Limitation on Consequential Refund claim - whether from date of order or from date of payment of Service Tax?

PJ/Case Study/2012-13/04

CASE STUDY

Prepared By:
CA Pradeep Jain
Sukhvinder Kaur LLB [FYIC]

Introduction:-

In the case under study, the issue involved was that the assessee had paid duty under protest for GTA service and then in litigation had claimed exemption under Notification No. 34/2004-ST dated 03.12.2004. The matter was decided in favour of assessee. They filed consequential refund claim for duty deposited under protest. The Department has sought to reject the refund claim on the ground that the refund claim was filed after limitation period of one year from the date of payment of one year.

M/s. Srijan Stones Pvt. Limited v/s Deputy Commissioner, C. Ex. Division, Jodhpur
[Order-in-Appeal No. 19(AKJ)ST/JPR-II/2012 Dated: 29.03.2012]

Brief Facts:-

- Appellant were registered under taxable service category of ‘Transport of Goods by Road Service’. They had deposited service tax for the period 01.01.2005 to 31.03.2009 on GTA services amounting to Rs. 1,10,159/- under protest. The matter was adjudicated vide order in original no. 731-760/ST/2009-10 dated 11.08.2010 wherein demand of Rs. 18849/- was confirmed.

- Thus, appellant filed consequential refund claim of Rs. 91, 310/- which was received by the Department on 10.09.2010.

- Department issued show cause notice proposing to reject the refund claim on the ground that refund claim is filed after one year from the date of payment of service tax hence it is time barred. It was also alleged that the matter is already decided by order-in-original no. 524/2009-R(ST-ESP) dated 13.11.2009.

- The Adjudicating Authority passed the order-in-original disallowing the refund claim.

- Hence, appellant preferred an appeal before the Commissioner (Appeals).

Appellant’s Contentions:-

- Appellant contended that the refund claim filed by them was a consequential refund claim filed in lieu of Order-in-Original No. 731 TO 760/ST/2009-10 dated 11.08.2010. This order was passed in the show cause notice demanding payment of Rs. 2, 93, 452/- for the said period. In the Order-in-Original No. 731 TO 760/ST/2009-10 dated 11.08.2010, the demand of Rs. 18849/- was confirmed out of Rs. 2, 93, 452/-. As the appellant had deposited Rs. 1,10,109/- under protest and the afore-said order had vacated the protest clause, the appellant entitled to the refund of differential amount of Rs. 91, 310/- deposited under protest. Therefore, the appellant have filed the refund claim for grant of differential amount of Rs. 91, 310/- for which demand was not confirmed. Therefore, the appellant were entitled to the refund of amount deposited and the demand of which was not confirmed against them.

- It was submitted that the Order-in-Original No. 731 TO 760/ST/2009-10 dated 11.08.2010 was passed in the proceedings initiated vide show cause notice no. No.V(ST)SCN/116/JDR/09/15464 dated 24/09/09. The appellant had filed reply to this show cause notice and the demand of only Rs. 18849/- was confirmed after adjudication of the matter. Thus, the main issue has already been adjudicated upon. And the appellant have filed consequential refund of differential tax. At this stage no question of adjudication arises as the matter has already been adjudicated upon and decided vide Order-in-Original No. 731 TO 760/ST/2009-10 dated 11.08.2010. Therefore, at the stage of consequential relief no question arose for issuing the impugned show cause notice and passing of the impugned order.

- The appellant further submitted that in the impugned order it has been held that as the refund claim of the appellant was rejected vide order-in-original no. 524/2009-R(ST-EXP) dated 13.11.2009 and no appeal was preferred and the said order has attained finality therefore the present refund claim is not sustainable. In this regard the appellant submit that the impugned finding is not sustainable. It is submitted that no appeal was filed against the order-in-original no. 524/2009-R(ST-EXP) dated 13.11.2009 rejecting the refund claim of the appellant as the issue was pending wherein demand was raised and Order-in-Original No. 731 TO 760/ST/2009-10 dated 11.08.2010 was passed. Therefore, the fact that the order-in-original no. 524/2009-R(ST-EXP) dated 13.11.2009 has attained finality will not have effect on the consequential refund claim filed in lieu of Order-in-Original No. 731 TO 760/ST/2009-10 dated 11.08.2010 for refund of deposit made by the appellant.

- The appellant submitted that in the impugned order the learned Adjudicating Authority had given a finding that

“the refund claim filed by the party (appellant herein) vide their application received on 12.06.2009 in the department comprised the amount of present refund claim. The matter of the present refund claim, therefore, has already been disposed of and the matter attained finality…Since issue of refund of the amount claimed under the present application for refund has already been decided, therefore the argument of the party that the present refund claim is in consequence to the Order-in-Original No. 731 TO 760/ST/2009-10 dated 11.08.2010 is not tenable.”

In this regard it is submitted that when the issue of refund was already decided vide earlier order order-in-original no. 524/2009-R(ST-EXP) dated 13.11.2009 then the Adjudicating Authority passing the Order-in-Original No. 731 TO 760/ST/2009-10 dated 11.08.2010 should have noted this fact and not have passed the said order. But the Adjudicating Authority in that case has passed Order-in-Original No. 731 TO 760/ST/2009-10 dated 11.08.2010 in proceedings wherein demand was raised but only a portion of demand was confirmed. This shows that both the proceedings were separate and the consequential refund of the appellant could not have been rejected on the said ground that the present application for refund has already been decided. Thus, the impugned order challenged in this appeal is liable to be set aside.

- It is further submitted that they had deposited the service tax on pursuance of department irrespective of the fact that the service tax was not payable by them. However, they deposited the same under protest. Later on, they applied for refund of the service tax so deposited. But the department simultaneously initiated proceedings against the appellant for recovery of the service tax in question. Thus, the filing of refund and its disposal was a separate proceeding than the adjudication of show cause notice issued for recovery of the service tax so paid. Further, if they had not filed the refund and the matter would have been decided in their favour vide Order-in-Original No. 731 TO 760/ST/2009-10 dated 11.08.2010; then had the department not allowed the refund? Undoubtedly, the refund would have been allowed very easily as the consequential refunds are to be allowed within reasonable time. Going further, the refund application was individual matter; but the aforesaid order no. 731-760 covers a no. of parties wherein the same issue was decided. Thus, the order passed for majority would have precedence. Therefore, the fact of adjudication of the refund claim and not filing further appeal would have no impact on the refund claim filed in consequence of order dated 11.8.2010. Thus, the consequential refund claim of the appellant could not have been rejected on this ground.

- The appellant submit that the impugned order is contending that as the refund application was already decided, now the consequential refund arising out of order dated 11.8.2010 is not allowable. In this regard it is submitted that where there are two decisions by the same authority then the order beneficial to assessee would prevail. They had discussed this in the reply to show cause notice and the decision SCHMALZ INDIA PVT. LTD. Versus COMMISSIONER OF CUS. (IMPORTS), MUMBAI [2008 (232) E.L.T. 147 (Tri. - Mumbai)] was cited in this regard. But the learned Assistant Commissioner is denying the applicability of this decision by saying that the facts and circumstances of this decision are different from their case. In this regard it is submitted that in this case, the first order in original passed by the deputy commissioner order was passed for calling 50% loadings of transaction value. On the other hand, on the very same issue, the second order was passed by the same authority which called for 100% loading on the transaction value. Thus, the issue was the same, the adjudicating authority was the same and the orders were passed differently. In the case of appellant also, the matter had gone under adjudication twice wherein different orders were passed by the same authority. Therefore, the ratio of this decision is equally applicable in their case and the contention of the impugned order is not justified in denying the same. The impugned order should therefore be set aside and the appeal should be allowed.

- The appellant further submit that the impugned order is denying the applicability of decision of VISHNU CHEMICALS PVT. LTD. Versus COMMISSIONER OF C. EX., RAIPUR [2007 (218) E.L.T. 114 (Tri. - Del.)] as cited by them in their reply to show cause notice. It is alleged that the facts and circumstances of this case are different than that of the appellant. In this regard, it is submitted that in this case, it was decided that there cannot be different judgments in respect of same assessee on the same issue by the same authority. In this case, Cenvat Credit of GTA service was allowed to the assessee for one period while it was denied for the other period. In the instant case also, one order is in favour of the appellant while another order is against the appellant. Thus, in the light of above decision, the order in favour of the assessee should be given due respect and as such the refund should be allowed. Thus, the contention of the impugned order that the aforesaid decision is not applicable in the instant case is not sustainable and is liable to be quashed.

- The appellant further submit that the learned Adjudicating Authority has concluded that the payment under protest had already vacated when the impugned order for denying the refund in year 2009 was passed. As such, the refund sought in consequence of OIO dated 11.08.2010 calls for the bar of limitation provided under Section 11B of the Central Excise Act, 1944. In this regard, it is submitted that the protest gets vacated only after the case is decided. In the case of appellant, the amount deposited under protest was the subject matter of two proceedings – one was refund claim filed by them and the other was the show cause notice issued for recovery and appropriation of the service tax deposited under protest. The protest will not get vacated until both the cases are decided. The contention of the impugned order that the protest has got vacated when the refund claim application of the appellant was decided in the year 2009; is not sustainable on the grounds that the same amount was also under adjudication under another proceedings. Until the second proceeding is decided, the protest cannot be treated as vacated. Thus, the impugned order is not tenable and is liable to be set aside.

- The appellant reiterated that the amount of service tax deposited was under protest and the amount deposited under protest is excluded under the limitation prescribed in section 11B of the Central Excise Act, 1944. The relevant para of this section has been reproduced for your ready reference as follows:

“Provided further that the limitation of one year shall not apply where any duty has been paid under protest.”

Therefore, the allegation of the impugned order that the consequential refund filed by the appellant is time barred is not sustainable and is liable to be set aside.

- It is further submitted that in the case of G. S. Radiators Ltd. vs Commissioner of Central Excise, Ludhiana [2005 (179) ELT 0222 (Tri.-Del.)] the hon’ble Tribunal has held that the time limit prescribed under section 11B does not apply on amount deposited under protest. The verdicts of hon’ble Tribunal are produced as under:-

The question of limitation will not apply as provided under Section 11B of the Central Excise Act as the amount paid by the appellants on the direction of the department was being contested by them from the adjudicating stage till they won the appeal before the Tribunal. Therefore, such payment will be considered as payment under protest. Tribunal under its Final Order had given direction to give consequential relief to the appellants which should have been given by the department. But instead of giving them refund, they rejected it on time-bar which is not correct. In view of the above, I find that payment made by the appellants has to be considered as payment under protest and the refund should be allowed to them if otherwise in order.

As such, in the light of above decision, refund claim should be allowed to them and the impugned order should be set aside.

- The appellant further submitted that they had only made a deposit of the amount for which demand was raised under protest and had not deposited the tax, therefore, the said amount was to be refunded to the appellant-assessee. In this regard, reliance is placed on the decision given in the case of M/s Sesa Goa Ltd v/s CCE, Goa [2010-TIOL-1729-CESTAT-MUM] wherein it was held as under:

It is the duty of the Customs Officer while assessing the Bills of Entry to assess in accordance with law – Proper officer failing to take the cognizance of the Apex Court decision while assessing the Bills of Entry can be termed as accidental slip or omission – such errors are to be challenged for filing refund claims – similarly, when there is no duty, any amount deposited under protest is liable to be refunded – Appeals allowed with consequential relief: MUMBAI CESTAT;

Thus, in the light of above decision, the refund should be allowed to appellant and the impugned order should be quashed.

- It is submitted that the learned Adjudicating Authority has sought to reject the refund of the appellant on the ground that they have not established that the incidence of the amount of refund claimed has not been passed on to any other person. In this regard, it is submitted that this was not the subject matter of the show cause notice. The show cause notice which has been decided by this order asked to reject the refund claim only on the two grounds – on the basis of merits and on the basis of limitation. It did not asked the appellant to show cause about the clause of unjust enrichment. Since it was not the part of show cause notice, the allegation of unjust enrichment in the impugned order in original has made the order beyond the show cause notice. The order going beyond the show cause notice is not sustainable and liable to be set aside. This decision has been given in the case of JAY AR ENTERPRISES Versus COMMISSIONER OF CUSTOMS (SEA), CHENNAI [2007 (210) E.L.T. 459 (Tri. -Chennai)]. The verdicts of hon’ble Chennai Tribunal are produced as follows:-

“Order beyond show cause notice not sustainable - DEPB credit - Denial of - Show cause notice not proposed the denial hence, direction for debit of DEPB credit is beyond the scope of show cause notice, hence, not sustainable.”

The analysis of above decision makes it clear that where the order is passed on the grounds other than what are proposed in the show cause notice, it is not legally viable. Similar decision was given in the following case:-

· BHAGWATI SILK MILLS Versus COMMISSIONER OF CENTRAL EXCISE, SURAT [2006 (205) E.L.T. 182 (Tri. - Mumbai)]
· M/s Oswal Paper & Allied Industries Vs CCE, Jalandhar [2010-TIOL-678-CESTAT-DEL]
· Caliber Point Business Solutions Ltd Vs CST, Mumbai [2010-TIOL-554-CESTAT-MUM.]

In the above referred cases, it was held that the order should align with the allegations of the show cause notice. If the order is not passed in accordance with the grounds specified in the show cause notice, it is not tenable in the eyes of the law. In the case of appellant also, the show cause notice proposed to reject the refund claim of the appellant on the merits and on the basis of limitation. There was no allegation to prove the unjust enrichment in the show cause notice. As such, raising the allegation of unability to prove the unjust enrichment in the impugned order makes the order beyond the provisions of show cause notice. Such an order is not tenable in the light of aforesaid decisions. Thus, extending the ratio of above decisions, the impugned order in original should be quashed and the refund should be allowed.

Reasoning of the First Appellate Authority:-

- The Learned Commissioner (Appeals) noted that there were two issues to be decided in this appeal -

1. Whether the subject refund claim is admissible on merit?

2. Whether the refund claim is hit by time limit?

- On merits, it was observed that the Adjudicating Authority had held that the refund claim of Rs. 1, 10, 159/- filed by the appellant on 12.06.2009 and the same was adjudicated by the Adjudicating Authority vide OIO No. 524/2009-R(ST-EXP) dated 31.03.2009, includes the amount of the instant refund claim of Rs. 91, 310/- and the said order was not appealed against, hence the said refund claimed including the instant one attained finality. It was also observed that the Adjudicating Authority did not discuss the merit of the case in view of Order-in-Original No. 731-760/ST/2009-10 dated 11.08.2010 which followed the instant refund claim. Nevertheless the finding of the Adjudicating Authority that the refund claim has already been adjudicated and the appellate remedy to the said adjudication has already been exhausted, therefore the matter of rejection of refund claim attained finality is not the merit of the instant refund claim. Instead the Adjudicating Authority should have discussed the merit of the refund claim in the light of the OIO No. 731-760/ST/2009-10 dated 11.08.2010, before any order passed in compliance of any other notice whatsoever, cannot be termed the vacation of protest clause, under proviso to Section 11AB or Section 11B of the Central Excise Act, 1944. As such the finding of the Adjudicating Authority has no merit therefore set aside.

- As regards the limitation clause of the refund, the Commissioner (Appeals) observed that since the instant refund claim was filed on 10.09.2010, consequent upon OIO No. 731-760/ST/2009-10 dated 11.08.2010 which vacated the protest clause, the refund claim is within the time limit of one year, and therefore refundable to the appellant under proviso to Section 11B of the Central Excise Act, 1944.

- As regards the finding of the Adjudicating Authority with reference to the unjust enrichment clause of the case, it was observed that this point was not raised in the show cause notice, therefore the appellant is right in agitating that by discussing this point in the impugned order, the Adjudicating Authority traveled beyond the scope of the notice and therefore, is ultra vires.

Decision of the First Appellate Authority:-

Impugned order set aside. Appeal allowed.

Conclusion:-

When the service tax was paid under protest and the protest was vacated by an Order-in-Original, then only the action to claim refund of tax so paid under protest will arise. Therefore, the time limit of one year in filing refund of tax will be computed from the date of order and not from the date of deposit of service tax. The learned Commissioner (Appeal) rightly held that the consequential refund filed by the assessee was within the time limit of one year.

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PJ/CASE STUDY/2012-13/04
04 April 2014

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PJ/CASE STUDY/2012-13/04
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