2024 (4) TMI 911 - AT - Service Tax

Seeking refund of accumulated Cenvat credit - input services or not - Judicial Discipline - The department had not accepted the judgement in the case of Paul Merchants and filed a Civil Appeal before the Supreme Court - HELD THAT - The question of judicial discipline was examined by a three member bench of the Supreme Court in UNION OF INDIA VERSUS KAMLAKSHI FINANCE CORPORATION LTD. 1991 (9) TMI 72 - SUPREME COURT . The Assistant Collectors in that case flouted the orders of the Appellate Collector on the ground that the order of the Appellate Collector were not acceptable to the department. The assessee filed a Writ Petition before the Bombay High Court which passed strictures against the Assistant Collectors. Union of India filed an appeal before the Supreme Court which upheld the strictures passed by the Bombay High Court. Evidently, in this case, the Commissioner (Appeals) has refused to follow judicial discipline on the ground that the order of this Tribunal on the ground that it has not been accepted by the department. The very statement that a judicial decision is not acceptable is an objectionable phrase as held by in Kamlakshi Finance and the Commissioner (Appeals) was bound to have followed the order of this Tribunal since it was not stayed, suspended or set aside by a higher court. By displaying gross judicial indiscipline, the Commissioner (Appeals) has caused considerable harassment to the appellant without any benefit to the Revenue. It is to curb this tendency that the Supreme Court had dealt with the issue at length in Kamalakshi Finance. The impugned order is set aside - Appeal allowed.

Summary

Issues:
The issues involved in the judgment are the eligibility of services as 'Business Auxiliary Services', qualification as 'export of services' under Export of Services Rules, 2005, determination of services as 'input services' for refund, and the application of judicial discipline in following tribunal orders.

Eligibility of Services as 'Business Auxiliary Services':
The appellant, registered under service tax for 'Business Auxiliary Services', provided sourcing support to an international organization. The appellant filed refund applications for accumulated Cenvat credit under Cenvat Credit Rules, 2004. The applications were rejected on grounds including the service not being business auxiliary, not qualifying as export of service, and lack of correlation between invoices and foreign exchange. The Commissioner (Appeals) upheld the rejection. The appellant argued that the services rendered were indeed business auxiliary services and qualified as export of services. The Tribunal noted that the services provided were export of services, as in previous cases, and allowed the appeal.

Qualification as 'Export of Services':
The appellant contended that the services provided to the international organization qualified as export of services. The Revenue representative argued otherwise, stating that the services did not meet the criteria under Export of Services Rules, 2005. The Tribunal found that the services rendered did qualify as export of services, as established in previous cases, and granted relief to the appellant.

Determination of Services as 'Input Services' for Refund:
The dispute also involved whether the services for which credit was taken and refund was sought qualified as 'input services'. The Tribunal observed that the appellant had provided services to the international organization and had filed refund claims. It was noted that for a different period, the refund claims were rejected, but in the appellant's own case, refund was allowed following a specific precedent. The Tribunal emphasized the need for judicial discipline in following tribunal orders and set aside the impugned order, granting relief to the appellant.

Application of Judicial Discipline in Following Tribunal Orders:
The Commissioner (Appeals) displayed judicial indiscipline by not following the orders of the Tribunal, citing the non-acceptance of a previous decision by the department. The Tribunal referred to a Supreme Court case emphasizing the importance of revenue officers being bound by decisions of higher appellate authorities. The Tribunal held that the Commissioner (Appeals) should have followed the tribunal order, as it was not stayed, suspended, or set aside by a higher court. By failing to adhere to judicial discipline, the Commissioner (Appeals) caused harassment to the appellant without benefiting the Revenue. The appeal was allowed, and the impugned order was set aside, providing consequential relief to the appellant.