Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  Missing seized records must be considered while testing ITC claim; duplicate GST demands ordered corrected: Delhi High Court. *  GST appeal can’t be rejected without addressing taxpayer’s grounds: Allahabad High Court. *  Surplus IGST credit can offset CGST, SGST shortfall: GSTAT. *  GST refund can’t be denied when cancelled airfares are returned with tax: GSTAT. *  3 Hearing notices issued within 2 minutes: Gujarat High Court flags portal flaw, seeks report. *  GSTR-9, GSTR-9C filing for FY 2025-26 enabled; pending GSTR-1 and GSTR-3B must be filed first. *  Dupattas are exempt fabrics, can’t be taxed as fibres at 4%: Madras High Court. *  Full transitional credit allowed on capital goods received after GST rollout: GSTAT denies Rs. 6.99 lakh export duty credit. *  GST return mismatch alone can’t justify fraud proceedings: GSTAT orders fresh adjudication under section 73. *  Supplier found non-existent later can’t alone justify input tax credit denial: GSTAT. *  GST interest stops once tax reaches government account, can’t run until return filing: GSTAT. *  Cancelled flat booking- GST refund can’t be denied without excluding COVID period from limitation: GSTAT. *  India notifies rules of origin for India–New Zealand FTA. *  Incomplete E-bike kits classifiable as complete vehicles, but not eligible for CKD duty concession: CESTAT. *  Same GST rate on main input and output can’t by itself bar inverted duty refund: GSTAT. *  Unjust enrichment doesn’t apply to customs refunds from assessments finalised before July 13, 2006: Gujarat High Court. *  CENVAT credit can’t be denied solely because plant And machinery are embedded in earth: Karnataka High Court. *  DFIA exports ineligible for RoDTEP benefits; customs directs repayment with applicable interest. *  Second E-Way bill alone doesn’t prove another supply: GSTAT. *  Bail denied in Rs. 1.19 crore fake GST refund case over risk of accused absconding again: Punjab and Haryana High Court. *  GST registration can be restored after revocation deadline if outstanding dues are paid: Gauhati High Court. *  Multiple GST proceedings over same suppliers: Calcutta High Court directs dept. to share findings for adjudication. *  E-Governance portal services not OIDAR, fixed deposit interest not taxable: CESTAT. *  Rs. 500 Stamp duty required on authority letters for CAs, CMA and GST practitioners in Pune GST division.  *  Rs. 1.10 crore GST refund must be paid in cash after business closure: Allahabad High Court. *  Godown rent attracts 18% GST even when used exclusively for exempt agricultural warehousing: AAR. *  GST portal launches "Multi-State Registration" facility: one master TRN for registration applications across multiple States/UTs. *  RoDTEP scheme extended till 31st December, 2026.  *  Mere disagreement with order can’t override Rs. 20 lakh appeal limit: GSTAT. *  Customs interest can’t be backdated before confiscation liability is determined; nearly 8 year period excluded: Delhi High Court.
Subject News *  GST summons: anticipatory bail maintainable without arrest order, but relief denied in evasion case: Allahabad High Court. *  GST Appeal can’t be decided without hearing taxpayer’s objections to fresh evidence: Allahabad High Court. *  GST ITC can’t be reversed merely because supplier grants discount without reducing tax liability: GSTAT. *  Mere quoting of GST provision is not a valid charge: GSTAT quashes ITC denial. *  Personal hearing mandatory before adverse GST order, even without taxpayer’s request: Rajasthan High Court. *  Parallel bail pleas without full disclosure amount to abuse of process Rs. 43.08 crore GST case sent for fresh hearing: Supreme Court. *  GST refund based on unchallenged advance ruling can’t be recovered using later circular: GSTAT. *  Payment of GST alone doesn’t end interest and penalty liability when tax and interest remain unpaid beyond 30 days of notice: GSTAT. *  GST demand over builders’ 80% procurement rule requires reasoned adjudication: GSTAT. *  Eligible ITC doesn’t automatically entitle taxpayers to compensation cess refund on domestic sales: GSTAT. *  GST confiscation order passed before reply deadline invalid: GSTAT. *  GST interest can’t be retained after tax refund on delayed export receipts: Punjab & Haryana High Court. *  GST appeal can’t be dismissed over pre-deposit shortfall without opportunity To respond: Bombay High Court. *  DGGI SCN can’t be challenged before reply and adjudication:Chhattisgarh High Court. *  GST input tax credit can’t be denied solely due to supplier’s retrospective registration cancellation: GSTAT. *  GST notice must explain fraud allegations; merely repeating section 74 Is not enough:  Himachal Pradesh High Court. *  Audit detection alone can’t justify GST fraud penalty; specific suppression must be proved: GSTAT. *  GST order uploaded only under ‘Additional Notices’ tab without separate intimation set aside: Calcutta High Court. *  Service Tax appeal can’t be rejected for missing pre-deposit proof when payment is already recorded: CESTAT. *  SGST dept. can’t hear appeal against CGST order: Calcutta High Court. *  Mere dispatch of tax order can’t prove service or make appeal time-barred: CESTAT. *  Dealer incentives can’t be taxed merely on ledger entries: CESTAT. *  DGFT orders quashed for failure to supply DRI letter relied upon in SCN: Bombay High Court. *  GST penalty u/s 122(1A) can’t apply to Pre-2021 transactions; unregistered beneficiaries also covered: Delhi High Court. *  Expired E-way bill caused by wrong PIN code can’t justify GST penalty without intent to evade tax: GSTAT. *  Used railway rails can’t be taxed as track material without proof they are fit for reuse: CESTAT. *  Earlier DGGI notice doesn’t bar separate GST demand on different issue: Delhi High Court. *  ITC dispute involves no question of law: GSTAT directs appeal to Vice-President. *  Earlier DGGI notice doesn’t bar separate GST demand On different issue: Delhi High Court. *  No E-way bill required for interstate goods movement in november 2017: GSTAT quashes detention and penalty.  

Comments

Print   |    |  Comment

PJ/Case Law/2013-14/1993

Whether rebate claim for exported goods be appropriated against the amount of service tax dues without intimation?
Case:- ARUNACHALA GOUNDER TEXTILE MILLS PVT. LTD. Versus COMMR. OF C. EX., SALEM
 
Citation:-2013 (290) E.L.T. 499 (Mad.)

Issue:- Whether rebate claim for exported goods be appropriated against the amount of service tax dues without intimation?
 
Brief facts:-It has been stated that the petitioner is a private limited company incorporated under the Companies Act, 1956. The petitioner is engaged in the business of manufacturing different varieties of yarns, including acrylic, polyester and viscose yarns, meant for the domestic market, as well as for exports.
It has been further stated that the Central Government has issued a number of notifications providing export benefits, as a matter of policy, with a view to encourage exports. Such an exercise has been undertaken for the locally manufactured goods to be competitive in the markets. Rules 18 and 19 of the Central Excise Rules, 2002, provide certain reliefs, with regard to the levy of Central Excise duty on raw materials. Rule 18 of the Central Excise Rules, 2002, provides for the grant of the rebate of duty paid on excisable goods which are exported and with regard to the duty paid on the raw materials used in the manufacture of the exported goods. Rule 19 of the Central excise Rules, 2002, permits clearance of excisable goods, under bond, without payment of duty. Accordingly, Rule 18 provides for the refund of the Central Excise duty already paid on raw materials or final products cleared for export. Rule 19 facilitates duty clearance of excisable raw materials and final products meant for export. As such, the petitioner company had been making rebate claims with the second respondent, in terms of Rule 18 of the Central Excise Rules, 2002.
It has been further stated that the petitioner had made a rebate claim, relating to its export, in view of Rule 18 of the Central Excise Rules, 2002, before the second respondent. However, the respondents had been withholding the rebate amounts, due to the petitioner, by adjusting the same against the amounts said to be due from the petitioner relating to the amount of Service Tax leviable, in respect of business auxiliary services, on the procurement of export orders by overseas commission agents, in spite of the stay applications pending before the Courts of law.
It has been further stated that the Service Tax is also being administered under the Central Excise Department and is governed by the provisions of the Finance Act, 1994, read with the rules framed thereunder. Accordingly, periodical show cause notices had been issued by the officers concerned demanding the payment of Service Tax by the petitioner. Orders had been passed by the second respondent holding the petitioner liable to Service Tax, under the category of business auxiliary services, on the procurement of export orders by overseas commission agents. Most of the demands made against the petitioner had been confirmed on adjudication by the second respondent.
It has also been stated that appeals had been filed against the orders passed by the second respondent before the Commissioner of Central Excise (Appeals), Salem. The appeals filed against such orders had been rejected and the demands made against the petitioner had been confirmed, even though the penalty had been set aside in some cases. Second Appeals had been preferred against the said orders before the Customs, Excise and Service Tax Appellate Tribunal, under Section 86 of the Finance Act, 1994. The adjudged demands were to be deposited before the appeal is taken up for disposal by the Customs, Excise and Service Tax Appellate Tribunal, unless the pre-deposit is waived by the Tribunal, pursuant to the applications for stay filed under Section 35 of the Central Excise Act, 1944. The stay applications filed by the petitioner, under Section 35 of the Central Excise Act, 1944, had been allowed by the Tribunal, by granting unconditional waiver of pre-deposit amounts, as prayed for by the petitioner. However, the applications filed by the petitioner, relating to certain identical orders passed by the Appellate Commissioner, pertaining to the subsequent periods had been made infructuous due to the adjustment of the rebate amounts which were due to the petitioner towards the alleged Central Excise Arrears, by way of the impugned orders. The adjustment of the amounts made by the second respondent, from the amounts due to the petitioner, as rebate on exports, is arbitrary and contrary to the relevant provisions of law. No notice had been given to the petitioner before such adjustments had been made. In fact the petitioner had filed 15 rebate claims, vide its letter, dated 13-2-2012, for a total rebate amount of Rs. 47,00,094/-, before the second respondent, along with the supporting documents. Instead of allowing the same, the second respondent had adjusted the substantial portion of the said amounts for the alleged central excise dues of the petitioner. In view of the appropriation of the amounts, by the second respondent, the stay petition filed by the petitioner in the appeal pending on the file of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench at Chennai, in Appeal No. ST/217/2010, had become infructuous.

Appellant’s contention:-The learned counsel appearing on behalf of the petitioner had submitted that the adjustment of the amounts said to be due from the petitioner, as excise duty arrears, while the rebate claims made by the petitioner were pending and when the stay petitions in the appeals filed before the Tribunal were also pending adjudication, is arbitrary and illegal. The learned counsel appearing on behalf of the petitioner had submitted that it would suffice if the rebate claims made by the petitioner are decided by the second respondent, independently, and if such rebates are allowed, without adjustment of the amounts due to the petitioner and if the Tribunal is directed to dispose of the appeals, on merits, within a specified time. The learned counsel appearing on behalf of the petitioner had also submitted that the action of the second respondent in adjusting the amounts due to the petitioner, for the alleged central excise arrears said to be due from the petitioner, cannot be sustained in the eye of law in view of the following decisions:
(1)  Mahindra & Mahindra Ltd. v. Union of India, 1992 (59)E.L.T.505 (Bom.)
(2)  K.M. Subaida Beevi v. Tahsildar, 1995 (80)E.L.T.485 (Mad.)
(3)  National Steel Industries Ltd. v. Union of India, 2001 (134)E.L.T.616 (M.P.)
(4)  Lanco Kondapalli Power Private Ltd. v. Union of India, 2009 (242)E.L.T.340 (A.P.)
(5)  Bonfiglioli Transmissions Private Limited v. Commissioner of Central Excise, 2011-TIOL-670-HC-MAD-CX = 2012 (279)E.L.T.361 (Mad.)
(6)  Vinyllora Industries Pvt. Ltd. v. Commr.(A)-III, C.E. & S.T., Hyderabad [2012 (281)E.L.T.40 (A.P.) = 2012 (27)S.T.R.449 (A.P.)].
The learned counsel appearing on behalf of the petitioner had also submitted that though all efforts had been taken by the petitioner to move the stay petitions before the Customs, Excise and Service Tax Appellate Tribunal, it could not be taken up, as the Tribunal was not sitting, regularly, for a long time. In such circumstances, this Court had also granted certain orders protecting the interest of the petitioner. One such order had been passed, by this Court, on 3-12-2004, in W.P. No. 6361 of 2012.
It has been further stated that the second respondent had been informed about the pendency of the appeal before the Tribunal and that favourable orders had been passed by the Tribunal in similar matters. However, the second respondent had issued the impugned communication, dated 13-6-2012, stating that certain amounts had been adjusted in view of the Central Excise Arrears payable by the petitioner. The second respondent had issued the impugned communication, dated 13-6-2012, enclosing a cheque for a sum of Rs. 28,67,312/-, after adjusting the alleged dues of Rs. 18,32,782/-, against the total rebate claim made by the petitioner for a sum of Rs. 47,00,094/-. In such circumstances, this Court may be pleased to set aside the communication of the second respondent, dated 13-6-2012, and to direct the second respondent to consider the rebate claim of the petitioner, dated 13-2-2012, and to pass appropriate orders thereon. This Court may also be pleased to direct the Customs, Excise and Service Tax Appellate Tribunal to dispose of the appeal pending before it, in Appeal No. ST/217/2010, on merits and in accordance with law, within a specified period.
 
Respondent’s contention:- A counter affidavit had been filed on behalf of the respondents denying the averments and allegations made by the petitioner in the affidavit filed in support of the writ petition. It has been stated that the prayer in the writ petition is not maintainable, as the petitioner had filed a single writ petition challenging the Orders-in-Original Nos. 108 to 113 of 2012, dated 12-6-2012. It has been further stated that the petitioner is a manufacturer of “cotton lycra core spurn yarn’, classified by the petitioner, as falling under Central Excise Tariff heading No. 5205.90. According to the Revenue it is classifiable under Entry 5205.11/5606.00.
It has been further stated that, in Civil Appeal No. 2288 of 2011, filed by the petitioner before the Supreme Court of India, an order of stay had been granted only in respect of the recovery of interest, by an order, dated 8-5-2012. As such, the petitioner is liable to pay the entire duty due from it. While so, in view of the Finance (Amendment) Act, 2006, which had come into effect from 18-4-2006, the service commission paid by the petitioner to the agents abroad becomes taxable under the Finance Act, 1994, as Service Tax. Since the petitioner had failed to remit the same an Order-in-Original No. 18 of 2009, had been passed resulting in a demand of Rs. 9,75,134/-, for the period, from October, 2007 to September, 2008, and an Order-in-Original No. 13 of 2010, dated 30-9-2010, had been passed relating to the period, from April 2009 to June, 2009. The amendment inserting Section 66A had been held to be valid. Therefore, the petitioner had become liable to pay the Service Tax on the agency commission payable abroad, on and from 18-4-2006. The appeal filed by the petitioner before the first appellate authority had been dismissed. Challenging the said orders the petitioner had filed appeals before the Customs, Excise and Service Tax Appellate Tribunal. As per Section 35F of the Act, the amount that remained unpaid should be paid by the person preferring the appeal before the Tribunal. Only in cases of undue hardship the petitioner can approach the Tribunal for the waiver of the pre-deposit amount. Even though the petitioner had filed the appeal before the Tribunal during the year 2010, no order of stay had been obtained against the respondents, with regard to the recovery of the amounts due from the petitioner. Further, as per Section 87(a) of the Finance Act, 1994, any amount ‘payable’ by a person, under the provisions of the said Act, is not paid, the Central Excise Officer shall proceed to recover the amount due, by one or more of the modes mentioned therein. Accordingly, the rebate earned by the petitioner, by way of refund of excise duty paid by it, had been adjusted towards the amount of Service Tax due to the Government, under the power conferred by Section 87(a) of the Finance Act, 1994, read with Section 11 of the Central Excise Act, 1944.
It had also been stated that before the action had been initiated, under Section 87 of the Finance Act, 1994, a notice had been issued to the petitioner in compliance with the principles of natural justice. Even though the appeal filed by the petitioner had been numbered in the year, 2010, no steps had been taken by the petitioner to pursue the stay petition, by listing it for an early hearing of the same. Even if there are vacancies in the Tribunal in its South Zonal Bench at Chennai, it is always open to the petitioner to get the appeal, along with the stay petition, transferred and listed for hearing to another Bench, for an early disposal. However, the petitioner has moved the present writ petition before this Court, without taking the necessary steps for an early disposal of the stay petition and the appeal filed by the petitioner before the Customs, Excise and Service Tax Appellate Tribunal. As such, the writ petition filed by the petitioner is devoid of merits and therefore, it is liable to be dismissed.
 
Reasoning of judgement:- In view of the submissions made by the learned counsels appearing on behalf of the petitioner, as well as the respondents, and on a perusal of the records available and on considering the decisions cited supra, it is noted that the appropriation of the amounts, to the extent of Rs. 18,32,782/-, towards the alleged Service Tax dues said to be payable by the petitioner, from the amount of Rs. 47,00,094/- said to be due to the petitioner as export duty rebate, cannot be sustained in the eye of law. The petitioner ought to have been given a reasonable opportunity of hearing before the second respondent had appropriated the said amount towards the alleged excise duty liability of the petitioner. Even though an appeal had been preferred by the petitioner before the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench at Chennai, in Appeal No. ST/217/2010, along with the stay petition, the second respondent had appropriated the amount of Rs. 18,32,782/- from the export duty rebate, which was refundable to the petitioner, arbitrarily. The stay petition filed by the petitioner along with the appeal, in Appeal No. ST/217/2010, had been dismissed by the Tribunal, as infructuous, only due to the fact that the amount said to be due from the petitioner had been appropriated by the second respondent. However, it is noted that the Tribunal had granted an interim order of stay in other similar cases, in its order, dated 15-6-2012. As such, the requirement of pre-deposit had also been waived. It had also fixed the date of the hearing of the appeals as 16-8-2012. In such circumstances, this Court finds it appropriate to set aside the appropriation of the amount of Rs. 18,32,782/-, by the second respondent, towards the alleged liability of the petitioner, from the amount of Rs. 47,00,094/- refundable to it, as export duty rebate. It is for the second respondent to consider and pass appropriate orders, with regard to the rebate claim of the petitioner, dated 5-3-2012, without undue delay. It is for the Customs, Excise and Service Tax Appellate Tribunal, Chennai, to hear and dispose of the appeals filed by the petitioner, on merits and in accordance with law, as expeditiously as possible. The writ petition is ordered accordingly. No costs.
 
Decision:-Petition allowed.
 
Comment:- The gist of this case is that appropriation of dues of service tax from the refund/rebate claim of the assessee is not sustainable in the eyes of law. It is not justified more so if the alleged service tax dues is sub-judicious matter in an appeal before the Tribunal and that too without proper intimation. It cannot be contented that as the jurisdiction of Central Excise, Customs and Service Tax are same then the refund claim of one can be appropriated against the alleged dues of the other.
 
Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com