutory limitation for consequential refunds tied to a final appellate determination does not automatically apply; delay by the adjudicating authority cannot be used to time-bar a remand-directed entitlement. Obiter - remarks on policy against frustrating remand relief by procedural technicalities when the revenue authority delays. Conclusions: The limitation argument based on cited precedents was not applicable to the remand context; the refund could not be rejected as time-barred for reasons attributable to the adjudicating authority's inaction and the remand orientation of the appellate order. ISSUE-WISE DETAILED ANALYSIS - 3. Violation of principles of natural justice by not specifying defects and not affording opportunity to cure Legal framework: Principles of natural justice require that an adjudicating authority communicate grounds of adverse findings and afford an opportunity to be heard or to cure documentary defects before rejecting claims; appellate remands imposing a fresh adjudicatory duty intensify this requirement. Precedent Treatment: The Court relied on established administrative-law principles rather than new authority, treating non-specification and denial of opportunity as a clear procedural infirmity. Interpretation and reasoning: The adjudicating authority, although acting pursuant to a remand that expressly required adherence to natural justice, failed to specify which documents were lacking, did not call for missing items, and reached a negative conclusion on document sufficiency. Given that the original record showed prior production and consideration of documents and partial allowance of the claim, the authority's conduct amounted to a denial of a fair chance to cure or explain - especially material where the remand focused on nexus issues likely to require targeted documentation. Ratio vs. Obiter: Ratio - failure to specify deficiencies and to provide an opportunity to rectify before rejecting a remanded refund claim contravenes principles of natural justice and vitiates the rejection. Obiter - the Court's observation that administrative delay aggravates the prejudice caused by such procedural lapses. Conclusions: The adjudicating authority violated natural justice; consequently, its denial of the refund portion on that procedural basis was set aside and the claimant was entitled to succeed to the extent of the amount found eligible on merits. ISSUE-WISE DETAILED ANALYSIS - 4. Scope of appellate remand and excess of jurisdiction Legal framework: An appellate authority must act within its jurisdiction; a remand should be interpreted in light of the appeal, the relief sought, and the record; an appellant cannot be placed in a worse position by an appellate order absent a cross-appeal by the other side. Precedent Treatment: The Court applied settled principles of appellate jurisdiction and remand interpretation rather than reliance on fresh case law. Interpretation and reasoning: Although the remand language appeared to set aside the entire original order, the substance of the appeal and the absence of a cross-appeal supported a construction that the remand was meant to address the specific portion contested (the partial denial of refund). The adjudicating authority correctly limited its re-examination to the contested portion; however, it erred in procedure and delay as noted above. The Court emphasized that an Appellate Authority cannot, by a remand, worsen the position of an appellant beyond what was contested and that the original authority must act within the remit of the remand. Ratio vs. Obiter: Ratio - remand orders must be construed in their proper context; an appellant cannot be prejudiced by an appellate remand that, if taken literally, would exceed the appellate jurisdiction; corrective interpretation is permissible. Obiter - commentary on proper drafting and execution of remand orders to avoid such confusion. Conclusions: The remand was to be understood as confined to the contested refund portion; while the adjudicating authority interpreted and acted on that scope, procedural failings in conducting the denovo adjudication rendered its outcome unsustainable. OVERALL CONCLUSION Given the remand's scope, prior submission and partial allowance of documents, the adjudicating authority's unexplained finding of non-submission, its failure to specify defects or allow rectification, and the inordinate delay in acting on the remand, the impugned denial of the refund portion was set aside and the monetary refund was allowed to the extent (as computed by the original authority) of the eligible credit.