2023 (3) TMI 234 - AT - Service Tax

Refund of the service tax krishi kalyan cess and swachh bharat cess - duty free shops located in taxable territory - denial of partial refund claim for the 1st period solely for the reason that it was barred by limitation under section 11B of the Excise Act. Whether pursuant to the letters submitted by the appellant for ensuring compliance of the order dated 14.08.2019 passed by the Tribunal on 14.08.2019 for the 1st period and the order passed by the Commissioner (Appeals) on 26.05.2021 for the 3rd period the Assistant Commissioner could have treated these letters as fresh refund applications so as to confer power upon him to issue show cause notices to the appellant for denying the refund? HELD THAT - The Assistant Commissioner completely fell in error in treating the communication dated 05.09.2019 submitted by the appellant for compliance of the order dated 14.08.2019 passed by the Tribunal as a fresh application filed by the appellant for refund of Rs. 12, 77, 92, 894/-. As would be seen the appellant had made it clear in the communication dated 05.09.2019 that it was in the context of the refund application dated 31.01.2018 and the prayer made was to grant refund in view of the decision rendered by the Tribunal in M/S DELHI DUTY FREE SERVICES PVT. LTD. VERSUS COMMISSIONER CGST DIVISION DELHI SOUTH COMMISSIONERATE 2019 (8) TMI 1489 - CESTAT NEW DELHI . Thus the proceeding initiated by the Assistant Commissioner by treating the said communication as a fresh refund application was without jurisdiction and consequently all orders passed thereon are without jurisdiction and liable to be set aside - The Assistant Commissioner unless the decisions of the Tribunal and the Commissioner (Appeals) had been set aside had necessarily to comply with the directions issued by the Tribunal and the Commissioner (Appeals) and grant refund to the appellant for the 1st period and 2nd period. What is also important to notice in the present case is that while adjudicating the first show cause notice dated 24.08.2018 that was issued to the appellant when the refund application was filed the Assistant Commissioner had in the order dated 06.09.2018 after reminding himself of the observations made by the Supreme Court in Kamalakshi Finance 1991 (9) TMI 72 - SUPREME COURT about maintaining judicial discipline followed the decision of the Tribunal in Flemingo to hold that the appellant would be entitled for refund of service tax as the duty free shops were located beyond the taxable territory and it is only on the ground of limitation that the claim was rejected - The finding of the Assistant Commissioner on the issue of limitation was set aside by the Tribunal in the decision rendered on 14.08.2019 holding that limitation would not be applicable in a case where tax was realised without authority of law and so the appellant was entitled to refund. Thus the show cause notice that was again issued by a different Assistant Commissioner on 05.05.2020 when the appellant filed an application for implementing the said decision of the Tribunal seeks to not only nullify the decision of the Tribunal but also seeks to re-open the issues that had earlier settled by the Assistant Commissioner. Under section 11BB of the Excise Act if the amount is not refunded within three months from the date of the receipt of the application interest has to be paid to the applicant from the date immediately after the expiry of the three months from the date of receipt of such application till the date of refund of such duty. The uncalled for action of the Assistant Commissioner in denying refund to the appellant would also result in payment of an amount towards interest under section 11BB of the Excise Act to the appellant. Appeal allowed.

Summary

Issues Involved:
1. Refund of service tax, krishi kalyan cess, and swachh bharat cess for three periods.
2. Limitation under Section 11B of the Central Excise Act.
3. Principle of unjust enrichment.
4. Jurisdiction and compliance with appellate orders.
5. Contempt proceedings against officers for non-compliance with Tribunal orders.

Issue-wise Detailed Analysis:

1. Refund of Service Tax, Krishi Kalyan Cess, and Swachh Bharat Cess:
The appellant, engaged in the sale of goods from duty-free shops at the Indira Gandhi International Airport, filed for refunds based on the Tribunal's decision in Flemingo Duty Free Shop Pvt. Ltd., which held that duty-free areas qualify as non-taxable territories. Refunds were claimed for three periods: October 2016 to December 2016 (1st period), January 2017 to June 2017 (2nd period), and April 2010 to September 2016 (3rd period). The refund claims were initially processed, with partial refunds allowed and some claims denied based on limitation and unjust enrichment principles.

2. Limitation under Section 11B of the Central Excise Act:
The Assistant Commissioner rejected the refund for the 1st period, citing that it was barred by limitation under Section 11B of the Excise Act. The Tribunal, however, held that the limitation period under Section 11B was inapplicable as the tax was collected without authority of law. This was reaffirmed in the Tribunal's decision on 14.08.2019, which directed the refund of Rs. 12,77,92,894/- for the 1st period. The Assistant Commissioner's subsequent issuance of a show cause notice on the same grounds was deemed incorrect and beyond jurisdiction.

3. Principle of Unjust Enrichment:
The Assistant Commissioner expanded the scope of the show cause notice by introducing the principle of unjust enrichment after the appellant had filed replies. The Tribunal found that the Assistant Commissioner had previously accepted that the appellant had not passed on the tax burden to customers, supported by a cost accountant's certificate and a declaration from DIAL. Thus, the principle of unjust enrichment was not applicable.

4. Jurisdiction and Compliance with Appellate Orders:
The Tribunal emphasized that the Assistant Commissioner and the Commissioner (Appeals) were bound by its decisions and those of higher appellate authorities. The Assistant Commissioner's actions in issuing fresh show cause notices and denying refunds despite clear appellate orders were deemed to be in contempt of judicial discipline. The Tribunal asserted that the Assistant Commissioner and Commissioner (Appeals) overstepped their jurisdiction by attempting to re-adjudicate settled matters.

5. Contempt Proceedings Against Officers:
The Tribunal found the actions of the Assistant Commissioner and Commissioner (Appeals) contemptuous for not complying with its orders. It referred the matter to the Delhi High Court under Section 10 of the Contempt of Court Act, 1971, for considering contempt proceedings against the officers involved. The Tribunal also suggested that the Government consider recovering the interest amount paid to the appellant from the concerned officers due to their non-compliance.

Conclusion:
The Tribunal allowed the appeals filed by the appellant, set aside the orders denying refunds, and directed the refund of the amounts claimed for all three periods with applicable interest under Section 11BB of the Excise Act. The Tribunal dismissed the appeals filed by the Department and referred the matter for potential contempt proceedings against the officers involved.