CENVAT Credit Refund Can’t Be Denied In Absence Of Self-Assessed Return Having Been Questioned, Reviewed Or Re-Assessed: Delhi High Court

The Delhi High Court has held that a CENVAT credit refund cannot be denied in the absence of the self-assessed return having been questioned, reviewed or re-assessed.

The bench of Justice Yashwant Varma and Justice Dharmesh Sharma has observed that a self-assessed return also amounts to an “assessment” and unless it is varied or modified in accordance with the procedure prescribed under the relevant statute, it cannot possibly be questioned in refund proceedings.

The petitioner/assessee submitted self-assessed returns before the Service Tax Commissionerate in terms of Section 70. No further action on those returns appears to have been initiated by the respondents either in terms of the powers conferred by Section 72 or Section 73. Section 72 enables the Adjudicating Authority to undertake a “best judgment assessment”, in case an assessee either fails to furnish a return or having submitted a return fails to assess the tax payable in accordance with the provisions of the Act.

The Adjudicating Authority stands empowered by law to require the assessee to produce accounts, documents and evidence. After affording an opportunity of hearing, make an assessment of the value of taxable service to the best of its judgment and determine either the sum payable by the assessee or the amount liable to be refunded.

The department concluded that the services rendered by the petitioner would not fall within the ambit of the expression “export of services” as contemplated under Rule 6A of the Service Tax Rules, 1994.

The department held that with respect to Broadcasting services, even though the ordering company was an entity based out of Mauritius, the customer operation details as provided would indicate beneficiaries of service being present in India. Even the satellite services offered by the petitioner are in respect of channels broadcasted in India.

The department held against the petitioner additionally upon it coming to conclude that in terms of Section 2(105) of the Finance Act, 1994 read with Section 2(16), the services rendered to a Head Office would also imply services being provided to a Branch Office or representative in India. Thus falling outside the net of “export of service” as contemplated under the Finance Act, 1994 and the Service Tax Rules, 1994.

Section 73 empowers an Adjudicating Authority to place the assessee on notice in a case where it is found that service tax has either not been levied or paid or has been short levied, short paid or erroneously refunded. The Proviso to Section 73(1) enables the authority to act against an assessee in case service tax has not been levied or paid or has been short levied, short paid or erroneously refunded by reason of fraud, collusion, wilful misstatement, suppression of facts or contravention of any of the provisions of the Act or the Rules framed thereunder with the intent to evade payment of service tax.

The power under Section 73(1), in terms of the provision, as it stands today, is available to be invoked within 30 months from the relevant date. The expression “relevant date” is defined in Section 73(6). However, at the time when the refund applications were made, the power under Section 73(1) could have been invoked within a period of 18 months. Insofar as the Proviso to Section 73(1) is concerned, it can be invoked within a period of five years from the relevant date.

The petitioner/assessee assailed the order passed by the respondent department in terms of which its applications for refund of unutilized CENVAT credit have come to be negatived. The refund claims were lodged in respect of the quarters pertaining to October 2014 to December 2014, January 2015 to March 2015 and April 2015 to June 2015. These applications were made on the ground of the input services having been utilised by the petitioner in connection with the “export of services”. The services in question are Broadcasting, Business Support, IT Software and Management, and Maintenance or Repair services.

The assessee contended that an assessment as contemplated in taxing statutes would also include a self-assessment.

The court held that unless the self-assessed return, as submitted had been questioned, re-opened or re-assessed and the assertion of the petitioner of the services rendered by it qualifying as an export of service questioned or negatived in accordance with the procedure prescribed under the Act, its claim for refund could not have been negated.

The court noted that in the absence of the self-assessed return having been questioned, reviewed or re-assessed, the claim for refund of CENVAT credit could not have been denied by the respondents. When confronted with the application for refund, all that the respondents could have possibly examined or evaluated was whether the provisions of Rule 5 read along with the various prescriptions contained in the notification dated 18 June 2012 had been complied with. The respondents could not have doubted, questioned or undertaken a merit review of the self-assessed return which had been submitted.

Counsel for Petitioner: Mr. Tarun Gulati, Sr. Advocate along with a team from Khaitan & Co. comprising of Partners Sudipta Bhattacharjee and Onkar Sharma and Harsh Makhija (Principal Associate) and Mr. Arjyadeep Roy (Senior Associate)

Counsel for Respondent: Mr. Ashok Kumar Arya

Case Title: BT (India) Private Limited Versus UOI

Citation: 2023 LiveLaw (Del) 1082

Case No.: W.P.(C) 13968/2021

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