TaxTMI 
TaxTMI 
TaxTMI 
2023 (11) TMI 478
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....ces in question being Broadcasting, Business Support, IT Software and Management, Maintenance or Repair services. 2. As would be evident from the record, although the applications had been made on 29 September 2015, 23 December 2015 and 29 March 2016, the respondents chose to issue a first deficiency memo on 05 November 2019 followed by three other communications dated 13 May 2020, 19 May 2020 and 01 June 2020. According to the petitioner, its representatives were thereafter invited to several meetings in order to enable the respondents to ascertain the nature of services provided by the petitioner to its principal entity and to verify the claim for refund as made. 3. In terms of the impugned order dated 04 October 2021, the second respondent has come to conclude that the services rendered by the petitioner would not fall within the ambit of the expression 'export of services' as contemplated under Rule 6A of the Service Tax Rules, 1994 [1994 Rules]. 4. The second respondent holds that with respect to Broadcasting services, even though the ordering company was an entity based out of Mauritius, the customer operation details as provided would indicate beneficiaries of service bei....
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....this reason also the applications for refund were liable to be rejected. 8. For the purposes of evaluating the challenge as raised, it would be expedient to take note of the following undisputed facts. B. BRIEF FACTUAL BACKGROUND 9. The petitioner submitted self-assessed returns for the quarters in question before the Service Tax Commissionerate in terms of Section 70 of the Act. No further action on those returns appears to have been initiated by the respondents either in terms of the powers conferred by Section 72 or Section 73 of the Act. It becomes pertinent to note that the former provision enables the Adjudicating Authority to undertake a 'best judgment assessment', in case an assessee either fails to furnish a return or having submitted a return fails to assess the tax payable in accordance with the provisions of the Act. In either of those situations, the Adjudicating Authority stands empowered by law to require the assessee to produce accounts, documents and evidence and after affording an opportunity of hearing, make an assessment of the value of taxable service to the best of its judgment and determine either the sum payable by the assessee or the amount liable to be ....
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....id or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: Provided that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of- (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words "thirty months", the words "five years" had been substituted. Explanation. -Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of thirty months or five years, as the case may be. (1-A) Notwithstanding anything contained in sub-section (1) (except the period of thirty months of serving the notice for recovery of service tax), the Central Excise Officer may serve, subsequent to any notice ....
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.... under sub-section (1) in respect of such service tax, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid: Provided that the Central Excise Officer may determine the amount of short-payment of service tax or erroneously refunded service tax, if any, which in his opinion has not been paid by such person and, then, the Central Excise Officer shall proceed to recover such amount in the manner specified in this section, and the period of "thirty months" referred to in sub-section (1) shall be counted from the date of receipt of such information of payment. Explanation-1.-For the removal of doubts, it is hereby declared that the interest under Section 75 shall be payable on the amount paid by the person under this sub-section and also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the Central Excise Officer, but for this subsection. Explanation-2. -For the removal of doubts, it is hereby declared that no penalty under any of the provisions of this Act or the rules made thereunder sha....
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....ithout payment of duty under bond or letter of undertaking, or a service provider who provides an output service which is exported without payment of service tax, shall be allowed refund of CENVAT credit as determined by the following formula subject to procedure, safeguards, conditions and limitations, as may be specified by the Board by notification in the Official Gazette: Refund amount= (Export turnover of goods + Export turnover of services) x Net CENVAT credit Total turnover Where,- (A) "Refund amount" means the maximum refund that is admissible; (B) "Net CENVAT credit" means total CENVAT credit availed on inputs and input services by the manufacturer or the output service provider reduced by the amount reversed in terms of sub-rule (5C) of rule 3, during the relevant period; (C) "Export turnover of goods" means the value of final products and intermediate products cleared during the relevant period and exported without payment of Central Excise duty under bond or letter of undertaking; (D) "Export turnover of services" means the value of the export service calculated in the following manner, namely:- Export turnover of services = payments received during th....
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.... of excise and interest, if any, paid on such duty may make an application for refund of such duty and interest, if any, paid on such duty to the Assistant Principal Commissioner of Central Excise or Commissioner of Central Excise or Deputy Principal Commissioner of Central Excise or Commissioner of Central Excise before the expiry of two years from the relevant date in such form and manner as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in Section 12-A) as the applicant may furnish to establish that the amount of duty of excise and interest, if any, paid on such duty in relation to which such refund is claimed was collected from, or paid by him and the incidence of such duty and interest, if any, paid on such duty had not been passed on by him to any other person: Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2)....
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.... any other person. (3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder or any other law for the time being in force, no refund shall be made except as provided in sub-section (2). (4) Every notification under clause (f) of the first proviso to sub-section (2) shall be laid before each House of Parliament, if it is sitting, as soon as may be after the issue of the notification, and, if it is not sitting, within seven days of its reassembly, and the Central Government shall seek the approval of Parliament to the notification by a resolution moved within a period of fifteen days beginning with the day on which the notification is so laid before the House of the People and if Parliament makes any modification in the notification or directs that the notification should cease to have effect, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, but without prejudice to the validity of anything previously done thereunder. (5) For the removal of doubts, it is hereby declared ....
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....hereunder, the date of adjustment of duty after the final assessment thereof; (ec) in case where the duty becomes refundable as a consequence of judgment, decree, order or direction of appellate authority, Appellate Tribunal or any court, the date of such judgment, decree, order or direction; (f) in any other case, the date of payment of duty." "11-BB. Interest on delayed refunds.- If any duty ordered to be refunded under sub-section (2) of Section 11-B to any applicant is not refunded within three months from the date of receipt of application under sub-section (1) of that section, there shall be paid to that applicant interest at such rate, not below five per cent and not exceeding thirty per cent per annum as is for the time being fixed by the Central Government, by notification in the Official Gazette, on such duty from the date immediately after the expiry of three months from the date of receipt of such application till the date of refund of such duty: Provided that where any duty ordered to be refunded under subsection (2) of Section 11-B in respect of an application under subsection (1) of that section made before the date on which the Finance Bill, 1995 receives th....
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....l;" 22. After the amendment of Section 2(2) made by the Finance Act, 2011 the definition of 'assessment' reads thus : "2(2) "assessment" includes provisional assessment, self-assessment, re-assessment and any assessment in which the duty assessed is nil;" 23. It is apparent from the amended definition that self-assessment, provisional assessment, reassessment and any assessment in which the duty assessed is nil, is an assessment. Assessment includes self-assessment, when the provision of self-assessment has been incorporated in Section 17(1), and corresponding change has been made in the definition of assessment in Section 2(2). Earlier the word "self-assessment" was not included in the definition of assessment. xxxx xxxx xxxx 29. The first question for consideration is whether in the case of self-assessment without passing a speaking order, it can be termed to be an order of self-assessment. It was urged on behalf of the assesses that there is no application of mind and merely an endorsement is made by the authorities concerned on the bill of entry which cannot be said to be an order much less a speaking order. 30. In Escorts Ltd. v. Union of India & Ors. - (1994) Supp....
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....refund of duty shall be made before the expiry of six months from the date on which the duty was paid. In the face of this provision, the authorities under the Act, including the Government of India, had no option but to dismiss the appellant's application. This is also the view taken by this Court in Madras Rubber Factory Ltd. v. Union of India (1976) 2 SCC 255." 31. It is apparent from the aforesaid discussion that the endorsement made on the bill of entry is an order of assessment. It cannot be said that there is no order of assessment passed in such a case. When there is no lis, speaking order is not required to be passed in "across the counter affair". 17. It was then contended that an Adjudicating Authority cannot while considering an application for refund either question the self-assessment made by the assessee nor can it delve into issues touching upon the merits of the self-assessed return. According to learned senior counsel, proceedings pertaining to refund are akin to execution proceedings, and thus, while dealing with such claims, it is impermissible for the Adjudicating Authority to either sit in appeal over the self-assessment made by the assessee or for that mat....
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.... of the provisions prior to amendment and post amendment under the Finance Act, 2011, we are of the opinion that the claim for refund cannot be entertained unless the order of assessment or self-assessment is modified in accordance with law by taking recourse to the appropriate proceedings and it would not be within the ken of Section 27 to set aside the order of self-assessment and reassess the duty for making refund; and in case any person is aggrieved by any order which would include self-assessment, he has to get the order modified under Section 128 or under other relevant provisions of the Act." 19. Mr. Gulati additionally drew our attention to the following principles as enunciated by the Supreme Court in Collector of Central Excise Kanpur v. Flock (India) Private Limited (2000) 6 SCC 650:- "1. The consequence of non-challenge of an appealable order passed under the Central Excise and Salt Act, 1944 (hereinafter referred to as "the Act") arises for determination in this appeal. To be more specific, the question is in a case where the Assistant Collector of Central Excise passes an order classifying a product under a particular tariff item and the said order, though appeala....
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....of an order of assessment" necessarily imply that a claim for refund can be made without challenging the assessment in an appeal. It is submitted that if the assessment is not correct, a party could file a claim for refund and the correctness of the assessment order can be examined whilst considering the claim for refund. It was submitted that the wording of Section 27, particularly, the provisions regarding filing of a claim for refund within the period of 1 year or 6 months also showed that a claim for refund could be made even though no appeal had been filed against the assessment order. It was submitted that if a claim for refund could only be made after an appeal was filed by the party, then the provisions regarding filing of a claim within 1 year or 6 months would become redundant as the appeal proceedings would never be over within that period. It was submitted that in the claim for refund the party could take up the contention that the order of assessment was not correct and could claim refund on that basis even without filing an appeal. 6. We are unable to accept this submission. Just such a contention has been negatived by this Court in Flock (India) case [(2000) 6 SCC ....
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....low: - "3. Scrutiny of refund claim and sanction xxxx xxxx xxxx 3.2 The Divisional Office will scrutinise the claim, in consultation with Range, and check that the refund application is complete and is covered by all the requisite documents. This should be done, as far as possible, the moment refund claim is received and in case of any deficiency, the same should be pointed out to the applicant with a copy to the Range Officer within 15 days of receipt." 25. Continuing along this thread, Mr. Gulati also invited our attention to the Circulars dated 04 April 1990 and 01 October 2002, which prescribe and mandate that refund claims must necessarily be adjudicated and disposed of within three months. According to Mr. Gulati, since the respondents woefully failed to adhere to the aforenoted mandated timelines, the refund claims could not have been rejected on grounds as taken in the impugned order. 26. Insofar as the aforesaid proposition is concerned, Mr. Gulati also sought to draw sustenance from the decision rendered by this Court in Jian International v. Commissioner of Delhi Goods and Services Tax 2020 SCC Online Del 2606, which though rendered in the context of the Delhi Go....
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....ubstituting or subserving the salutary purposes of a Show Cause Notice [SCN]. It was submitted that as pointed out hereinbefore, the deficiency memos issued in 2019 and 2020 only required the petitioner to provide further information and documentation. Those notices in any case, according to learned senior counsel, did not ever place the petitioner upon notice of the grounds on which the second respondent either proposed to reject the refund application or was inclined to negative its claim. It was submitted that although the petitioner vide its various emails, collectively enclosed as Annexure P-13, had repeatedly sought personal hearing, no opportunity of hearing was afforded nor was any SCN issued. 28. Mr. Gulati took strong exception to the procedure as adopted by the respondent, contending that the entire record would reveal that the petitioner was never made aware of the basis of rejection of its claim for refund and those reasons came to light only when the impugned order came to be passed. 29. While seeking to expound upon the purposes which are served by a SCN and the obligation of the respondents to disclose the material or grounds on which a particular action is propos....
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....to the appellant to show cause against the same. However, we may also add that even if it is not mentioned specifically but from the reading of the show-cause notice, it can be clearly inferred that such an action was proposed, that would fulfil this requirement. In the present case, however, reading of the show-cause notice does not suggest that noticee could find out that such an action could also be taken...." 30. It was then contended that undisputedly refund for a similar set of services was granted to the petitioner for the period pertaining to July 2014 to September 2014. In the absence of there being any fundamental variation in the nature of services that were rendered by the petitioner, Mr. Gulati would contend that the respondents have clearly acted arbitrarily in rejecting the refund claims in question. It was submitted that while the principles of res judicata may not strictly be applicable to matters relating to tax, it is also well settled that where a fundamental aspect recurring over different assessment years remains unquestioned and unchanged, the respondents would clearly stand estopped from taking a contrary view. 31. Reliance in this regard was placed upon t....
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....e Radhasoami Satsang was entitled to exemption under Sections 11 and 12 of the Income Tax Act of 1961." 32. Insofar as the question of the petitioner rendering 'intermediary services' is concerned, Mr. Gulati argued that the aforesaid issue clearly stands answered against the respondents in light of the judgment rendered in Verizon Communication India Pvt. Ltd v. Assistant Commissioner, Service Tax, Delhi III & Anr 2017 SCC Online Del 10299. The relevant parts of the said judgment are extracted hereinbelow: - "45. In any event the Circular dated 3rd January 2007 would in any event not apply to the services provided by Verizon India to Verizon US. In order to determine who the 'recipient' of a service is, the agreement under which such service has been agreed to be provided has to be examined. When the Master Supply Agreement between Verizon India and Verizon US is examined, it is plain that the recipient of the service is Verizon US and it is Verizon US that is obliged to pay for the services provided by Verizon India. 46. The position does not change merely because the subscribers to the telephone services of Verizon US or its US based customers 'use' the services provided by....
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....bmitted that the petitioner should be relegated to the alternative remedy as provisioned for under Section 85 of the Act and file an appeal before the appropriate Appellate Authority, challenging the impugned order. Learned counsel for the respondents also submitted that the allegation of the principles of natural justice having been violated is also clearly misconceived bearing in mind the deficiency memos which were issued. It was further pointed out that the representatives of the petitioner had also been invited to personal hearings which were conducted on the virtual platform on 24 July 2020 and again on 24 & 28 June 2021, 26 July 2021 and 05 August 2021. 34. Insofar as the challenge on merits is concerned, it was the submission of learned counsel that the claims for refund that may be made with respect to CENVAT credit would necessarily have to be considered in accordance with the provisions made in Section 11B of the Excise Act read with Rule 5 of the CCR Rules. According to learned counsel, Section 83 of the Act contemplates certain provisions of the Excise Act, including Sections 11B and 11BB, to be applicable to service tax in the same manner as they would apply to asses....
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....ermined in accordance with clause (D) of sub-rule (1) of rule 5 of the said rules. (f) for the value of all services other than export during the quarter, the time of provision of services shall be determined as per the provisions of the Point of Taxation Rules, 2011. (g) the amount of refund claimed shall not be more than the amount lying in balance at the end of quarter for which refund claim is being made or at the time of filing of the refund claim, whichever is less. (h) the amount that is claimed as refund under rule 5 of the said rules shall be debited by the claimant from his CENVAT credit account at the time of making the claim. (i) In case the amount of refund sanctioned is less than the amount of refund claimed, then the claimant may take back the credit of the difference between the amount claimed and amount sanctioned. 3. Procedure for filing the refund claim. - (a) The manufacturer or provider of output service, as the case may be, shall submit an application in Form A annexed to the notification, to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, as the case may be, in whose jurisdiction,- (i) the factory from which ....
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....said, it was the contention of the respondents that a conjoint reading of Section 11B of the Excise Act and Rule 5 of the CCR Rules would lead one to the irresistible conclusion of a power of determination inhering in the competent authority even at the stage where an application for refund may be made. 39. Insofar as the orders of refund made on earlier occasions is concerned, learned counsel would contend that since the issue of refund of CENVAT credit is essentially one relating to assessment of tax, it is the well settled precept of res judicata being inapplicable which would govern. It was thus contended that merely because orders of refund may have been framed in the past, the same would neither operate as res judicata nor could it be said to operate as an estoppel against the respondents. 40. Learned counsel further submitted that the reliance placed on Section 73 of the Act is clearly misconceived since the refund has not been denied on grounds which are spoken of in that provision. Learned counsel also laid emphasis on Section 73 being applicable only in a situation where either service tax has not been levied or paid or has been short levied, short paid or erroneously r....
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....inclined to take. 44. However, and as a reading of the deficiency memos would indicate, they abjectly failed to either place the petitioner on notice of the view proposed to be taken nor did those communications confront the petitioner with the conclusion which ultimately formed the basis for the passing of the impugned order. It is in this context that the principles enunciated in Gorkha Security Services assume significance. 45. In the said decision, the Supreme Court has while expounding upon the basic requirements of a SCN, significantly observed that in order for such a notice to be recognized as fulfilling the requirements of the principles of natural justice, it must necessarily embody the material or the grounds on the basis of which an action is proposed to be initiated. It was further held that a notice to show cause must also necessarily disclose the particular penalty or action which is proposed to be taken. 46. When tested on the aforesaid precepts, it becomes apparent that the deficiency memos abjectly fail to meet the two foundational precepts as enunciated by the Supreme Court in Gorkha Security Services. As was noticed by us hereinabove, the respondents neither ....
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....estioned either in accordance with Section 72, if the competent authority is of the opinion that the assessee has failed to assess the tax in accordance with the provisions of the Act or Rules made thereunder or in circumstances which are enumerated in Section 73. 51. It becomes pertinent to note that the expression 'assessment' has been duly defined under the 1994 Rules to include self assessment of service tax. Rule 2(b) of the said Rules is reproduced hereinbelow:- "Rule 2 - Definitions (1) In these rules, unless the context otherwise requires,-- xxxx xxxx xxxx (b) "assessment" includes self assessment of service tax by the assessee, reassessment, provisional assessment, best judgment assessment and any order of assessment in which the tax assessed is nil; determination of the interest on the tax assessed or reassessed;" 52. A comprehensive reading of the provisions of the Act would thus establish that a self-assessed return stands placed on a pedestal equivalent to that of an actual order of assessment, provisional or best judgment assessment or a reassessment. This issue in any case is liable to be answered against the respondent in light of the decision in ITC Limit....
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.... reproduced hereinbelow: - "17. Assessment of duty.-(1) An importer entering any imported goods under Section 46, or an exporter entering any export goods under Section 50, shall, save as otherwise provided in Section 85, self-assess the duty, if any, leviable on such goods. (2) The proper officer may verify [the entries made under Section 46 or Section 50 and the self-assessment of goods referred to in subsection (1)] and for this purpose, examine or test any imported goods or export goods or such part thereof as may be necessary. Provided that the selection of cases for verification shall primarily be on the basis of risk evaluation through appropriate selection criteria. (3) For the purposes of verification under sub-section (2), the proper officer may require the importer, exporter or any other person to produce any document or information, whereby the duty leviable on the imported goods or export goods, as the case may be, can be ascertained and thereupon, the importer, exporter or such other person shall produce such document or furnish such information (4) Where it is found on verification, examination or testing of the goods or otherwise that the self-assessment i....
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....ompanied by such documentary or other evidence (including the documents referred to in Section 28-C) as the applicant may furnish to establish that the amount of duty or interest in relation to which such refund is claimed was collected from, or paid by him and the incidence of such duty or interest, has not been passed on by him to any other person. (1-B) Save as otherwise provided in this section, the period of limitation of one year shall be computed in the following manner, namely- (a) in the case of goods which are exempt from payment of duty by a special order issued under sub-section (2) of Section 25, the limitation of one year shall be computed from the date of issue of such order; (b) where the duty becomes refundable as a consequence of any judgment, decree, order or direction of the appellate authority, Appellate Tribunal or any court, the limitation of one year shall be computed from the date of such judgment, decree, order or direction; (c) where any duty is paid provisionally under Section 18, the limitation of one year shall be computed from the date of adjustment of duty after the final assessment thereof or in case of re-assessment, from the date of such r....
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....cation under clause (f) of the first proviso to subsection (2) shall be laid before each House of Parliament, if it is sitting, as soon as may be after the issue of the notification, and, if it is not sitting within seven days of its re-assembly, and the Central Government shall seek the approval of Parliament to the notification by a resolution within a period of fifteen days beginning with the day on which the notification is so laid before the House of the People and if Parliament makes any modification in the notification or directs that the notification should cease to have effect, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, but without prejudice to the validity of anything previously done thereunder. (5) For the removal of doubts, it is hereby declared that any notification issued under clause (f) of the first proviso to sub-section(2), including any such notification approved or modified under subsection (4), may be rescinded by the Central Government at any time by notification in the Official Gazette." 57. It becomes pertinent to note that both the Customs as well as the Excise Acts follow an identical....
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....erved that once an assessment filed had been duly adjudicated in accordance with the procedure prescribed under the statute, it would be impermissible for the said decision being reviewed or revisited at the stage of consideration of a refund claim. 61. In Priya Blue Industries, the Supreme Court was faced with a situation where a Bill of Entry had been duly assessed and the duty payable in terms of that assessment deposited under protest. It was thereafter that an application for refund came to be preferred. As would be evident from the conclusions ultimately recorded in that decision, the Supreme Court categorically held that once an order of assessment came to be made, the duty was liable to be paid in accordance with that order alone. Their Lordships pertinently observed that unless such an order of assessment is reviewed or modified in appeal, the duty as determined to be payable would remain untouched and it would not be open for an assessee to seek a review of the assessment order, bearing in mind the fact that the claim for refund is not akin to proceedings in appeal. It was further held that the authority which is enjoined to consider a refund claim can neither sit in an ....
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.... 73 of the Act. The application for refund of CENVAT credit was founded on the petitioner assessing that it was not liable to pay service tax on services so exported. The accumulation of CENVAT credit came about in light of the various input services received by the petitioner and it having availed credit of service tax paid thereon in terms of Rule 3 of the CCR Rules. It was in respect of the accumulated CENVAT credit that the application for refund came to be made. 66. In our considered view, unless the self-assessed return, as submitted had been questioned, re-opened or re-assessed and the assertion of the petitioner of the services rendered by it qualifying as an 'export of service' questioned or negatived in accordance with the procedure prescribed under the Act, its claim for refund could not have been negated. As was observed by the Supreme Court in ITC Limited, a self-assessed return also amounts to an 'assessment' and unless it is varied or modified in accordance with the procedure prescribed under the relevant statute, the same cannot possibly be questioned in refund proceedings. As the Supreme Court had held in the decisions aforenoted, the authority while considering a....
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....ould amount to recognising the existence of an adjudicatory function inhering in the refund sanctioning authority and would clearly be abhorrent to the principles enunciated in the said decision of the Supreme Court. 70. Since the liability or otherwise of the petitioner to pay service tax would flow and rest only upon the assertions made in the self-assessed return, the various issues which have been gone into by the second respondent while passing the impugned order would clearly be an exercise beyond the jurisdiction which could otherwise be recognised to exist at the stage of consideration of a refund claim. We thus find that the impugned order is clearly rendered unsustainable on this score and is liable to be set aside for the aforesaid reasons. G. CERTAINTY IN TAXATION MATTERS 71. We also find merit in the contention of Mr. Gulati, who had assailed the impugned order additionally on the basis of the refunds which had been duly granted for earlier periods. While it is true that the principles of res judicata may not be strictly applicable, we find that the nature and ambit of services which were rendered by the petitioner across separate assessment periods had remain uncha....