TaxTMI 
TaxTMI 
2023 (11) TMI 478
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....ilized by the petitioner in connection with 'export of services'. The services 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 c....
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....' as defined under the Place of Provision of Services Rules, 2012[PoPS Rules], and for 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 ....
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.... thirty months from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid 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) Notwithstandi....
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....m such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him 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 o....
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.... (iii) in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund." 13. The procedure for the making of a refund claim is prescribed by Rule 5 of the CENVAT Credit Rules, 2004 [CCR Rules]. The said Rule reads as follows: - "Rule 5 - Refund of CENVAT credit (1) A manufacturer who clears a final product or an intermediate product for export without 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 i....
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.... value of services shall be determined in the same manner as the value for the purposes of sub-rule (3) and (3A) of rule 6 is determined." 14. Since the respondents had in the course of their submissions also alluded to the provisions of Sections 11B and 11BB of the Central Excise Act, 1944 [Excise Act], and which provisions stand adopted by virtue of Section 83 of the Act, we deem it appropriate to reproduce those provisions hereinbelow: - "11-B. Claim for refund of duty and interest, if any, paid on such duty.- (1) Any person claiming refund of any duty 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....
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....e) the duty of excise and interest, if any paid on such duty borne by the buyer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person; (f) the duty of excise and interest, if any paid on such duty borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify: Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government the incidence of duty and interest, if any, paid on such duty has not been passed on by the persons concerned to 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,....
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....ain period, on the basis of the rate fixed by the Central Government by notification in the Official Gazette in full discharge of his liability for the duty leviable on his production of certain goods, if after the manufacturer has made the payment on the basis of such rate for any period but before the expiry of that period such rate is reduced, the date of such reduction; (e) in the case of a person, other than the manufacturer, the date of purchase of the goods by such person; (ea) in the case of goods which are exempt from payment of duty by a special order issued under sub-section (2) of Section 5A, the date of issue of such order; (eb) in case where duty of excise is paid provisionally under this Act or the rules made thereunder, 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 ....
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....d. 16. Mr. Gulati submitted that there can be no dispute with respect to the fact that an assessment as contemplated in taxing statutes would also include a self-assessment. This, according to learned counsel, is a proposition which is no longer res integra and stands authoritatively settled by the Supreme Court in ITC Limited vs. Commissioner of Central Excise Bombay (2019) 17 SCC 46. Mr Gulati invited our attention to the following passages from that decision: - "21. The first question for consideration is whether the assessment includes self-assessment also. Prior to the amendment by the Finance Act, 2011 the assessment had been defined in Section 2(2) thus : "2(2) "assessment" includes provisional assessment, reassessment and any order of assessment in which the duty assessed is nil;" 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, reasses....
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..... No formal order can be expected in such a case, it is more like 'across-the-counter' affair. In the present case, it may be reiterated that the appellant himself classified the goods under Tariff Item No. 73.33/40 and paid the duty at the rate applicable thereunder. At that stage, he did not raise any dispute either as to classification or as to the right of duty applicable. Hence, there was no occasion for passing a formal order since there was no lis at that stage. The bill of entry presented by the appellant was signed, signifying approval by the assessing officer. That itself is an order of assessment in such a situation. We are, therefore, not prepared to agree that there is no order of assessment in this case, and therefore, the limitation prescribed in Section 27 did not begin to run. Section 27 is emphatic in language. It says that an application for 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 Lt....
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....e amendment. It will virtually amount to an order of assessment or reassessment in case the Assistant Commissioner or Deputy Commissioner of Customs while dealing with refund application is permitted to adjudicate upon the entire issue which cannot be done in the ken of the refund provisions under Section 27. In Hero Cycles Ltd. v. Union of India [Hero Cycles Ltd. v. Union of India, 2009 SCC OnLine Bom 801: (2009) 240 ELT 490 (Bom)] though the High Court interfered to direct the entertainment of refund application of the duty paid under the mistake of law. However, it was observed that amendment to the original order of assessment is necessary as the relief for a refund of claim is not available as held by this Court in Priya Blue Industries Ltd. [Priya Blue Industries Ltd. v. Commr. of Customs, (2005) 10 SCC 433 : (2004) 172 ELT 145] xxxx xxxx xxxx 47. When we consider the overall effect 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 pr....
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....ving to make any claim in that behalf. The provision indicates the importance attached to an order of the appellate or revisional authority under the Act. Therefore, if an order which is appealable under the Act is not challenged then the order is not liable to be questioned and the matter is not to be reopened in a proceeding for refund which, if we may term it so, is in the nature of execution of a decree/order....." 20. The said principles, as laid down in Flock (India) were further reiterated by the Supreme Court in Priya Blue Industries Limited v. Commissioner of Customs (Preventive) (2005) 10 SCC 433. The relevant parts of the said judgment are extracted hereinbelow: "5. Under Section 27 of the Customs Act, 1962, a claim for refund can be made by any person who had (a) paid duty in pursuance of an order of assessment, or (b) a person who had borne the duty. It has been strenuously submitted that the words "in pursuance 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....
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.... view which the second respondent was proposing to take and which has ultimately been adopted by it while rejecting its applications for refund. Mr. Gulati pointed out that a reading of the aforesaid communications would indicate that they were more in the nature of interrogatories rather than a notice calling upon the petitioner to show cause why its claim for refund was considered untenable on merits. 23. The impugned order and the rejection of the claim for refund was also assailed on an alleged violation of Clause 3.2 of the Central Excise Manual and which stipulates that deficiency memos should be issued within 15 days from the date of receipt of the refund application. Mr. Gulati submitted that in the present case, the communications noticed hereinabove came to be issued after more than four years from the date when the refund applications had been made. 24. Clause 3.2 of the Central Excise Manual which was referred to is extracted hereinbelow: - "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 cover....
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....ess the refund application beyond the statutory timelines as provided under Rule 90 of the CGST Rules, referred above. This could then also be construed as rejection of the petitioner's initial application for refund as the petitioner would thereafter have to file a fresh refund application after rectifying the alleged deficiencies. This would not only delay the petitioner's right to seek refund, but also impair petitioner's right to claim interest from the relevant date of filing of the original application for refund as provided under the Rules. xxxx xxxx xxxx 11. Consequently, this Court is of the view that the respondent has lost the right to point out any deficiency, in the petitioner's refund application, at this belated stage. 12. Accordingly, this Court directs the respondent to pay to the petitioner the refund along with interest in accordance with law within two weeks." 27. It was the submission of Mr. Gulati further that the so-called deficiency memos cannot be read as substituting or subserving the salutary purposes of a Show Cause Notice [SCN]. It was submitted that as pointed out hereinbefore, the deficiency memos issued i....
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....portant to mention as to what would be the consequence if the noticee does not satisfactorily meet the grounds on which an action is proposed. To put it otherwise, we are of the opinion that in order to fulfil the requirements of principles of natural justice, a show-cause notice should meet the following two requirements viz: (i) The material/grounds to be stated which according to the department necessitates an action; (ii) Particular penalty/action which is proposed to be taken. It is this second requirement which the High Court has failed to omit. We may hasten to add that even if it is not specifically mentioned in the show-cause notice but it can clearly and safely be discerned from the reading thereof, that would be sufficient to meet this requirement. xxxx xxxx xxxx 27. We are, therefore, of the opinion that it was incumbent on the part of the Department to state in the show-cause notice that the competent authority intended to impose such a penalty of blacklisting, so as to provide adequate and meaningful opportunity to the appellant to show cause against the same. However, we may also add that even if it is not mentioned specifically bu....
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....f the fact that strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 17. On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter - and if there was no change it was in support of the assessee - we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income Tax in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under Sections 11 and 12 of the Inco....
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....m service providers in order to fulfil its obligations under the Master Supply Agreement with Verizon US made no difference to the fact that the recipient of service was Verizon US and the place of provision of service was outside India. (iv) The subscribers to the services of Verizon US may be 'users' of the services provided by Verizon India but under the Master Supply Agreement it was Verizon US that was the 'recipient' of such service and it was Verizon US that paid for such service. That Verizon India and Verizon US were 'related parties' was not a valid ground, in terms of the ESR or the Rule 6A of the ST Rules, to hold that there was no export of service or to deny the refund. xxxx xxxx xxxx (vi) Even for the period after 1st July 2012 the provision of telecommunication service by Verizon India to Verizon US satisfied the conditions under Rule 6A(1)(a), (b), (d) and (e) of the ST Rules and was therefore an 'export of service'. The amount received for the export of service was not amenable to service tax." D. CONTENTIONS OF THE RESPONDENTS 33. Controverting the aforenoted submissions, learned counsel representing the respondents firstly su....
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....be subjected to the following safeguards, conditions and limitations, namely:- (a) the manufacturer or provider of output service shall submit not more than one claim of refund under this rule for every quarter: Provided that a person exporting goods and service simultaneously, may submit two refund claims one in respect of goods exported and other in respect of the export of services every quarter. (b) in this notification quarter means a period of three consecutive months with the first quarter beginning from 1st April of every year, second quarter from 1st July, third quarter from 1st October and fourth quarter from 1st January of every year. (c) the value of goods cleared for export during the quarter shall be the sum total of all the goods cleared by the exporter for exports during the quarter as per the monthly or quarterly return filed by the claimant. (d) the total value of goods cleared during the quarter shall be the sum total of value of all goods cleared by the claimant during the quarter as per the monthly or quarterly return filed by the claimant. (e) in respect of the services, for the purpose of computation of to....
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....by a certificate in Annexure A-I, duly signed by the auditor (statutory or any other) certifying the correctness of refund claimed in respect of export of services. (f) The Assistant Commissioner or Deputy Commissioner to whom the application for refund is made may call for any document in case he has reason to believe that information provided in the refund claim is incorrect or insufficient and further enquiry needs to be caused before the sanction of refund claim. (g) At the time of sanctioning the refund claim the Assistant Commissioner or Deputy Commissioner shall satisfy himself or herself in respect of the correctness of the claim and the fact that goods cleared for export or services provided have actually been exported and allow the claim of exporter of goods or services in full or part as the case may be." 37. Learned counsel specifically referred to Clause 3(g) of the said notification and which speaks of the Assistant or the Deputy Commissioner being obliged to record their satisfaction with respect to the correctness of the claim as well as the fact that goods cleared for export or services provided have actually been exported. According to learned....
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....ciples of natural justice. The respondents have in this regard essentially referred to the deficiency notices dated 05 November 2019 and the three follow up communications dated 13 & 19 May 2020 and 01 June 2020. It was their contention that the aforenoted deficiency notices are liable to be read as evidence of sufficient and broad compliance with the natural justice requirements. We find ourselves unable to sustain that contention for the following reasons. 43. As we view the deficiency memos which had been issued, we find that those communications essentially called upon the petitioner to furnish additional documentation and provide further details with respect to the various transactions which formed the subject matter of the claim for refund. Those communications, as Mr. Gulati rightly contended, were more in the nature of interrogatories rather than a SCN. In order for the deficiency memos to qualify as notices which would be compliant with the requirements of the principles of natural justice, it was incumbent upon the respondents to have confronted the petitioner with the issue of 'export of services' as well as whether it was an 'intermediary'. For a notice to be recogni....
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.... the requirements put in place in terms of Rule 5 of the CCR Rules read along with the Notification dated 18 June 2012. It becomes pertinent to note that the aforesaid Notification specifies the various particulars, details and documentation which must accompany and form part of a refund claim. A deficiency memo would thus be confined to the applicant assessee being called upon to fulfil any shortcoming or supplement documentation that must accompany a claim for refund. In any event, the deficiency memo cannot be viewed as a substitute for a SCN. 48. We, in this regard, agree with the observations rendered by the Gujarat High Court in New Pensla Industries v. Union of India 2017 SCC Online Guj 2596 and which in our considered opinion, correctly held that a deficiency memo is not in the nature of a SCN and that it merely serves the purpose of placing a party on notice of being liable to furnish additional information and remedy any deficiency in a claim that may be laid. F. EXAMINATION OF A REFUND CLAIM 49. That takes us then to the principal question and which relates to the nature and extent of the power that may be available to be exercised by the Adjudicating Authority whi....
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....T credit may be allowed. Undisputedly, the notification dated 18 June 2012 owes its genesis to this power which stands placed in the hands of the Board. The said notification in Clause 3(g) obliges the Assistant of the Deputy Commissioner to examine and verify the correctness of the refund claim and to ensure that goods cleared for export or services provided have actually been exported. It is the aforesaid safeguard and condition as contained in that Notification which the respondents would urge us to recognise as conferring an adjudicatory power upon the competent authority while considering a claim for refund. 55. The petitioner on the other hand, contends that the extent of the power which is available to be exercised by an authority while considering a claim for refund is no longer res integra and stands concluded in light of the judgments rendered by the Supreme Court in Flock(India), Priya Blue Industries and ITC limited. 56. In order to evaluate the rival submissions, we firstly note that the Act adopts Section 11B of the Excise Act. As is evident from a reading of the said provision and more particularly Section 11B (2), a refund is granted by the competent authority....
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....dent, such imported goods or export goods shall continue to be governed by the provisions of Section 17 as it stood immediately before the date on which such assent is received." xxxx xxxx xxxx "27. Claim for refund of duty.- (1) Any person claiming refund of any duty or interest,- (a) paid by him; or (b) borne by him, may make an application in such form and manner as may be prescribed for such refund to the Assistant Commissioner of Customs or Deputy Commissioner of Customs, before the expiry of one year, from the date of payment of such duty or interest: Provided that where an application for refund has been made before the date on which the Finance Bill, 2011 receives the assent of the President, such application shall be deemed to have been made under sub-section (1), as it stood before the date on which the Finance Bill, 2011 receives the assent of the President and the same shall be dealt with in accordance with the provisions of sub-section (2): Provided further that the limitation of one year shall not apply where any duty or interest has been paid under protest: Provided also that where the amount of refund claimed is ....
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....duty to any other person; (b) the duty and interest, if any, paid on such duty on imports made by an individual for his personal use; (c) the duty and interest, if any, paid on such duty borne by the buyer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person; (d) the export duty as specified is Section 26; (e) drawback of duty payable under Sections 74 and 75; (f) the duty and interest, if any, paid on such duty borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify; (g) the duty paid in excess by the importer before an order permitting clearance of goods for home consumption is made where- (i) such excess payment of duty is evident from the bill of entry in the case of self-assessed bill of entry; or (ii) the duty actually payable is reflected in the reassessed bill of entry in the case of reassessment. Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government, the incidence of duty and interest, if any,....
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....ise of reassessment. 58. Section 27 enables a person to claim refund of duty or interest which may have been either paid or borne by it. Section 27(2) of the Customs Act, in terms identical to Section 11B (2) of the Excise Act, speaks of refunds being effected upon the proper officer being satisfied that the whole or any part of the duty paid is refundable. Section 27(2) is thus a provision which is pari materia with Section 11B (2) of the Excise Act. 59. The Supreme Court in ITC Limited, notwithstanding Section 27(2) employing the expression 'satisfied' held that unless a self-assessed return is revised or doubted in exercise of powers of reassessment, best judgment assessment or where it be alleged that duty had been short levied, short paid or erroneously refunded, those powers would not be available to be exercised at the stage of considering an application for refund. Having noticed the statutory position which prevails, we turn then to the decisions which would have a bearing on the question which stands posited. 60. Flock (India) was one of the earliest decisions which dealt with the aspect of a claim for refund emanating from a return which had been duly assesse....
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....ssment of service tax and thus being evidence of a position similar and akin to that which obtains under the Customs and Excise Acts. 63. Their Lordships in ITC Limited categorically held that notwithstanding a self-assessed Bill of Entry having been merely endorsed by the competent authority, the same would nonetheless amount to an 'assessment'. It was in that backdrop that it was held that once a self-assessed return had been duly accepted, the same could not be modified or varied by an authority while considering an application for refund. 64. It becomes pertinent to note that the appellant before the Supreme Court in that case, had sought to press the claim for refund asserting that it had due to inadvertence failed to submit a self-assessment return taking into consideration an exemption notification. It was this claim which came to be ultimately negatived by the Supreme Court and which held that a claim for refund cannot be entertained unless the order of assessment, and which would include a self-assessment return, is modified in accordance with the procedure prescribed in the statute. In our considered opinion, it is these principles enunciated in Flock (India), Priya....
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....012 had been complied with. The respondents, at this stage of the proceedings, could not have doubted, questioned or undertaken a merit review of the self-assessed return which had been submitted. 68. The reliance which is placed on Clause 3(g) of the Notification dated 18 June 2012 also would not justify the denial of refund, since the expressions 'determine' and 'satisfy' as appearing in the parent Rule as also the Notification noted hereinabove would have to be construed bearing in mind the limited jurisdiction and authority which was available in the hands of the Adjudicating Authority and exercised by it while considering the application for refund. In any case, the mere usage of the expressions 'determine' or 'satisfy' would, in our considered opinion, not amount to expanding the nature of the authority which the second respondent could have exercised while evaluating an application for refund. Once the self-assessed return of the petitioner and in terms of which its claim of refund and of being in exigible to service tax had attained finality and had not been reassessed or questioned, the refund was clearly liable to be granted automatically. 69. At the stage of consid....