We are sharing with you an important judgement of the Hon’ble Mumbai CESTAT, in the case of Vodafone (I) Ltd. Vs. Commissioner of Service Tax, Mumbai-I [2014-TIOL-2263-CESTAT-MUM] on following issue:
Whether the Authorities be allowed to cause unnecessary delay in sanctioning of refunds?
Facts & background:
In the instant case, the Stay application filed by the Revenue against the Order-In-Appeal (“OIA”) was dismissed by the Hon’ble CESTAT, Mumbai on July 14, 2014 by observing that the issue had already been decided against the Revenue and the Lower Appellate Authority had merely followed the Tribunal’s Order.
Thereafter, Vodafone (I) Ltd. (“the Applicant”), filed an application under Rule 41 of the CESTAT Procedure Rules, 1982 for implementing the Order of the Hon’ble Tribunal inasmuch as to direct Revenue to sanction rebate/ refund to them.
During the pendency of this application, the appeal filed by the Revenue against the OIA was dismissed on August 21, 2014 and the Hon’ble Tribunal directed the Jurisdictional Asst. Commissioner to dispose of the refund/ rebate claim within a period of one month from the date of receipt of that Order.
When the matter concerning this application came up for hearing on September 23, 2014, the learned Additional Commissioner informed the Bench that the Order was received by the Department only on September 16, 2014 and there was no time for implementation. On the next occasion i.e. on October 27, 2014, the learned Additional Commissioner submitted a report dated October 22, 2014 of the Commissioner of Service Tax, Mumbai – III , mentioning that although the Pune Commissionerate had sanctioned the refund pursuant to the Order dated March 12, 2013 of the Hon’ble Tribunal, the Commissioner of Service Tax-I, Mumbai is of the view that it is not compulsory to follow the view taken by Pune Commissionerate and that the Department’s case is having merit and that stay be granted. Thereafter on October 28, 2014, the learned Additional Commissioner submitted a letter dated October 28, 2014 wherein Shri S.K. Singh, OSD of Central Board of Excise and Customs [“the CBEC or “the Board”] (Judicial Cell) stated that the Board is considering filing a Civil Appeal against the order of the Hon’ble Tribunal dated August 21, 2014.
As the Hon’ble Tribunal was not satisfied with the action taken by the Department, therefore, another report was called, enquiring the steps taken by the Department to implement the Order of the Tribunal.
When the matter was heard recently in the Tribunal, a report was received by the Bench from the Commissioner of Service tax, Mumbai – III enclosing a letter addressed to the Applicant seeking certain documents (challans, invoices & FIRC copies) to scrutinize the refund claim of the Applicant also from unjust enrichment angle. Further Two months’ time was also sought to implement the Order of the Tribunal.
The Applicant took strong objection to this report and submitted that issue of unjust enrichment had already been considered in detail in the OIA and all the relevant documents are available on record and have been considered by the Lower Authorities earlier.
In these circumstances, the Applicant prayed to the Hon’ble Tribunal that disciplinary action against the erring officials be initiated.
The Hon’ble CESTAT, Mumbai after observing that there is no consistency in the view taken by the Departmental officers and moreover after clear direction to the concerned officer to dispose of the refund/ rebate claim within one month, no steps were taken to implement the Order of this tribunal till October 28, 2014 and no explanation is given for that, held that in these circumstances, the conduct of the concerned official is not appreciated but in the interest of justice, the time of 15 days is granted to the learned Commissioner of Service tax, Mumbai – III to dispose of the refund claim failing which the tribunal shall be constrained to initiate contempt of court proceedings against the erring officials.
Further, considering that the claim is having a bearing of interest on the amount of refund, it was further held by the Hon’ble Tribunal that the Authorities have to take expeditious steps to sanction the refund claim keeping in mind that the interest is to be paid from the kitty of the general public.
The Hon’ble Tribunal further ordered that the copy of this order be sent to the Chairman, CBEC, Secretary (Rev), the Ministry of Finance and the Hon’ble Finance Minister for necessary consideration.
Point to Note:
Its uphill task to get refund from the Department and leave question of interest on delay of refund granted. Further, why the Officers do not adhere to the instructions of the CBEC is a big question and is there any accountability/ responsibility for non-adherence of the same.
Recently, the CBEC has issued Instruction F. No. 201/01/2014-CX.6 dated June 26, 2014 (“the Instruction”), for all the Commissioners to follow judicial discipline in the matters relating to refund though it is not followed at the Adjudication level.
The CBEC vide the Instruction, invited attention to the order of the Hon’ble High Court of Gujarat (“the HC”) in the case of E.I. Dupont India Pvt. Ltd. [2013-TIOL-1172-HC-AHM-CX]. In this case, E.I. Dupont had filed an appeal before the HC against rejection of a refund claim on an issue which had earlier been decided by the HC against the Revenue, though in a matter relating to a different assessee. Thus for deciding the refund, a binding precedent judgment existed. However, thebinding precedent was not followed, which led to litigation before the HC to which it took a serious view.
The CBEC noted that on the subject of refund, where the Department has gone in appeal, a Circular No. 695/11/2003-CX dated February 24, 2003 (“the Circular”) already existed in this regard and had the Circular been followed in the instant case, unnecessary litigation as well as adverse observation of the HC could have been avoided.
Therefore, the CBEC has directed the Adjudicating Authorities to peruse the judgment of the HC in the case of E.I. Dupont India Pvt. Ltd. (supra) for complete understanding of the issues involved and directions of the HC to follow judicial discipline. Further, the officers have also been directed to peruse the judgement of the Hon’ble Supreme Court in Union of India Vs. Kamlakshi Finance Corporation Ltd. [2002-TIOL-484-SC-CX-LB] which is an authoritative pronouncement on the issue and which has also been cited by the HC.
Moreover, the CBEC wanted the Commissioners to bring the contents of the Instruction to the notice of all Adjudicating Authorities under their jurisdiction with directions to follow the same scrupulously.