2024 (10) TMI 1547 - AT - Service Tax

Refund of service tax paid under the reverse charge mechanism on the transportation of raw material rock phosphate - entitlement to exemption notification no. 3/2013 S.No.21(e) claimed - appellant had self-assessed service tax and filed returns which have not been modified through any appeal proceedings and appellant directly filed refund claims which can be sanctioned only if the assessments are modified - HELD THAT - The settled legal position is that the refund proceedings are in the nature of execution proceedings and cannot be used to modify the assessment already made. Just as in an execution proceeding the decree cannot be modified, in a refund proceeding, the assessment cannot be modified as held by the Supreme Court in ITC Limited. 2019 (9) TMI 802 - SUPREME COURT Also In BT (India) Pvt. Ltd, 2023 (11) TMI 478 - DELHI HIGH COURT held that ITC Ltd case would apply to service tax refunds also. This case is identical to BT (India) Pvt. Ltd. supra inasmuch as the question is whether refund of service tax paid can be sanctioned or denied so as to modify the self-assessments already made and it has been answered in the negative by the Delhi High Court. The only difference between this case and that of BT (India) Pvt. Ltd. is that the assessee would have been entitled to refund and in this case, the appellant would not be entitled to refund if the refund is processed as per the assessments. But that is immaterial. In view of the judgment of ITC Ltd and BT (India) Pvt. Ltd. supra it is held that since the appellant had not assailed the self-assessments and as per the assessments the appellant is not entitled to any refund, the appellant would not be entitled to refund and it has been correctly rejected. Appeal dismissed.

Issues Involved:

1. Whether the appellant is entitled to a refund of service tax paid under the reverse charge mechanism on the transportation of rock phosphate.
2. Whether rock phosphate qualifies as a chemical fertilizer eligible for exemption under Notification No. 3/2013 [S.No.21(e)].
3. Whether refund proceedings can be used to modify self-assessed service tax returns.

Issue-wise Detailed Analysis:

1. Entitlement to Refund of Service Tax:

The appellant, a manufacturer of single super phosphate (SSP), paid service tax under the reverse charge mechanism on the transportation of rock phosphate, its raw material. The appellant later claimed that it was entitled to an exemption under Notification No. 3/2013 [S.No.21(e)], which exempts transportation of chemical fertilizers from service tax, and thus filed for a refund of the service tax paid. However, the Assistant Commissioner rejected the refund claim, and the Commissioner (Appeals) upheld this decision, leading to the present appeal.

The appellant argued that the service tax was erroneously paid and claimed a refund based on the exemption notification. The appellant relied on previous judgments by the Bombay High Court, which classified rock phosphate as a chemical fertilizer. Conversely, the revenue argued that the appellant had correctly self-assessed and paid the service tax, and since the assessments were not appealed or modified, the refund could not be granted.

2. Classification of Rock Phosphate:

The appellant contended that rock phosphate is a chemical fertilizer, referencing judgments from the Bombay High Court, which supported this classification. However, the revenue countered that rock phosphate is a mineral used as a raw material to manufacture SSP and does not qualify as a chemical fertilizer for exemption purposes. The revenue further argued that the context of the Bombay High Court's judgments was different, relating to the classification under the erstwhile Customs Tariff, and thus not applicable to the current service tax exemption context.

3. Modification of Self-Assessed Returns in Refund Proceedings:

The Tribunal examined the legal position regarding the modification of self-assessed returns in refund proceedings. It was noted that refund proceedings are akin to execution proceedings and cannot be used to alter assessments already made. The Supreme Court in ITC Ltd. v. Commissioner of Central Excise, Kolkata IV, and the Delhi High Court in BT (India) Pvt. Ltd. v. UOI, have established that unless self-assessments are modified through appropriate legal proceedings, refund claims cannot be entertained to alter such assessments.

The Tribunal emphasized that the appellant's self-assessed returns, which included the service tax payment, were not challenged or modified through appeal. Therefore, the refund claim could not be entertained as it would effectively modify the self-assessment, contrary to established legal principles.

Conclusion:

In light of the Supreme Court's judgment in ITC Ltd. and the Delhi High Court's judgment in BT (India) Pvt. Ltd., the Tribunal held that since the appellant did not challenge the self-assessments, and as per the assessments, the appellant is not entitled to any refund. Consequently, the appeal was dismissed, and the impugned order rejecting the refund was upheld. The Tribunal concluded that the appellant's claim for a refund was correctly rejected, as refund proceedings cannot be used to reassess or modify self-assessed service tax liabilities.

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