2024 (1) TMI 1339 - HC - Service Tax

Rejection of second refund claim for the third time - refund service tax which was paid on purchase of under construction residential property - violation of principles of natural justice - HELD THAT - The respondent, while considering the discrepancies, did not even consider the findings of the CESTAT or the findings arrived at by the appellate authority in two Order-in- Appeals, and again rejected the second refund claim for the third time on the same grounds. It is trite law that the orders passed by the higher forum is binding upon the subordinate authorities. Once the CESTAT has held that the petitioners are entitled to refund and refund could not have been rejected on the ground that service provider might have taken the CENVAT Credit and in such case whether the service provider has followed Rule 6 of the CENVAT Rules, 2004 in respect of the exempted services provided by it. As such, verification has to be done by the jurisdictional officer for non-compliance on part of the service provider, if any, and the refund claim of the petitioners could not have been denied by respondent No.3. After considering the facts and the documentary evidence, first refund claim was allowed by the respondent authority. Therefore, the second refund claim could not have been rejected on the same grounds as the orders passed by the CESTAT as well as appellate authority are binding upon the adjudicating authority being the subordinate authority. The respondent authority has not taken into consideration any of the documents made available by the petitioners coupled with the fact that first refund claim has already been allowed after the CESTAT passed the order by the Assistant Commissioner, CGST Division-VI, Ahmedabad South. The impugned orders are quashed and set aside. The respondents are directed to grant second refund claim passed by the adjudicating authority granting first refund claim along with statutory interest in terms of Section 11B of the Central Excise Act, 1944 as made applicable to the service tax vide Section 83 of the Finance Act, 1994 - Petition allowed.

Issues Involved:

1. Legality of the rejection of the second refund claim for service tax paid on under-construction residential property.
2. Applicability of the Delhi High Court decision in Suresh Kumar Bansal v. Union of India to the present case.
3. Alleged procedural lapses and non-compliance with documentary requirements by the petitioners.
4. Jurisdiction and adherence to previous appellate and tribunal decisions by the adjudicating authority.

Issue-wise Detailed Analysis:

1. Legality of the Rejection of the Second Refund Claim:
The petitioners sought a refund of service tax paid on the purchase of under-construction residential properties. The Assistant Commissioner of Service Tax initially rejected the first refund claims due to lack of bifurcation of preferential location charges and absence of necessary documentation. However, after appeals, the Central Excise & Service Tax Appellate Tribunal (CESTAT) allowed the first refund claims, and the adjudicating authority granted them. Despite this, the second refund claims were rejected on similar grounds, leading to further appeals. The court found that the rejection of the second refund claim was unjustified, as the issues had been previously resolved in favor of the petitioners by higher authorities, including the CESTAT.

2. Applicability of the Delhi High Court Decision:
The respondents argued that the decision in Suresh Kumar Bansal v. Union of India, which held that service tax cannot be charged in the absence of a proper valuation mechanism, was not applicable post-2012 due to legislative amendments. However, the court noted that the CESTAT had already considered and allowed the refund claims on similar grounds, indicating that the principles from the Bansal case were applicable. The court emphasized that the adjudicating authority should have adhered to the CESTAT's decision, which was binding.

3. Alleged Procedural Lapses and Non-compliance:
The respondents contended that the petitioners failed to provide necessary documents, such as the no-objection certificate from the developer and evidence of service tax payment. The court found that the petitioners had submitted relevant documents, including bank statements and declarations from the developer, which were not adequately considered by the adjudicating authority. The court criticized the repeated issuance of show-cause notices on identical grounds as a violation of judicial discipline and principles of natural justice.

4. Jurisdiction and Adherence to Previous Decisions:
The court highlighted the principle that orders from higher forums, such as the CESTAT, are binding on subordinate authorities. The repeated rejection of the second refund claim, despite clear directions from appellate bodies, was deemed a breach of jurisdiction and judicial discipline. The court reiterated that once a matter is settled by a higher authority, it should not be reopened on the same grounds without new evidence or legal basis.

Conclusion:
The court quashed the impugned orders rejecting the second refund claims and directed the respondents to grant the refunds with statutory interest. The decision underscored the importance of adhering to established judicial decisions and criticized the respondent department's actions as an unwarranted challenge to settled matters. The petitions were allowed, emphasizing the necessity of respecting judicial hierarchy and procedural fairness.

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