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TMI Blog2007 (10) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... ement dated 29th August, 1996 the appellant engaged M/s. ICI (India) Ltd. as their consignment, distribution and selling agent. Clause 2.1 of the said agreement defined relation of both in this manner. Duties of that agent was defined by clause 3 of agreement. Such agent in terms of clause 3.2 of the agreement was to use its best endevours to promote and market the products of the appellant. Clause 3.3 required the agent to promote , market and sell the products of the appellant. According to clause 3.2.1 of the agreement, the agent was required to accept orders from the customers for effecting sale of the products. Clause 3.14 required the agent to bear all distribution costs including customers servicing, credit evaluations, selling, advertising , marketing , transportation, transit losses and delivery cost pertaining to the products. As per para 7.2 of Agreement, for discharging the duties under the agreement , the agent was entitled to a commission of 21% of the net selling price of the products . In short, he submitted that the arrangement with the principal and ICI Ltd. was not that of principal and agent but there was a joint venture for sale of products of the former ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ably realized the service tax amounting Rs.64,94,422/- from the Appellant which should be refunded and both the Authorities below were wrong to reject refund application of the Appellant for the above amount made in February, 1999. 2.The Ld. D.R. appearing for the Revenue submitted that the appellants' activity was purely of the nature defined by Section 65 (25) of Finance Act, 1994 and ICI India Ltd. had acted as forwarding agent of the appellant. Therefore, the appellant is governed by the decision of the Tribunal in the case of Medpro Pharma pvt. Ltd. Vs. Commr. of C. Ex., Chennai - 2006 (3) S.T.R. 355 ( Tri.-LB.). He also relied on the decision of Tribunal in the case of Umrao Traders Vs. Commr. of C.E., Jaipur -II - 2007 (6) STT 477 (New Delhi-CESTAT). 3.1Heard both sides and perused the record. 3.2Record reveals that the Appellant filed a refund application on 12.10.99 claiming refund of Rs.64,94,422/- towards service tax paid by them for the period from July 97 to February, 1999 relying on the judgment of Apex Court in the case of Laghu Udyog Bharati Vs. Union of India -1999 (112) ELT 365 (SC) = 2006 (2) STR 276 (SC). On scrutiny of such application, D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (their explosives business has now been transferred to Indian Explosives Ltd.) for sales and marketing services. As a part of the arrangement, ICI has provided a host of services as sales and marketing agents for IES in respect of our Initiating Explosives products. For this purpose, ICI had outsourced and procured C F Agency services by appointing various C F Agents. It is this C F Agents who had provided C F Agency services to ICI in respect of the aforesaid products and they were paid C F Agency commission @ ranging between 2.5% to 5% of the value of goods handled by them. (ii)If at all service Tax is to be paid by the beneficiary of C F Service for the period July, 1997 to August, 1998 as per proposals of the Finance Bill 2000 then Service Tax @ 5% of the fee paid by ICI to C F Agents will need to be paid by us. As against this, we had calculated and paid, albeit mistakenly, service tax for the above period @ 5% of the entire amount of fee paid by us to ICI towards sales and marketing services. Service Tax for the above period ( July '97 to August, 1998) therefore needs to be recomputed. The amount works out to Rs.2,68,133/-. A certificate issued by M/s. Khetan Chau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pex Court in the case of Loghu Udyog Bharti (supra). The authority found that the appellant was registered under law and paid Service Tax from July, 1997 to February, 1999. On examination of the Agreement between the appellant and ICI (I) Ltd. , the Authority found that the agent was responsible for obtaining necessary license, permits and approvals under the relevant laws and required to comply with legal requirements. At page 7 of the order of adjudication, the authority found that the agreement between the parties established that ICI (I) Ltd. acted as clearing and forwarding agent on behalf of the appellant. However, relying on the clause 112 and 113 of the Finance Bill, 2000, the authority opined that the appellant was required to deposit the Service Tax in view of validation clause and also for such decision relied on notification No. 7/99 ST dated 23/8/99. With such a conclusion, the authority rejected the refund claim of the appellant. 3.7Sequel to the decision of the learned A.O., the Ld. Appellate Authority also held that he found no reason to interfere with the findings of the Ld. Adjudicating Authority and concluded that ICI (I) Ltd. acted as a clearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section (3), the following sub-section had been substituted, namely :- "(3) On and from the 16th day of July, 1997, there shall be levied a tax at the rate of five per cent. of the value of taxable services referred to in sub-clauses (g), (h), (i), (j), (k), (l), (m), (ma), (n) and (o) of clause (48) of section 65 and collected in such manner as may be prescribed"; (c) in section 67, after clause (k), the following clause had been inserted, namely :- "(ka) in relation to service provided by goods transport operator to a customer, shall be the gross amount charged by such operator for services in relation to carrying goods by road in a goods carriage and includes the freight charges but does not include any insurance charges;" 117. Validation of certain action taken under Service Tax Rules. - Notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority, sub-clauses (xii) and (xvii) of clause (d) of sub-rule (1) of rule 2 of the Service Tax Rules, 1994 as they stood immediately before the commencement of the Service Tax (Amendment) Rules, 1998 shall be deemed to be valid and to have always been valid as if the said sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be illegally collected under an ineffective or an invalid law, the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively. The most important condition, of course, is that the Legislature must possess the power to impose the tax, for, if it does not, the action must ever remain ineffective and illegal. Granted legislative competence, it is not sufficient to declare merely that the decision of the Court shall not bind for that is tantamount to reversing the decision in exercise of judicial power which the legislature does not possess or exercise. A court's decision must always bind unless the conditions on which it is based are so fundamentally altered that the decision could not have been given in the altered circumstances. Ordinarily, a Court holds a tax to be invalidly imposed because the power to tax is wanting or the statute or the rules or both are invalid or do not sufficiently create the jurisdiction. Validation of a tax so declared illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed and the tax thus made legal. Sometimes this is done by providing fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxing statutes. It is necessary that the legislature should be able to cure defects in statutes. No individual can acquire a vested right from a defect in a statute and seek a windfall from the legislature's mistakes. Validity of legislations retroactively curing defects in taxing statutes is well recognised and courts, except under extraordinary circumstances, would be reluctant to override the legislative judgment as to the need for and the wisdom of the retrospective legislation. In Empire Industries Ltd. v. Union of India [(1985) 3 SCC 314 : 1985 SCC (Tax) 416 : 1985 Supp. 1 SCR 292)], Apex Court observed : "not only because of the paramount Governmental interest in obtaining adequate revenues, but also because taxes are not in the nature of a penalty or a contractual obligation but rather a means of apportioning the costs of Government amongst those who benefit from it". 5.Various circumstances on which refund may arise and the manner how such grant can be made were considered by Hon'ble Supreme Court in case of Mafatlal Industries Ltd. Vs. U.O.I- 1997 (89) ELT 247 (SC). Summary of consideration as appearing in part IV of the judgment in terms of para-99 read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 991 (Amendment) Act are constitutionally valid and have to be followed and given effect to. Section 72 of the Contract Act has no application to such a claim of refund and cannot form a basis for maintaining a suit or a writ petition. All refund claims except those mentioned under Proposition (ii) below have to be and must be filed and adjudicated under the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be. It is necessary to emphasis in this behalf that Act provides a complete mechanism for correcting any errors whether of fact or law and that not only an appeal is provided to a Tribunal - which is not a departmental organ - but to this Court, which is a civil court. (ii). Where, however, a refund is claimed on the ground that?(ii) the provision of the Act under which it was levied is or has been held to be unconstitutional, such a claim, being a claim outside the purview of the enactment, can be made either by way of a suit or by way of a writ petition. This principle is, however, subject to an exception : where a person approaches the High Court or Supreme Court challenging the constitutional validity of a provision but fails, he cannot take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... people. There is no immorality or impropriety involved in such a proposition. The doctrine of unjust enrichment is a just and salutory doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched. (iv). It is not open to any person to make a refund claim on the basis of a decision of a Court or Tribunal rendered in the case of another person. He cannot also claim that the decision of the Court/Tribunal in another person's case has led him to discover the mistake of law under which he has paid the tax nor can he claim that he is entitled to prefer a writ petition or to institute a suit within three years of such alleged discovery of mistake of law. A person, whether a manufacturer or importer, must fight his own battle and must succeed or f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e - shall not however entitle the State to recover the taxes/duties already refunded and in respect whereof no proceedings are pending before any Authority/Tribunal or Court as on this date. All pending matters shall, however, be governed by the law declared herein notwithstanding that the tax or duty has been refunded pending those proceedings, whether under the orders of an Authority, Tribunal or Court or otherwise. (ix). The amendments made and the provisions inserted by the Central Excises and Customs Law (Amendment) Act, 1991 in the Central Excises and Salt Act and Customs Act are constitutionally valid and are unexceptionable. (x). By virtue of sub-section (3) to Section 11B of the Central Excises and Salt Act, as amended by the aforesaid Amendment Act, and by virtue of the provisions contained in sub-section (3) of Section 27 of the Customs Act, 1962, as amended by the said Amendment Act, all claims for refund (excepting those which arise as a result of declaration of unconstitutionality of a provision whereunder the levy was created) have to be preferred and adjudicated only under the provisions of the respective enactment. No suit for refund of duty is maintainable in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of the said agreement as to whether the nature of activity carried out by the ICI (India) Ltd. was clearing and forwarding agent in terms of Section 65 ( 25) read with Section 65 (105) (J) of Finance Act, 1994. Such a controversy was elaborately dealt by Tribunal in its different decisions which were not at all before the learned Commissioner (Appeals) while passing the impugned order. In paras 7 to 10 of the reported decision in the case of Mahavir Generics Vs. CCE, Bangalore - 2004 (170) ELT 78 ( Tri-Del) the Tribunal on examination of various terms of agreement came to conclusion that the appellant in that case had not acted as clearing and forwarding agent. For convenience of reading the same is reproduced below. "7. On going through the terms of the agreement between M/s. Cipla Limited and the appellant we notice the following clauses as relevant : 1. AND WHEREAS the Principal has agreed to appoint the AGENT as its Consignment Agent for the sale of the Product throughout India on the following terms and conditions : - 2. The Principal will supply the product from any of its depots and loan licence (as per Annexure 1) to the Agent on a consignment basis thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nging to Principal as in the present case. The agent's responsibility was only to procure orders and to act for improving the market conditions. It was under these circumstances, the Tribunal took the view that they were rendering the services in the nature of clearing and forwarding agent. 10. In the facts of the present case it is clear that the appellants are neither clearing any goods nor forwarding any goods. Products of the principal are supplied to the appellant on consignment basis and the appellant sells the products to the customers. Such an activity would not come within the service provided to a client by clearing and forwarding agent in relation to clearing and forwarding operation. Merely because the appellant had once got registered as a Clearing and Forwarding agent for the purpose of Service Tax under a misunderstanding of the correct legal position they cannot be compelled to continue such registration if they under law are not liable. In the light of the above, we set aside the order impugned and allow the appeal." 6.2 Larger Bench of the Tribunal in the case of Larsen Toubro Ltd.Vs. Commr. of C.E., Chennai 2006 (3) S.T.R. 321 ( Tri.- LB) held that ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort operators and clearing forwarding agents in pursuance to the decision of the Hon'ble Supreme Court in the case of Laghu Udyog Bharti V. Union of India reported at 1999 (112) E.L.T. 365. During the pendency of the refund claim, the provisions of the law were revalidated retrospectively by Section 117 of Finance Act, 2000. In view of the revalidation Act, the levy of service tax, during the relevant period, is a valid levy. The Commissioner (Appeals) followed the decision of the Tribunal in the case of Hindalco Industries Ltd. and Anr. V. C.C.E. reported in 2003 (58) R.L.T. 578. In view of the above decisions, we find no infirmity in the impugned order, the appeals are dismissed" 6.6It may be appreciated that granting refund by Administrative authority in respect of taxes realized by mistake is nothing impermissible in view of judgment of Hon'ble High Court of Allahabad in the case of Prism Cement Limited Vs. Union of India -2003 (161) E.L.T. 93 (Allahabad) . The Hon'ble Court held that the judgment in Mafat Lal Industries Ltd. V. Union of India , 1997 (89) E.L.T. 247 (S.C.) has not denied administrative justice. The Hon'ble Court in para- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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