The GTL infrastructure Ltd. (appellant) is a provider of “Business Auxiliary Services” a taxable service. The appellant and Chennai Network Infrastructure Ltd. (CNIL) filed petitions in Bombay High Court and Madras High Court seeking a merger. The merger was sanctioned by the Hon’ble Bombay High Court on 22.07.2011 however the petition before the Hon’ble Madras High Court is still pending.
Based on the merger sanctioned by the Bombay High Court, and a presumption that the appellant was required to discharge CNIL’s liabilities, they filed a consolidated service tax returns. They included CNIL's liability in their return and CNIL however, did not file any returns. The appellant also paid the CNIL's liabilities towards service tax amounting to Rs.79,92,56, 619/- by debit entry in the appellants CENVAT account for the period October 2010 to March 2012. A part of the amount was paid by utilizing CENVAT credit in CNIL's account.
However, since approval from the Hon’ble Madras High Court, was still pending, the appellant CNIL's turnover and liabilities were not required to be included.
CNIL later filed a declaration under Voluntary Compliance Encouragement Scheme (VCES) disclosing their liability of Rs.79,92,56,919/- and discharged it on 22.11.2013. The designated VCES authority issued a Discharge certificate to CNIL. CNIL informed the appellant that all service tax liability has been paid by them and they have no objection in the appellant taking credit of service tax paid on behalf of CNIL.
As a measure of abundant caution, the appellant approached the Hon’ble Bombay High Court in a Writ Petition seeking prior approval from Court for the re-credit of the service tax paid on behalf of CNIL. The Hon’ble Court by order dated 27.01.2014 directed the Commissioner to decide the matter treating the Writ Petition as a representation.
The Commissioner by his order dated 7.3.2014 directed the appellant to approach the proper officer to pursuing a remedy. The appellant has challenged this order dated 7.3.2014 before the Tribunal which dismissed the appeal as not maintainable.
Though it cannot be stated with certainty, the Commissioner apparently resorted to this approach to compel the appellant to seek “remedy” by following the refund procedure. The refund procedure would have introduced the issue of limitation as section 11B requires any refund claim to be filed within one year. Apparently in this case, it was beyond one year. It seems this was the reason as later, the authorities did raise this objection before the Tribunal!
The appellant apparently understanding the situation, did follow the Commissioner’s advice but challenged the same before the Tribunal. As the Tribunal dismissed the appeal against the Commissioner’s order as not maintainable, the appellant approached the Hon’ble Bombay High Court. The Hon’ble Court disagreed with the Tribunal and held that the Hon’ble Tribunal is competent to decide the appeal and should do so in accordance with law.
The Appellant’s Counsel among other issues submitted the following points:
- the Commissioner was competent to decide the issue as per Section 12E of the Central Excise Acts, 1944 read with Section 83 of the Finance Act, 1994
- He was duty bound by the directions of the Honble High Court in its order dated 27.01.2014.
- The amount in dispute has already been paid by CNIL admitting it to be its service tax liability.
- The payment was confirmed by the competent authority under VCES scheme and a discharge certificate was issued.
- The appellant is entitled to take CENVAT credit of the amount of service tax paid on behalf of CNIL by the appellant as CNIL
- The appellant had filed returns including CNIL turnover service tax payment has been accepted by the Revenue.
- As the said amount is not to be paid by the appellant and CNIL has paid the same the appellant is entitled to re-credit.
- Disallowance of the credit would amount to recovering the tax amount twice.
The main argument from the revenue was that the appellant representation was beyond the one year time limit prescribed under Section 11B. Hence their claim is not maintainable. In support various case laws i.e. Vighnahar SSK Ltd., BDH Industries Ltd. and Automotive Metal Stampings Pvt. Ltd.
The Hon'ble Tribunal allowed the appeal stating :
“it is an admitted fact that the amount paid by the appellant is not required to be paid by the appellant as service tax and they have discharged the service tax liability of CNIL during the impugned period. We further note that the appellant has informed vide their letters dated 05.01.2012 and 09.04.2013 about the fact of paying service tax on behalf of CNIL and are filing service tax returns including the turn over of CNIL in their turn over and paying service tax. Therefore, the amount paid by the appellant in excess of their service tax liability ceased to be in nature of service tax paid by them and is merely an excess deposit paid by the appellant. Therefore, such excess deposit paid by the appellant is refundable to the appellant and the provisions of Section 11B of the Central Excise Act, 1944 are not applicable to the facts of this case as held by the Honble Delhi High Court in the case of Hind Agro Industries Ltd. (supra) wherein the Honble High Court held that
“16. There can be no manner of doubt that the custom authorities in the instant case were bound to refund the cess erroneously paid by the Appellants for the period from 15th January, 2001 till 19th February, 2002 under a mistake of law. They had paid the cess when in fact no such cess was payable. There is no question of processing a claim of refund of such amount in terms of the Customs Act at all because the payment made mistakenly was not under that Act. In the circumstances, the period of limitation under Section 27 of the Act would not apply, as explained in Salonah Tea Company Limited. The applications for refund having been made well within the period of three years after discovery of mistake by the Appellants, are not barred by limitation. Question (a) in para 7 above is accordingly answered in favour of the Appellants. Consequently, the need to answer question (b) does not arise.”
……The applications for refund having been made well within the period of three years after discovery of mistake by the Appellants, are not barred by limitation. Question (a) in para 7 above is accordingly answered in favour of the Appellants. Consequently, the need to answer question (b) does not arise.”