2015 (12) TMI 214 - AT - Service Tax

Denial of refund claim - Notification No. 11/2002 CE (NT) dated 1.3.2002 - refund of credit only in respect of inputs and not input services - Held that - refund claim was rejected without issue of show-cause notice and there was violation of principles of justice. It was submitted that the question of re-adjudication could not have arisen since there was no show-cause notice in the first place and without issuing a show-cause notice there cannot be any question of re-adjudication at any stage and nor can a fresh show-cause notice be issued. It was submitted that this is an incurable defect. We are unable to agree with this submission. There is no time limit prescribed in the law for issue of show-cause notice to reject a refund claim nor to sanction a refund claim. In the absence of any time limit prescribed under the law, even at this stage, the original adjudicating authority can issue a fresh show-cause notice and consider the refund claim. Accordingly since the principles of natural justice have not been observed, the impugned order as regards the third refund claim is set aside and the matter is remanded to the original adjudicating authority for considering the refund claim afresh in accordance with law. - Decided in favour of assessee.

Summary

Issues:
1. Rejection of refund claims based on Notification No. 11/2002 CE (NT) dated 1.3.2002.
2. Rejection of a refund claim without issuing a show-cause notice.

Analysis:
1. The judgment addresses three refund claims for the period from September 2004 to June 2006. The first two refund claims were rejected solely on the basis that Notification No. 11/2002 CE (NT) dated 1.3.2002 allowed refunds only for inputs and not input services. However, referring to a previous order, it was highlighted that even before 14.03.2006, refunds could be granted irrespective of notifications. The tribunal agreed with this interpretation, stating that the appeals should be allowed as the rejection was solely based on the absence of a notification allowing refunds for input services.

2. Concerning the third refund claim for the period April 2006 to June 2006, it was argued that the rejection without a show-cause notice violated principles of justice. The petitioner claimed that without a show-cause notice, there could be no re-adjudication or issuance of a fresh notice, deeming it an incurable defect. However, the tribunal disagreed, noting that there is no specific time limit in the law for issuing a show-cause notice for refund claims. Therefore, the original adjudicating authority could still issue a fresh notice and consider the refund claim. As natural justice principles were not followed in this case, the tribunal set aside the order on the third refund claim, remanding it to the original authority for reconsideration in compliance with the law.