2024 (12) TMI 603 - AT - Service Tax

Refund of service tax suffered on the specified services used for the authorized operations of the SEZ - rejection on the ground of time limitation - HELD THAT - The appellant while admitting the delay in filing the refund claims within the normal has pointed to the fact that clause 3(iii)(e) of Notification No. 12/2013-ST, allows the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise to extend the time limit however no decision was rendered to their request for extension. When a discretionary power is conferred on an Authority, the power must be exercised in a reasonable, transparent and rational manner free from whims, vagaries and arbitrariness. It is a part of the Authority s public duty to do so. It goes without saying that the discretion has to be exercised judiciously within the four-corners of the statute. The Authority empowered to use his discretion cannot ignore and remains silent when a request is made. One of the safeguards to ensure that discretion is exercised reasonably and judiciously is to give a reasoned order on the issue for which the power is being exercised. From the admission made by the appellant it is clear that there is some negligence on their part. The question is whether the degree of negligence is so high as to close the door of refund on the assessee- appellant, especially when the law permits that the normal period of filing a refund claim can be extended by the appropriate authority. To take a view that failure to comply with the time limit would result in dismissal of the appeal involving a fairly large sum is to put procedural requirement on a high pedestal and that too in this case without even attempting to examine the remedy available in law. This omission would hinder justice. No business man would knowingly file a belated claim. However long delays are also not in the interest of finalizing the rights and liabilities of both the appellant and revenue, expeditiously and statutory authorities along with the applicants are bound by the timelines as mentioned in the Act or notification under which the refund is being processed. In the instant case the Original Authority is not seen to have examined the appellants request for extension of time as permitted by the notification and to that extent the order is unthinking and arbitrary. The portion of the impugned orders in as far as they relate to rejecting the refund claims on the question of time bar are set aside and remanded to the Ld. Original Authority to examine the appellants request for considering their refund claim in terms of clause 3(iii)(e) of Notification No. 12/2013-ST afresh - Appeal disposed off by way of remand.

Summary

Issues Involved:

1. Eligibility for refund of service tax for services used in SEZ operations.
2. Time-bar for filing refund claims.
3. Procedural lapses and their impact on substantive benefits.
4. Authority's discretion in extending time limits for refund claims.
5. Natural justice and procedural fairness in adjudication.

Detailed Analysis:

1. Eligibility for Refund of Service Tax:

The primary issue in these appeals is the refund of service tax on specified services used for authorized operations of Special Economic Zones (SEZs). The appellant filed refund claims under Notification No. 40/2012-ST, later superseded by Notification No. 12/2013-ST. The adjudicating authority initially rejected these claims on the grounds of time-bar, but the appellant argued that the substantive benefit of the refund should not be denied due to procedural lapses. The appellant cited various precedents to support their contention that procedural infractions should not negate substantive rights.

2. Time-bar for Filing Refund Claims:

The appellant admitted delays in filing refund claims, attributing them to administrative changes and health issues of the staff responsible for tax matters. The adjudicating authority rejected the claims as time-barred, but the appellant argued that the notification allows for an extension of the filing period by the Assistant or Deputy Commissioner of Central Excise. The tribunal noted that the statutory time limits are sacrosanct, but also recognized the provision for extending these limits under certain conditions.

3. Procedural Lapses and Substantive Benefits:

The appellant contended that the delay in filing was a procedural lapse and should not affect their entitlement to the refund. They argued that the notification provides for an extension of time, and the authority should have considered their request for such an extension. The tribunal emphasized that procedural requirements should not overshadow substantive rights, especially when the law permits flexibility.

4. Authority's Discretion in Extending Time Limits:

The tribunal highlighted that when a discretionary power is conferred on an authority, it must be exercised judiciously, transparently, and reasonably. The authority's failure to consider the appellant's request for an extension of time was deemed arbitrary and unthinking. The tribunal cited the Supreme Court's view that discretion must be exercised in a manner free from whims and arbitrariness.

5. Natural Justice and Procedural Fairness:

The tribunal found a breach of natural justice in the original orders, as they were passed without notice or a personal hearing. It stressed the importance of procedural fairness and the need for authorities to provide reasoned orders. The tribunal remanded the matter to the original authority for reconsideration, ensuring that the appellant is given an opportunity to present their case.

Conclusion:

The tribunal set aside the portions of the impugned orders that rejected refund claims on the grounds of time-bar and remanded the matter for fresh consideration. The original authority was directed to examine the appellant's request for an extension of time under Notification No. 12/2013-ST and to follow principles of natural justice in re-adjudicating the claims. The tribunal emphasized the need for a reasoned and transparent exercise of discretion by the authority. The appeals were disposed of with directions for expeditious processing within ninety days.