Commissioner Of Service Tax vs Reliance Communications Ltd

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI

COURT No. I

Appeal No. ST/270, 271, 272, 273 and 274/11

Commissioner of Service Tax Mumbai Appellant Vs.

Reliance Communications Ltd. Respondent

Appeal No. ST/177, 182/11

Reliance Communications Ltd. Appellant Vs.

Commissioner of Service Tax Mumbai Respondent

(Arising out of Order-in-Original No. 26-31/ST-II/KKS/2010 dated 20.12.2010 passed by Commissioner of Service Tax, Mumbai II)

For approval and signature:

Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

Appearance:

Shri R.K. Das, Dy. Commr (AR) for appellant Shri J.H. Motwani, Advocate for respondent

CORAM:

Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical)

Date of Hearing: 02.09.2015 Date of Decision: 02.09.2015

ORDER NO

Per: M.V. Ravindran

All these appeals are filed by Revenue as well as assessee against the very same Order-in-Review, hence they are being disposed of by a common order.

2. Revenue is aggrieved by the impugned order on the ground that on merits the Reviewing Authority has held in favour of the assessee, while the assessee is aggrieved on the ground that rejection of refund claims have been taken up for disposal and held against the assessee beyond the period of limitation as is prescribed under Section 73 (i) read with Section 84 of the Finance Act, 1994.

3. Heard both sides and perused the records.

4. The issue involved in this case is the assessee while providing telecom services during the period December 2005 to May 2006, sold recharge vouchers to distributors at a discount to the printed MRP indicated on the sale invoice cost on distributors. The assessee discharged the service tax on the pre-paid recharge vouchers by considering the MRP therein as cum-tax price, but as the value realized on sale of Recharge Coupon Vouchers was less than the MRP, they claimed refund of the excess service tax paid. Adjudicating authority passed an order in favour of the assessee. The impugned order is passed by the Commissioner of Service Tax, Mumbai II after reviewing the orders of the adjudicating authority.

5. Learned Counsel would submit that identical issue was decided by this Bench in their own case as reported at 2015-TIOL-1109-CESTAT-MUM and produces a copy of the said order. It is his submission that in that case, Revenue had come in appeal before this Bench and the Bench has held that prior to 19.08.2009, provisions of Section 84(1) read with Section 73(1) requires that show-cause notice for the recovery of refund erroneously sanctioned should be issued within one year from the relevant date. It is his submission that in the cases in hand, Review Order was passed in February 2009, May 2009 and show-cause notice reviewing the said order was passed after one year i.e. beyond the period as has been prescribed in the statute.

6. Learned D.R. while arguing the case of the Revenue, submits that the adjudicating authority as well as the Reviewing Authority has wrongly held that the assessee has discharged excess service tax. It is his submission that both the authorities have not discussed the issue on merits. He would submit that the provisions of Section 84 are very clear which are to be applied in the Revisional Authoritys power to issue show-cause notice and decide the same after reviewing the orders of the adjudicating authority. He would take us through the said provisions of Section and submit that the question of mixing the provisions of Section 73(i) of the Finance Act with Section 84 does not arise at all.

7. After considering the submissions made by both the sides, we find that the preliminary jurisdictional point raised by the learned Counsel would apply in this case. It is seen from the records that the show-cause notice which has been issued by the Reviewing Authority for reviewing the refund orders passed by the adjudicating authority was on 26.08.2010. The said show-cause notice was issued for reviewing the orders-in-original dated 25.02.2009 and 15.05.2009. We find strong force in the contentions raised by the learned Counsel that the provisions of Section 73(1) of the Finance Act, 1994 as is existed during the relevant period, provides for erroneous refund within one year from the relevant date by issuing show cause cum demand notice. In the cases in hand, the show-cause notice issued by the Reviewing Authority is clearly beyond the period of one year. The Reviewing Authority as well as the Department Representatives reliance on the provisions of Section 84 to drive the point the provisions of Section 73(1) will not apply in the case of revision of the adjudicating authoritys order of sanctioning refund. We find that the said proposition of the learned D.R. and the adjudicating authoritys findings are a non-starter. This Bench in the assessees own case as cited herein above wherein one of us i.e. M.V. Ravindran, Member (Judicial) was one of the Member has held as under.

6.1 We find that the grounds for initiating revision proceedings under section 84 were threefold, namely

i) service is provided by the respondent to retail customers. Therefore the value for the purpose of charging service tax should be the value paid by the customers, that is the MRP. The difference between the MRP and the sale price is on account of commission of distributors and other incidental costs such as staff cost, bank interest, building hire charges, transportation cost, promotional charges on the brand, license fee paid to the government etc. and these are part of the assessable value of telephone services provided by the respondent to the customers/subscribers.

ii) as the MRP includes the incidence of service tax payable on the RCVs, the burden of service tax element is passed on to the customers/subscribers. And therefore the refund has resulted in unjust enrichment to the respondent

iii) in terms of sections 73A, the service tax collected from any person should be deposited with the Central government. Therefore the sanctioning authority erred in holding that the respondent have neither charged nor collected the extra amount representing service tax from their distributors.

6.2 The ld AR contended that the erstwhile section 84 must be read with the substituted Section 84 effective from 19.08.2009. We find this argument faulty and to be rejected straightway. The period of dispute is Nov 2005 when the erstwhile Section 84 as reproduced in para 2 above, was in force. And we proceed to discuss the matter in the context of such Section as it stood before 19.08.2009.

6.3 The Commissioner, in the impugned order, did not consider it necessary to go into the merits of the case and refrained from examining the issue of unjust enrichment as well as the aspect of section 73A raised in the show cause notice. The Commissioner strikes at the very root of validity of the show cause notice issued under Section 84 by invoking Section 73(1). We note that Section 84 distinctly requires in clause (1), that the order to be passed by the Commissioner in terms of this Section must be 'subject to the provisions of this Chapter'. In our view, the word Chapter can only mean the chapter of the Act in which Section 84 occurs. All Sections of the Service Tax Law are comprised in Chapter V of the Finance Act 1994. Therefore we see no fault in the reasoning of the counsel that the order passed by the Commissioner is subject to the time limitation prescribed under Section 73 of chapter V of the Finance Act 1994. And since there is no allegation regarding presence of elements of fraud, misrepresentation etc. involving extended time period, the show cause notice should have been issued under section 73 (1) within one year from the relevant date prescribed under section 73(6) (iii), which in this case would be the date on which the refund order was passed by the sanctioning authority.

6.4 The learned AR argued that if such a view is taken it would render clause (5) of section 84 otiose. For the sake of convenience, we reproduce clause 5 below:

"no order under this section shall be passed after the expiry of two years from the date on which the order sought to be revised has been passed".

We find no contradiction between clause (1) and clause (5). The latter clause merely says that the revision proceedings initiated by the Commissioner must be completed by passing an order within two years from the date on which the order sought to be revised has been passed. In this case the order sought to be revised was passed on 9.07.2008 and therefore order of Commissioner is required to be passed before 8.7.2010 which was done. However the requirement of clause (1) that the Order is subject to the provisions of Section 73 has to be met simultaneously. That is, the requirement of Section 73 has to be fulfilled. Section 73 (1) of the Finance Act is the provision in service tax law with regard to, inter alia, recovery of amounts erroneously refunded. The Section specifically lays down the procedure and time period within which Show Cause Notice must be issued for recovery of erroneous refunds. This position has been confirmed by the Larger Bench decision in the case of Best and Crompton Engg. Ltd. vs Commissioner C.EX. Chennai - 2000 (121) ELT 272 (Tri-LB). It was held in this decision that the show cause notice as contemplated under section 11A of the Central Excise Act is required to be issued for recovery of erroneously refunded amounts within the time limit as provided in that Section from the relevant date and not through proceedings under section 35E. Although these decisions were rendered in the context of the Central Excise Act, the ratio will apply in the context of Service Tax law because the provisions of recovery and review under sections 11A and 35E of the Central Excise Act are identical to the provisions under Section 73(1) and erstwhile Section 84 of the Service Tax law. The issue is no more res integra. We therefore agree with the order of the Commissioner.

6.5 It is stated in the appeal of Revenue that such an interpretation would render clause (5) of Section 84 completely nugatory and unworkable. We cannot agree with this apprehension. A harmonious reading of sections 73 and 84 lead to the conclusion that once the order passed in terms of section 84 holds that the refund was erroneously sanctioned, the recovery thereof can be effected only through the mechanism of section 73 (1). Naturally the time limits laid down in section 73 (1) have to be adhered to. Rather we find that if any other interpretation of a combine reading of Section 73 and erstwhile Section 84 is accepted, it would lead to an incongruous situation whereby every show cause notice for recovery of erroneous refund could be issued beyond the time stipulation of one year as long as the proceedings under Section 84 are completed within the specified time limit of two years. It is obviously not the intention of the lawmakers to provide incongruity in the combined reading of these Sections.

7.1 It can be seen from the above reproduced ratio of the judgement that identical issue in respect of the very same assessee, this Bench has taken a view in their favour. Since a view has already been taken in the assessees own case we do not find any reason to deviate from such a view. Accordingly we hold that on jurisdiction itself i.e. to issue of show-cause notice within a period of one year, assessees appeals needs to be allowed and the Revenues appeals needs to be rejected and we do so.

8. Assessees appeals are allowed and the Revenues appeals are rejected.

(Dictated in Court)

(C.J. Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial)

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1 9 Appeal No. ST/177, 182, 270 to 274/11