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TMI Blog2023 (3) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... nal passengers from such duty free shops which operate at the departure and arrival terminals of the Airport. For granting license to the shops in the duty free area, agreements were executed between the appellant and Delhi International Airport Limited DIAL. License fee, airport service charges, marketing fees and utility charges were included in the invoices issued by DIAL and service tax, krishi kalyan cess and swachh bharat cess were paid by the appellant under the provisions of the Finance Act, 1994 the Finance Act. A Division Bench of the Tribunal in Commissioner of Services Tax-VII vs. M/s. Flemingo Duty Free Shop Pvt. Ltd. 2018 (8) G.S.T.L. 181 (Tri.-Mumbai), however, held on 28.09.2017 that the duty free area at the Airport qualifies as a non-taxable territory and, therefore, service tax would not be chargeable on the rent paid by such shops, whether they are in the arrival terminal or in the departure terminal. The Tribunal, therefore, held that the service tax charged on the rent paid for the duty free shops would be without authority of law and refund could be claimed. 2. The appellant, therefore, filed refund applications under section 11B of the Central Excise Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal No. 50902 of 2020, Service Tax 50901 of 2020 and Service Tax Appeal No. 51827 of 2021. 5. The facts giving rise to these four appeals are that the appellant had filed three refund applications, each dated 31.01.2018, for an amount of Rs. 40,62,18,793/- for the 1st and 2nd periods, pursuant to the decision of the Tribunal in Flemingo. A show cause notice dated 24.08.2018 was issued to the appellant proposing to reject the claim for the 1st period on the ground that the claim was barred by limitation. The reply submitted by the appellant was not accepted and the Assistant Commissioner, by order dated 06.09.2018, rejected the refund of Rs. 12,77,92,894/- for the 1st period but sanctioned refund of Rs. 27,84,25,899/- for the 2nd period. The appellant challenged the denial of refund for the 1st period and the department also challenged the grant of refund for the 2nd period. The Commissioner (Appeals) disposed of the appeal filed by the appellant for the 1st period on 02.05.2019 with a direction for re-examination of the matter on certain aspects. However, the said order dated 02.05.2019 passed by the Commissioner (Appeals) to the extent refund was denied was set aside by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals) on the sole ground that the services were provided to the appellant in a taxable territory. This appeal was dismissed by the Commissioner (Appeals) by order dated 18.05.2020. The said order dated 18.05.2020 passed by the Commissioner (Appeals) has been assailed by the Department in Service Tax Appeal No. 50902 of 2020. Third Period (ST No. 50901 of 2020 and ST Appeal No. 51827 of 2021) 8. The appellant filed a refund application on 31.12.2018 for the 3rd period, but a show cause notice dated 01.02.2019 was issued to the appellant proposing to deny the refund on the grounds that the duty free shops were located in a taxable territory; the Tribunal had committed an error in the decision rendered by the Tribunal in Flemingo; and that an appeal had also been preferred by the Department before the Commissioner (Appeals) against the order dated 06.09.2018 granting refund to the appellant for the 2nd period. 9. The reply filed by the appellant to the show cause notice was not accepted, and by an order dated 27.06.2019 the Assistant Commissioner rejected the refund for the 3rd period on the ground that duty free shops were located in taxable territory and for coming to this conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has been placed on the following decisions: (a) Union of India vs. Kamalakshi Finance Corporation 1992 Supp (1) Supreme Court Cases 433; (b) East India Commerical Co. Ltd. vs. Collector of Customs, Calcutta 1983 (13) E.L.T. 1342 (SC); (c) Khandwala Enterprises vs. Union of India 2020 (371) E.L.T. 50 (Del.); and (d) Nav Bharat Impex vs. Union of India 2010 (255) E.L.T. 324 (Del.); (ii) When on the same facts, the Tribunal and Commissioner (Appeals) had held that limitation and principle of unjust enrichment are inapplicable, it was not open to the authority to issue show cause notices on these issues and subsequently deny refund. Collateral proceedings could not have been initiated through issuance of the show cause notices. In this connection, reliance has been placed on the following decisions: (a) BSNL vs. Union of India (2006) 3 Supreme Court Cases 1; (b) Amalgamated Coalfields Ltd. vs. Janapada Sabha Chhindwara 1963 Supp (1) SCR 172; (c) Radhasoami Satsang vs. CIT, Agra (1992) 1 Supreme Court Cases 659; and (d) Honda Siel Power Products Ltd. vs. Union of India 2020 (372) E.L.T. 30 (All); (iii) The Assistant Commissioner grossly erred in issuing addendum da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.08.2020 seeking to review the Appellate order dated 26.05.2020 is without jurisdiction and there is no infirmity in the order dated 26.05.2020 passed by the Commissioner (Appeals) for granting refund for the 2nd period. 12. Shri Mihir Ranjan, learned special counsel appearing for the Department made the following submissions: (i) The impugned orders, each dated 10.12.2020, passed by the Assistant Commissioner rejecting the refund claim for the 1st period and 3rd period do not suffer from any illegality. To claim refund, the appellant relied upon the decision of the Tribunal in Flemingo, but this decision of the Tribunal has been assailed by the Department before the Supreme Court and, therefore, the decision of the Tribunal has not attained finality; (ii) Even otherwise, the legal position has now changed in view of the judgment of the Madhya Pradesh High Court in Vasu Clothing, though this judgment of the Madhya Pradesh High Court has also been assailed by the Vasu Clothing before the Supreme Court; (iii) The decision of the Madhya Pradesh High Court in Vasu Clothing was not examined by the Tribunal in the decision rendered on 14.08.2019 as the Tribunal held that the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refund claim for the 1st period was denied solely for the reason that it was barred by limitation under section 11B of the Excise Act. The Assistant Commissioner, however, decided the issue relating principle of unjust enrichment in favour of the appellant. The observations in connection with the principle of unjust enrichment are as follows: "46. In any case, the Applicant has produced a certificate from cost accountants M/s Amit Singhal & Associates whereby it is certified that the cost of such service tax charged by service providers has not been included in determining the selling price and therefore has not been passed onto the end customers. I have also verified that said data relied by cost accountant on sample basis and find that the Applicant has not passed on the cost of service tax on the input services under consideration, to its customers. Further I am in receipt of a letter dated 24.08.2018 by DIAL declaring that no refund claim of service tax (as received from the applicant) for the period Oct 2016-June 2017 shall be filed by them. ***** Thus, the unjust enrichment provisions are not applicable to the present refund claims." 16. Regarding the quantum, the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to whether or not the sales by the appellant at the duty free shops qualify as export. Thus, the very basis to issue the show cause notice has not been examined in the impugned order. To this extent, the same is a non-speaking order inasmuch as the Adjudicating Authority must have examined the issue on the basis of which the show cause notice has been issued to the appellant. I find that the Chandna Impex vs CCU 2011 (269) ELT 433 (SC), the Hon'ble Supreme Court has held that "Statutory appeal dismissed in limine by non-speaking order by High Court, as submitted High Court should have examined each question formulated with reference to material considered by Tribunal and given its reasons." Thus, it must have been examined as to whether or not the supply by the appellant qualifies as export of goods out of India. Lacking the examination of this aspect, the impugned order suffers infirmity and this aspect needs to be re-examined by the Adjudicating Authority. (iii) I also find that the refund has been granted to the appellant following the judicial discipline applying the ratio of the judgment in CST vs. Flemingo Duty Free Shops Pvt. Ltd. (2018 (8) GSTL 181 Tri-Mum). Though at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtion of the order passed by the Tribunal is reproduced below: "15. It was imperative for the Commissioner to have confined himself to the issue raised in the show cause notice but what transpires from the Order passed by the Commissioner is that the Commissioner instead of examining this limited issue relating to limitation went beyond the show cause notice and in fact went to the extent of observing that it was necessary for the adjudicating authority to have examined whether the supply by the Appellant qualifies "export of goods". As noticed above, the show cause notice did not call upon the Appellant to submit a reply on this issue and in fact proceeded on the footing that the sale of goods by a duty free shop to outbound international passengers was "export of goods" *****" 22. After considering the decision of the Delhi High Court in Alar Infrastructure Pvt. Ltd. vs. Commissioner of Central Excise, Delhi-I 2015 (40) S.T.R. 1066 (Del. HC), the Tribunal observed as follows: "25. The Delhi High Court clearly observed that if the services rendered by the Appellant therein were not liable to the Service Tax at all, the question of processing the refund application of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in fact the show cause notice proceeded on the footing that the Appellant qualified as an exporter of goods. In the earlier paragraphs of this order it has been held that the adjudicating authority or the appellate authority cannot go beyond the allegations contained in the show cause notice. It would, therefore, not be necessary to consider the submission of the learned Authorized Representative of the Department. 30. The impugned order dated 2 May, 2019 is, accordingly, set aside and the Appeal is allowed. The Appellant would be clearly entitled to refund of the amount of Rs. 12,77,92,894/- that was denied to the Appellant by the Assistant Commissioner." (emphasis supplied) 25. At this stage, it also needs to be emphasised that in regard to the refund allowed by the Assistant Commissioner for the 2nd period, the Department had filed an appeal before the Commissioner (Appeals). By an order dated 18.05.2020, the Commissioner (Appeals) dismissed the appeal after placing reliance upon the decision of the Tribunal rendered on 14.08.2019 in regard to the 1st period and observed as follows: "The Hon'ble CESTAT has clearly held that the amount paid by the respondent cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e." 27. The Department had also placed reliance on the decision of the Supreme Court in Hotel Ashoka vs. Assistant Commissioner of Commercial Taxes 2012 (276) E.L.T. 433 (SC), but the Commissioner (Appeals) held that this judgment would support the case of the appellant. 28. The Commissioner (Appeals) relied upon the decision of the Bombay High Court in A-1 Cuisines Pvt. Ltd. vs. Union of India 2019 (22) G.S.T.L. 326 (Bom.), which referred to the decision taken by the Government of India on 31.08.2018 in a Revision relating to Aarish Altaf Tinwala to hold that the transaction effected at duty free shops at the arrival or departure terminals of International Airports in India may have taken place within the geographical territory of India, but for the purposes of levy of customs duty or any other tax, the area of duty free shops shall be deemed to be an area beyond the customs frontiers of India. 29. The Central Government relied upon the judgment of the Supreme Court in Hotel Ashoka and the relevant portion of the decision of the Central Government is as follows: "11. The Central Government however observes that the duty free shops though being physically located in Indian Ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken and, therefore, in our opinion, the transactions had taken place beyond or outside the custom frontiers of India." (emphasis supplied) 31. After referring to the aforesaid decision of the Government of India and the decision of the Supreme Court in Hotel Ashoka, the Bombay High Court, in A-1 Cuisine, held as follows: "11. The Central Government has thus applied the ratio laid down by Hon'ble Supreme Court in Hotel Ashoka (supra) and correctly held that the transactions effected at the duty free shops at the arrival or departure of the International Airports in India located after the passenger clears immigration might have taken place within the geographic territory of India, but for the purposes of levy of Customs Duties or any other taxes, the area of duty free shops shall be deemed to be the area beyond the customs frontiers of India and the transaction would be said to have taken place outside India. 12. ***** In such event, whether it is the sale/purchase/supplies of goods or services, to or from such duty free shop, the same is said to be taken place outside India. Hence, the same would be a "non-taxable supply" under Section 2(78) of CGST/SGST and such duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period January 2017 to June 2017 by your order dated 06.09.2018, refund of Rs. 12,77,92,894/- pertaining to the period October 2016 to December 2016 was rejected on the ground of limitation. Subsequently, the Ld. Commissioner (Appeals) also rejected our appeal and directed the Adjudication Officer to re-examine the matter against which we preferred an appeal before the Hon'ble CESTAT, New Delhi being Appeal No. ST/51447/2019. It may be noted that vide order dated 14.08.2019 in Appeal No. ST/51447/2019, the Hon'ble CESTAT, New Delhi is pleased to allow our appeal and has held that the refund of service tax amounting to Rs. 12,77,92,894/- is payable to us. A copy of the order dated 14.08.2019 is enclosed as Annexure 1 for your reference. Thus, considering the decision of Hon'ble CESTAT, New Delhi, we request you to please grant us the refund of service tax amounting to Rs. 12,77,92,894/- along with interest." (emphasis supplied) 36. Once the Tribunal had held in the decision rendered on 14.08.2019 that the appellant would be entitled to refund of Rs. 12,77,92,894/- that was denied to the appellant by the Assistant Commissioner since the issue of limitation would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions) then the department cannot charge Service Tax on the rent paid by the duty free shops. However, the fact remains that the application of definition of territory under Customs Act and Finance Act, were not an issue in dispute before the Hon'ble Tribunal and Hon'ble Tribunal's observations on this issue appears to be beyond the scope of the appeal. It further appears that the observation of Hon'ble CESTAT is not correct in as much as Section 2(27) of Customs Act 1962 defines India as, India "includes the territorial waters of India. Sub-Section (27) of Section 65B Finance Act, 1994 defines "India" as, ***** ***** 24. ***** The issue of taxable territory in relation to Customs and Central Excise duties was clarified by Hon'ble Supreme Court in the matter of Aban Lyod Chiles Offshore Ltd. Vs. Union of India, 2008(227) ELT 24 (S.C.) ***** Therefore, it is respectfully submitted that the Hon'ble CESTAT has erred in holding/describing the duty free shops at departure module of International Airport as in non taxable territory, which is undoubtedly within the taxable territory of India in view of the provisions of Customs Act, 1962, Finance Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or filing the refund claim, the Assistant Commissioner observed as follows: "17.3 I find that in the instant case the appellant himself filed the claim under Section 11B of the Act and in view of discussion held in forgoing paras, the provision of Section 11B, in whole are applicable for processing of the refund claim including provisions of relevant date provided for filing of refund claim. Further Hon'ble Supreme Court has held in the matter of Mafatlal Vs Union of India that in the case of taxes collected without authority of law or levy has been held unconstitutional by the Courts, the tax payer will have file the civil suit for recovery of such unlawful or unconstitutional of tax. Accordingly, I find that if claim is filed under the provisions of Section 11B of the Central Excise Act, the said Section shall ipso facto be applicable in the processing of the refund claim. The authority could not go beyond the provisions of Section 11B while deciding the claim and therefore I find that the claim has been hit by bar of limitation, accordingly inadmissible on this count also." 43. As regards unjust enrichment, the Assistant Commissioner held that the principle of unjust enri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .05.2020 passed by the Commissioner (Appeals) as a fresh application for refund would be without jurisdiction and all orders passed thereon are liable to be set aside. The Assistant Commissioner, unless the decisions of the Tribunal and the Commissioner (Appeals) had been set aside, had necessarily to comply with the directions issued by the Tribunal and the Commissioner (Appeals) and grant refund to the appellant for the 1st period and 2nd period. 47. Secondly, a perusal of the show cause notices leaves no manner of doubt that the Assistant Commissioner sat in appeal over the decisions rendered by the Tribunal and the Commissioner (Appeals). In regard to the decision rendered on 14.08.2019, the Assistant Commissioner commented that the Tribunal "has cited various case laws and without giving any findings inter alia held that if services rendered by the applicant were not liable to service tax the question of processing of refund claim under section 11B of the Central Excise Act, 1944 would not arise" and ultimately observed that "the present refund claims are to be scrutinized only under section 11B of the Central Excise Act, 1944, and, therefore, the period of limitation mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is undoubtedly within the taxable territory of India. 49. The Commissioner (Appeals) agreed with the appellant that the duty free shops were situated beyond the customs frontier of India and, therefore, the service tax paid by the appellant was refundable, but decided the issue of limitation and the issue of unjust enrichment against the appellant. The Commissioner (Appeals) was bound by the decision of the Tribunal rendered on 14.08.2019 wherein it had been held that the issue of the limitation would not arise in the present matter as tax had been collected without authority. It was for implementation of the order passed by the Tribunal that an application had been filed. Thus, under no circumstances the Commissioner (Appeals) could have taken upon himself the task of deciding the issue of limitation or unjust enrichment. 50. One course open to the Tribunal, at this stage, is to set aside the order dated 10.12.2020 passed by the Assistant Commissioner and the order dated 23.09.2021 passed by the Commissioner (Appeals) for the reasons stated above, but more importantly, the issue that calls for an examination is as to whether the Assistant Commissioner and the Commissioner (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithdrawn. The Judicial Commissioner was not sitting in appeal over the Tribunal and we do not think that in the circumstances of this case it was open to him to say that the order of the Tribunal was wrong and, therefore, there was no injustice in disregarding that order. As we have said earlier, such view is destructive of one of the basic principles of the administration of justice. In fairness to him it must be stated that learned counsel for the respondent did not attempt to support the judgment of the Judicial Commissioner on the ground that no manifest injustice resulted from the refusal of the respondent to carry out the directions of a superior tribunal. He conceded that even if the order of the Tribunal was wrong, a subordinate and inferior tribunal could not disregard it; he readily recognised the sanctity and importance of the basic principle that a subordinate tribunal must carry out the directions of a superior tribunal." (emphasis supplied) 53. This principle was also laid down by Supreme Court in Dharma Chand Jain vs. The State of Bihar AIR 1976 SC 1433 and the observations are: "The State Government being a subordinate authority in the matter of grant of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the Supreme appellate tribunal which do not attract the unanimous approval of all members of the judiciary. When I sat in the Court of Appeal, I sometimes thought the House of Lords was wrong in over ruling me. Even since that time there have been occasions, of which the instant appeal is one, when alone or in company. I have dissented from a decision of the majority of this House. But the judicial system only works if someone is allowed to have the last word and if that last word, once spoken, is loyally accepted." (emphasis supplied) 55. In this connection it will also be appropriate to refer to the decision of the Supreme Court in Kamlakshi Finance. The order passed by the Assistant Collector not only ignored the order of the Collector (Appeals) remanding the matter, but also distinguished the decision of the Tribunal by observing that the decision of the Tribunal had not been agreed to by the Department as an appeal had been filed in the Supreme Court. The assessee filed a writ petition in the Bombay High Court to challenge the said order of the Assistant Collector. The High Court not only quashed the order passed by the Assistant Collector but also directed the Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws. ***** 8. We have dealt with this aspect at some length, because it has been suggested by the learned Additional Solicitor General that the observations made by the High Court, have been harsh on the officers. It is clear that the observations of the High Court, seemingly vehement, and apparently unpalatable to the Revenue, are only intended to curb a tendency in revenue matters which, if allowed to become widespread, could result in considerable harassment to the assesses-public without any benefit to the Revenue. We would like to say that the department should take these observations in the proper spirit. The observations of the High Court should be kept in mind in future and the utmost regard should be paid by the adjudicating authorities and the appellate authorities to the requirements of judicial discipline and the need for giving effect to the orders of the higher appellate authorities which are binding on them." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner (Appeals). The order dated 18.05.2020 is with regard to the claim made for the 2nd period while the order dated 26.05.2020 is with regard to the claim made for the 3rd period. In both these orders the Commissioner (Appeals) decided the issues in favour of the appellant. In the former order dated 18.05.2020, the Commissioner (Appeals) emphasized that the appellant was entitled to refund because of the order dated 14.08.2019 passed by the Tribunal and all the contentions advanced on behalf of the Department had been considered and rejected. In the latter order dated 26.05.2020, the Commissioner (Appeals) noted that he was bound by the order dated 14.08.2019 passed by the Tribunal and also referred to the decision of the Supreme Court in Kamalakshi Finance to observe that he had to maintain judicial discipline. The relevant portion of the order passed by the Commissioner (Appeals) is reproduced below: "(c) Coming to the present appeal of appellant, the Adjudicating Authority has rejected the refund claim relying mainly (I) upon the OIA dated 02.05.2019 and (II) the Revenue appeal mentioned in para no. 4(i)(b)(2)(i) above. Since, both the appeals have now been decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a period continuing with the period, the refund of which has already been allowed by the CESTAT vide the judgment dated 14.08.2019, needs to be allowed following the settled principle of judicial discipline." (emphasis supplied) 60. The order dated 14.08.2019 of the Tribunal, the orders dated 18.05.2020 and 26.05.2020 passed by the Commissioner (Appeals) were before the Assistant Commissioner when the order dated 10.12.2020 was passed by the Assistant Commissioner or the order dated 23.09.2021 was passed by the Commissioner (Appeals), denying the refund to the appellant on the applications filed by the appellant for implementation of the order dated 14.08.2019 passed by the Tribunal and the order dated 26.05.2020 passed by the Commissioner (Appeals). 61. Thus, not only the show cause notices could not have been issued to the appellant in a matter where the appellant had merely sought implementation of the order dated 14.08.2019 passed by the Tribunal and the order dated 26.05.2020 passed by the Commissioner (Appeals), but even otherwise the orders passed by the Assistant Commissioner and the Commissioner (Appeals) on these show cause notices seek to annul to the directions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Shri P.R. Lakra the Commissioner (Appeals-II), Central Tax/Excise, who passed the order on 23.09.2021 for wilful disobedience of the order dated 14.08.2019 passed by the Tribunal in Service Tax Appeal No. 51447 of 2019 (M/s. Delhi Duty Free Services Pvt. Ltd. vs. Commissioner, CGST Division, Delhi South Commissionerate). 64. In view of the aforesaid discussion: (i) Service Tax Appeal No. 51853 of 2021 filed by the appellant deserves to be allowed and is allowed. The impugned order dated 23.09.2021 passed by the Commissioner (Appeals) is set aside; (ii) Service Tax Appeal No. 50902 of 2020 filed by the Department to assail the order dated 18.05.2020 passed by the Commissioner (Appeals) is dismissed; (iii) Service Tax Appeal No. 50901 of 2020 filed by the Department to assail the order dated 26.05.2020 passed by the Commissioner (Appeals) is dismissed; (iv) Service Tax Appeal No. 51827 of 2021 filed by the appellant is allowed and the order dated 23.09.2021 passed by the Commissioner (Appeals) is set aside; (v) The appellant shall be entitled to refund of the amount claimed for the 1st period, 2nd period and 3rd period with applicable rate of interest under section 11BB ..... X X X X Extracts X X X X X X X X Extracts X X X X
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