2024 (5) TMI 1056 - AT - Central Excise

Recovery of the refund of service tax paid - vice of judicial discipline - services rendered to Electro Motive Diesel, Inc (EMD) - export of services or not - Whether the refund granted to the appellant pursuant to the Tribunal's order can be challenged by way of a show cause notice u/s 11A of the Central Excise Act. - HELD THAT - There is no doubt that the issue has been considered in the earlier decisions passed in the case of the appellant themselves, where the Tribunal in NATIONAL ENGG. INDUSTRIES LTD. VERSUS COMMR. OF C. EX., JAIPUR 2007 (12) TMI 170 - CESTAT, NEW DELHI dealt with the similar issue while allowing the appeal observed ' In the present case, it is revealed from contract that the appellant would be paid USD equipment (sic) (equivalent) to non-convertible Indian Rupee at the Rate of Exchange prevailing on the date of supply order. It is noted that the equivalent amount of foreign exchange payable to the appellant was not released to the Indian Railways, and therefore, the appellant complied with the provision of Rule 3(1)(b) of the Rules.'. Similarly, in the final order in the case of the appellant in NATIONAL ENGINEERING INDUSTRIES LTD. VERSUS COMMR. OF C. EX., JAIPUR 2011 (9) TMI 759 - CESTAT, NEW DELHI , the issue decided in favour of the appellant was whether the service provider appellant in India getting rupee value equivalent to commission amount of 5% US shall be liable to service tax on the allegation of nonfulfilment of condition of Rule 3(1)(3) of Export Service Rules, 2005. Admittedly, neither the final order nor the consequential order of refund was challenged by the Revenue and had thereby attained finality. If the Revenue was agreed by the grant of the refund amount, the proper remedy was to approach the proper forum by way of appeal and not by issuing the show cause notice as they have done in the present case. May be, the matter was subjudiced before the Supreme Court, however, there was no stay of the impugned order and, therefore, the Revenue was bound to implement the order of the Tribunal as confirmed by the High Court of Rajasthan. The authorities below have seriously erred in upholding the recovery of the refunded amount from the appellant. Once the issue has been decided by the Tribunal that the appellant is entitle to the refund, the authorities below have no jurisdiction to order for recovery of the said refunded amount unless the order of the Tribunal granting refund is stayed or set aside by a higher forum, which is not in the present case. Infact the lower authorities further exceeded the brief by commenting critics on the decision rendered by the Tribunal which is much superior in hierarchy. The impugned order is, therefore, set aside. Appeal allowed.

Summary

Issues Involved:
1. Whether the refund granted to the appellant pursuant to the order of the Tribunal can be challenged by way of a show cause notice u/s 11A of the Central Excise Act for recovering the amount refunded.
2. Whether the services provided by the appellant qualify as export of services under Rule 3(2) of the Export of Services Rules, 2005.

Summary:

Issue 1: Challenge to Refund via Show Cause Notice u/s 11A
The Tribunal examined whether the refund granted to the appellant could be challenged by way of a show cause notice u/s 11A of the Central Excise Act. The appellant argued that the issue was no longer res integra, citing several decisions in their favor, including the Tribunal's final order dated 22.05.2017, which had attained finality as no appeal was preferred by the Revenue. The Tribunal noted that the Revenue did not challenge the final order nor the consequential refund order, thus these orders attained finality. It was emphasized that the proper remedy for the Revenue was to appeal to a higher forum rather than issuing a show cause notice, especially when there was no stay on the Tribunal's order. The Tribunal cited various judicial pronouncements underscoring the binding nature of higher judicial orders and the necessity of judicial discipline. The Tribunal concluded that the authorities below erred in passing orders for recovery of the refunded amount, which was beyond their jurisdiction.

Issue 2: Qualification as Export of Services
The Tribunal also addressed whether the services provided by the appellant qualified as export of services under Rule 3(2) of the Export of Services Rules, 2005. The appellant had filed a refund claim treating the services rendered to Electro Motive Diesel, Inc. (EMD) as export of services. The Revenue argued that the commission received by the appellant was in non-convertible Indian Rupees, thus not fulfilling the conditions stipulated in Rule 3(2). However, the Tribunal had previously decided in favor of the appellant, noting that the arrangement effectively conserved foreign exchange in India, fulfilling the object of export of service. The Tribunal reiterated that the decision of the Rajasthan High Court in favor of the appellant was binding, and the mere pendency of an SLP before the Supreme Court did not justify ignoring the binding nature of the Tribunal's order.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal and emphasizing the necessity of judicial discipline and adherence to binding judicial orders. The authorities below were found to have acted beyond their jurisdiction in ordering the recovery of the refunded amount.