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2025 (4) TMI 10 - AT - Service Tax100% EOU - Recovery of refunds when the provisions of Section 84 did not exist at the relevant time - denial of balance of the refund on the ground that there was no nexus between the input services and output services nature of output services is not indicated in the invoices FIRCs did not contain reference to export invoices original copies of the FIRCs were not submitted and the services were rendered in India - Extended period of limitation. HELD THAT - Hon ble Delhi High Court while dealing with similarly placed issue regarding the assessment in the case of BT (INDIA) PRIVATE LIMITED VERSUS UNION OF INDIA ANR. 2023 (11) TMI 478 - DELHI HIGH COURT held that assessment requires to be revised by competent authority before taking executionary action. It is opined that the same principle applies to the present case where show cause notices have been issued to recover the refunds sanctioned to the appellants by invoking the provisions of Section 73 without a competent authority determining that the refunds were erroneous. Further on the point of questioning lack of nexus between the input services and the output services it is found that Tribunal in a number of decisions held that nexus cannot be questioned while deciding a refund and the correct course of action would be to decide the eligibility of various input services for credit and thereafter in the refund proceedings decides the correctness of the claim in terms of the provisions of the Rule 5. This Bench in the case of CCE Delhi and Delhi-III Vs M/s Convergys India Services Pvt. Ltd. 2016 (10) TMI 485 - CESTAT CHANDIGARH held that On perusal of the impugned orders we find learned Commissioner (Appeals) examined each one of the input services and recorded his finding about their eligibility. We find in the grounds of appeal the Revenue contended that services like outdoor catering Mandap Keeper interior decoration are not connected to export of services and the link is farfetched. The appeal filed by the Revenue further states that the reliance placed by the Commissioner (Appeals) on the CESTAT final order dated 15-5-2009 is not appropriate as the said order has not reached the finality. We find such reasoning cannot be legally sustainable. Regarding the submissions like non-production of original FIRCs non-mentioning of output service in the invoices and discrepancies in the figures etc. the submissions of the learned Counsel for the respondents that procedural lapses if any should not come in the way to extend the substantial benefit available to the respondents agreed upon. Extended period of limitation - HELD THAT - Revenue has clearly erred in issuing the show cause notices under Section 73 of the Finance Act. It is found that during the impugned period Commissioner of Central Excise has no power to examine the legality or propriety of the orders passed by lower authorities save otherwise than by invoking the provisions of Section 84. In this case no such power has been exercised. Further in contravention of the provisions of Section 84 the show cause notice has been issued beyond the expiry of two years - The show cause notices were issued without reviewing the orders of the lower authority sanctioning the refunds under the provisions of Section 84. Such an act would defeat the very purpose of Section 84 and directly proceeding to recover the refunds granted under Section 73 would defeat the purpose of Section 84. Therefore the impugned show cause notices cannot be sustained. Conclusion - i) The Revenue s invocation of Section 73 without prior revision under Section 84 is legally flawed. ii) SCN issued by the Revenue are unsustainable because they lacked a prior determination of error by a competent authority. iii) The alleged lack of nexus between input and output services is not a valid ground for denying the refund as the eligibility for credit should be determined independently. Appeal dismissed.
ISSUES PRESENTED and CONSIDERED
The Tribunal considered the following core legal issues:
ISSUE-WISE DETAILED ANALYSIS 1. Invocation of Section 73 vs. Section 84 The relevant legal framework involved the Finance Act, 1994, specifically Sections 73 and 84. Section 73 allows for the recovery of erroneously refunded amounts, while Section 84 provided for the revision of orders by the Commissioner. The Tribunal noted that prior to 19.08.2009, Section 84 did not provide for the revision of refund orders after two years. The Tribunal interpreted that the Revenue's attempt to recover the refunds under Section 73 without a prior revision under Section 84 was legally unsustainable. The Tribunal relied on precedents that emphasized the need for a competent authority to first determine that a refund was erroneous before initiating recovery proceedings. 2. Justification for Show Cause Notice The Tribunal examined whether the show cause notices issued by the Revenue were valid. The Tribunal concluded that the notices were issued without a competent authority's determination that the refunds were erroneous, as required by law. The Tribunal referenced the decision in Topcem India, which clarified that refunds granted based on existing legal precedents cannot be deemed erroneous due to subsequent changes in law. The Tribunal found that the Revenue's actions were procedurally flawed and lacked legal backing. 3. Nexus Between Input and Output Services The Tribunal addressed the allegation that the input services did not have a nexus with the output services. The Tribunal referred to the definition of "input service" under Rule 2(l) and noted that the eligibility of input services for credit should be determined separately from the refund process. The Tribunal cited the decision in Convergys India Services Pvt. Ltd., emphasizing that the nexus should be assessed based on whether the absence of such services would adversely impact the quality and efficiency of the output services. The Tribunal found that the Revenue's challenge to the nexus was not substantiated. 4. Procedural Infirmities The Tribunal considered the issue of procedural lapses, such as the non-production of original FIRCs and discrepancies in documentation. The Tribunal agreed with the respondent's argument that procedural lapses should not impede the granting of substantial benefits. The Tribunal cited precedents that supported the view that procedural errors should not outweigh substantive compliance with the law. SIGNIFICANT HOLDINGS The Tribunal held that:
The Tribunal dismissed the Revenue's appeal and upheld the respondent's entitlement to the refund, stating that "the impugned order is sustainable and the appeal is liable to be dismissed." The decision reinforced the principle that procedural compliance should not overshadow substantive rights and entitlements under the law.
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