2022 (3) TMI 1103 - AT - Service Tax

Refund of service tax - Business Auxiliary services - export of service or not - non-production of Foreign inward remittance certificate - HELD THAT - The Commissioner (A) had held that it was only an inadvertent error, which finding has also been accepted by the revenue. Although de-novo order was dutifully paused, but none of the findings, observations and directions contained in the order of the Commissioner (A) has been adhered to or given effect to or followed by, the adjudicating authority. The impugned order cannot be sustained since the same is contrary to the accepted OIA, and also because, there being an order of an appellate authority containing factual findings in the first round which has attained finality, the same is binding on the revenue. The only course therefore available to the revenue is to follow the directions and findings contained in the said OIA and pass a consequential order. Instead, the authorities have proceeded tangentially as though the said findings of the Commissioner (A) are non-est., which is not the correct approach which amounts to judicial impropriety and hence, contrary to the prevalent judicial hierarchical structure. The impugned order cannot be sustained, and is set aside. In view of this, it is held that the appellant s service would qualify as export service, ARVs are heavy vehicles and hence, are not covered under Section 65(9) ibid. and hence the ST paid under RCM was by mistake as claimed by the appellant, which qualifies for refund. The authorities below have also denied the refund holding that the appellant had acted as a middleman/agent, but even that may not stand since, in the first place, they have not denied the receipt in foreign currency; and secondly, there is no independent verification whether the services of appellant falling within the ambit of BAS would qualify as export of service or not. The appeal is allowed - decided in favor of appellant.

Summary

Issues:
1. Rejection of refund claim by authorities.

Analysis:
The case involves a Public Sector Undertaking (PSU) that entered into a contract with a foreign supplier for the supply of Armoured Recovery Vehicles (ARVs). The PSU claimed a refund of service tax paid on coordination expenses related to the contract. The Assistant Commissioner initially rejected the refund claim, leading to an appeal before the Commissioner of Central Excise (Appeals). The Commissioner remanded the matter back to the adjudicating authority for fresh consideration. The Commissioner held that the ARVs were heavy vehicles not covered under the relevant tax provision and that the procedural grounds for rejecting the refund claim were not substantive. Both the PSU and the Department accepted the Commissioner's order. However, the adjudicating authority once again rejected the refund claim, leading to an appeal before the first appellate authority, which confirmed the rejection.

In the first round, the Commissioner (A) had given factual findings supporting the PSU's claim for a refund. The Commissioner (A) noted that the PSU was not liable to pay service tax for the services rendered and that the grounds for rejecting the refund claim were procedural or technical, not substantive. Despite this, in the subsequent de-novo order, the authority once again denied the refund based on the same procedural grounds. The appellate authority found that the impugned order was contrary to the accepted Order-in-Appeal (OIA) and that the findings of the Commissioner (A) were binding on the revenue. The appellate authority set aside the impugned order, holding that the PSU's service qualified as export service, the ARVs were not covered under the relevant tax provision, and the service tax paid was a mistake eligible for a refund.

The authorities also contended that the PSU acted as a middleman/agent, but this argument was refuted due to the lack of denial of receipt in foreign currency and the absence of independent verification regarding the export of services. Ultimately, the impugned order was set aside, and the appeal was allowed with consequential benefits as per law.

In conclusion, the judgment highlights the importance of adhering to factual findings and directions of appellate authorities, ensuring that procedural grounds do not unjustly deny eligible refund claims, and recognizing the applicability of legal precedents in determining tax liabilities and refund eligibility.