2023 (11) TMI 306 - AT - Service Tax

Rejection of refund claim - scope of SCN - SCN proposed for rejection of the refund claim in terms of Rule 9(c) of the Place of Provision of Services Rules, 2012, whereas the learned Pr. ADG has rejected the refund benefit by applying Rule 4 of the said Rules - HELD THAT - The show-cause notice dated 20.07.2015 had proposed for denial of the refund benefit, holding that the appellants are an intermediary and as such, their case falls under Rule 9(c) ibid and as such, the services provided by them do not fall under the category of Export of Service for the purpose of grant of the refund benefit. The original authority while adjudicating the show-cause notice dated 20.07.2015 had dropped the proposals made therein and had considered that the services provided by the appellant qualify as Export of Service for the purpose of grant of benefit of the refund provided under Rule 5 ibid read with Notification issued thereunder. However, on appeal filed against the said original order by the Revenue, the learned Pr. ADG has taken entirely a different view and accepted the appeal filed by the Revenue holding that the appellant should not be entitled for refund in terms of Rule 4 ibid. Hence, it is evident that the learned Pr. ADG has gone beyond the scope of show-cause notice. It is settled law that show-cause notice is the foundation on which the Department must build up its case and the Department cannot urge new grounds/points which were never raised in the show-cause notice. It is also settled by the Hon'ble Supreme Court that Review proceedings cannot go beyond the grounds taken in the show-cause notice, as held in the cases of COMMISSIONER OF CENTRAL EXCISE, NAGPUR VERSUS M/S BALLARPUR INDUSTRIES LTD 2007 (8) TMI 10 - SUPREME COURT , CCE VERSUS SHITAL INTERNATIONAL 2010 (10) TMI 19 - SUPREME COURT and THE COMMISSIONER OF CENTRAL EXCISE, BHUBANESWAR-I VERSUS M/S. CHAMPDANY INDUSTRIES LIMITED 2009 (9) TMI 7 - SUPREME COURT that the show-cause notice is the foundation in the matter of levy and recovery of duty, penalty and interest. Thus, Revenue cannot take a new ground at the appellate stage which was not canvassed in the show-cause notice issued by the Department. In the circumstances of the present case, since the learned Commissioner (Appeals) has traveled beyond the scope of the show-cause notice and applied entirely the different rule for rejection of refund benefit in favour of the appellant, the impugned order cannot sustain for judicial scrutiny. Appeal allowed.

Summary

Issues:
The issues involved in the judgment are the rejection of a refund claim under Rule 5 of the CENVAT Credit Rules, 2004, the application of Rule 4 of the Place of Provision of Services Rules, 2012, and the scope of the show-cause notice in the context of refund benefits.

Rejection of Refund Claim under Rule 5 of CENVAT Credit Rules, 2004:
The appellant, engaged in taxable services, filed a refund application claiming Rs. 10,58,10,484 under Rule 5 of the CENVAT Credit Rules, 2004. The Dy. Commissioner of Service Tax sanctioned Rs. 8,51,67,603 but rejected Rs. 2,06,42,881. The Review Order directed an appeal to the Commissioner (Appeals). The Principal Additional Director General, CGPM, WRU, Mumbai, disposed of the case by rejecting the original order and allowing the refund of Rs. 8,51,67,603. The appellant appealed to the Tribunal, challenging the impugned order dated 29.06.2018.

Application of Rule 4 of the Place of Provision of Services Rules, 2012:
The Advocate for the appellant argued that the show-cause notice proposed rejection under Rule 9(c) but the Pr. ADG rejected the refund claim under Rule 4. The Advocate contended that the Pr. ADG went beyond the scope of the show-cause notice. The Revenue's Advocate reiterated the findings in the impugned order.

Scope of Show-Cause Notice in Refund Benefit Context:
The show-cause notice proposed denial of refund benefit under Rule 9(c) for being an intermediary. The original authority found the services qualified as 'Export of Service' for refund benefits. However, the Pr. ADG accepted the Revenue's appeal under Rule 4, deviating from the show-cause notice. The Tribunal held that the Pr. ADG exceeded the show-cause notice scope, citing legal precedents that new grounds cannot be raised beyond the notice.

Judgment:
The Tribunal found that the impugned order rejecting the refund benefit was not meritorious. It was noted that the Department had accepted a similar legal point in a previous order, preventing them from pursuing a contrary decision. The Tribunal allowed the appeal in favor of the appellant, setting aside the impugned order and granting consequential relief as per law.