2025 (6) TMI 926 - AT - Service Tax

Direction to carry out and comply with the order passed by this Tribunal - reference to Rule 41 of the CESTAT (Procedure) Rules 1982 to invoke jurisdiction of this Tribunal so as to give effect to its order. Whether consequential relief granted by the Tribunal would include the entire amount the appropriation of which was held by us to be contrary in law? - HELD THAT - The appropriation of Rs. 299.81 crore and Rs. 122.052 crore was held to be not inconformity to law since reversal of those two amounts happened much prior to issue of show-cause notice and Section 73 sub Section 3 of the Finance Act 1994 as existing them was not permitting issue of show-cause notice when duty or the amount was already paid before issue of show-cause notice except when extended period was invoked - the entire demand of CENVAT Credit of Rs. 683, 31, 98, 658/- that was confirmed by the Commissioner in the impugned order was set aside while holding that appropriation of the amount referred in para 8.4 and 8.5 of the order was held to be not valid only for the reason that it was contrary to Section 73 (3) of the Finance Act 1994. Whether the disputed amount of Rs. 122, 05, 41, 156/- which is stated to be taken as credit towards trading of goods is also eligible for refund since appropriation of the same was held by the Tribunal as improper? - HELD THAT - Neither the show-cause notice nor the Order-in- Original impugned have given any detail of any sales undertaken by the Appellant during the period of show-cause notice and from the record it is noted that Appellant was contractually obligated to provide various telecom services like co-location hosting marketing and sale promotion business and technology consulting and other business support service - there is a a strong believe that concerning eligibility of Appellant to get refund of Rs. 122.05 crores there is a requirement of scrutinisation of documents to find out if in fact the said reversed amount was done in respect of trading of goods or as pointed out in the show-cause notice at para 8.1 that those credits availed by the Appellant were on input services received from different companies which was reversed by the Appellant on persuasion (apparently by the Respondent). Therefore there is a requirement that Respondent-Department may delve into the matter in detail and prepare a Report regarding the credit to the tune of Rs. 122.05 crores taken by the Appellant were taken from input services received and were utilised for the trading of goods and to extend the benefit of consequential relief accordingly in respect of this amount of Rs. 122, 05, 41, 156/-. The understanding of learned Joint Commissioner appreciated who submitted para wise reply to this miscellaneous application and in making a note as to why this Tribunal had concluded that order by the Original Authority appropriating the said amount of Rs. 122, 05, 41, 156/- was not sustainable and also taking note of the fact that no findings of this Tribunal was made in respect of self assessed and suo-moto payments of tax of the amount of Rs. 122, 05, 41, 156/- was not payable. This aspect has to be looked into in determining consequential relief while granting refund so as to avoid multiplicity of litigation but not in the way department intended to do by issuing show-cause notice to deny consequential relief which was also expressly granted by this Tribunal in respect of amount of Rs. 256, 45, 51, 029/- mentioned in the miscellaneous application. Whether the specific relief sought through amendment of the appeal memo in granting refund of Rs. 256, 45, 51, 029/- in cash to the Appellant is permissible under the law? - HELD THAT - When the command of the law is shall be refunded to him in cash irrespective of anything contained in the existing act and whether Appellant had closed its business or not it is entitled to cash refund and since the amount was never utilised when the matter was sub-judiced and nothing from record would reveal receipt of the said amount from any other person to apply the doctrine of unjust enrichment to which effect affidavit of the Director of Appellant has also been filed consequential relief to grant refund of Rs. 256, 45, 51, 029/- that was specifically incorporated in the prayer portion vide this Bench order dated 19.11.2024 has to be paid in cash alone and since more than three months have passed in the mean time Respondent-Department is directed to pay the same with applicable interest forthwith and not later than four weeks of receipt of copy of this order. Whether the issue of show-cause notice dated 13.03.2025 by the Respondent to the Appellant proposing to refuse the relief granted by the Tribunal in its final order was proper? - HELD THAT - First of all such a notice which Respondent-Commissioner states to have been issued in conformity to the principle of natural justice prima facie establishes a defiance attitude to the Tribunal s order since Respondent-Department had recourse to file appeal challenging legality of the said order and also can take administrative decision in the presence of the Assessee- Appellant as to what would be the exact nature of the consequential relief. As noted in the final order of this Tribunal. Secondly without reference to the provision of law how such notice is to be adjudicated by the concerned official unless law and legal procedure are to be applied to deal with such show-cause notice. Thirdly if at all it is to be considered as a notice under Section 73 of the Finance Act 1994 then no refund was made to hold the said as erroneous refund for the purpose of issuing a show-cause notice for its recovery apart from the fact as pointed out by the learned Counsel for the Appellant that Respondent-Department can t disregard an order unless a competent authority or Court grant a stay on the said order - the said show-cause notice dated 13.03.2025 as nullity in the eye of law. Conclusion - Miscellaneous application filed under Rule 41 of the CESTAT (Procedure) Rules 1982 for implementation of Bench s order by way of grant of refund of Rs. 256, 45, 51, 029/- in cash with applicable interest is allowed. Respondent-Commissioner is directed to pay the same forthwith and in no event later than four weeks of receipt of this order. A decision on the eligibility of getting refund of the other amount of Rs. 122, 05, 41, 156/- is to be taken at the Commissioner s end within three months of receipt of this order upon examination of documents record of the Appellant/Applicant. Compliance report be submitted to this Bench on 10.06.2025 through a mention memo. Application disposed off.

Summary

The core legal questions considered by the Tribunal in this matter are as follows:

(i) Whether the consequential relief granted by the Tribunal includes the entire amount whose appropriation was held contrary to law;

(ii) Whether the specific relief sought by the appellant through amendment of the appeal memo, namely refund of Rs. 256,45,51,029/- in cash, is permissible under the applicable legal framework;

(iii) Whether the disputed amount of Rs. 122,05,41,156/-, reversed as credit related to trading of goods, is eligible for refund as consequential relief;

(iv) Whether the issuance of a show-cause notice dated 13.03.2025 by the respondent proposing to reject the refund granted by the Tribunal was proper and legally sustainable.

Regarding the first and third issues concerning the scope of consequential relief and eligibility of the Rs. 122.05 crore amount for refund, the Tribunal examined the provisions of the Finance Act, 1994, the Cenvat Credit Rules, 2004, and the CGST Act, 2017. The Tribunal noted that the original adjudicating authority had appropriated Rs. 299.81 crores and Rs. 122.05 crores towards recovery of alleged wrongly availed Cenvat credit. However, the Tribunal found that these appropriations were not sustainable in law because the amounts had been reversed by the appellant prior to the issuance of the show-cause notice, and Section 73(3) of the Finance Act, 1994 prohibits issuance of such notices where the amount has already been paid or reversed, barring invocation of extended limitation period which was not applicable here.

The Tribunal emphasized that the reversal of these amounts precluded their inclusion in the demand and appropriation proceedings. It specifically reproduced paras 8.4 and 8.5 of its final order dated 24.01.2025, which held that the original authority's actions to appropriate these sums were illegal and unsustainable. The Tribunal thus set aside the entire confirmed demand of Cenvat credit amounting to Rs. 683,31,98,658/-.

On the question of whether the Rs. 122.05 crore reversed amount qualifies for refund as consequential relief, the Tribunal observed that the appellant had not initially sought refund of this amount as part of its consequential relief. The appellant's reversal was stated to be on account of the credit relating to services used for trading goods, but the Tribunal found no detailed findings or evidence in the show-cause notice or impugned order substantiating the revenue's claim that the credit was ineligible due to trading activities. The appellant had submitted sale registers and contended that it did not undertake trading of telephone equipment, but rather provided telecom services.

The Tribunal concluded that the issue required further scrutiny by the revenue to determine whether the reversed credit pertained to eligible input services or was indeed ineligible due to trading. It directed the Respondent-Commissioner to examine the appellant's documents and records and decide on the eligibility of refund of this amount within three months, thereby ensuring that the relief granted is consistent with the facts and law. This approach was aimed at avoiding multiplicity of litigation and ensuring justice.

Regarding the second issue on the permissibility of cash refund of Rs. 256,45,51,029/-, the Tribunal analyzed the provisions of Section 142(6)(a) of the CGST Act, 2017, which governs refund claims for Cenvat credit transitioned to the GST regime. The Respondent-Department agreed to re-credit the amount to the appellant's electronic credit ledger but denied cash refund based on the proviso to Section 142(6)(a) that prohibits refund of any Cenvat credit balance carried forward under the CGST Act.

The appellant contended that it had ceased business operations since 2018 and thus could not utilize the credit in the electronic ledger, necessitating cash refund to repay debts. The appellant relied on precedents, including the Tribunal's decision in Chariot International Pvt. Ltd. and the Supreme Court's ruling in Chandrapur Magnet Wires (P) Ltd., which establish that reversal of credit without utilization equates to non-availment of credit, thereby entitling the taxpayer to cash refund, especially upon business closure.

The Tribunal referred to Section 142(7)(b) of the CGST Act, which mandates that appeals and proceedings relating to output tax or duty liability initiated under the existing law prior to the appointed day shall be disposed of under the existing law, and any admissible amount shall be refunded in cash notwithstanding anything to the contrary in the existing law. The Tribunal held that this provision overrides the proviso to Section 142(6)(a) and entitles the appellant to cash refund of the said amount.

The Tribunal further noted that the amount in question was never utilized and there was no evidence of unjust enrichment. It therefore directed the Respondent-Commissioner to pay the refund amount along with applicable interest within four weeks, emphasizing the binding nature of the Tribunal's earlier order that had expressly granted consequential relief including cash refund.

On the fourth issue concerning the propriety of the show-cause notice dated 13.03.2025, the Tribunal held that the issuance of such notice was improper and amounted to defiance of the Tribunal's order. The notice was vague, lacking reference to any specific legal provisions, and was issued despite the ongoing appeal and the absence of a stay or suspension of the Tribunal's order. The Tribunal cited relevant precedent establishing that a department cannot disregard a judicial order unless stayed by a competent authority.

The Tribunal struck down the show-cause notice as a nullity and an abuse of the judicial process, directing that no adverse action be taken against the appellant pursuant to the notice. This ensured the sanctity and enforceability of the Tribunal's orders and prevented harassment of the appellant through unauthorized administrative action.

In conclusion, the Tribunal's significant holdings are:

"The Tribunal may make such orders or give such directions as may be necessary or expedient to give effect or in relation to its orders or to prevent abuse of its process or to secure the ends of justice." (Rule 41, CESTAT (Procedure) Rules, 1982)

"Section 73(3) of the Finance Act, 1994 does not allow issue of show cause notice when the duty or the amount is already paid before issue of show cause notice except for the circumstances leading to invocation of extended period which were not available in the present case."

"The amount of Rs. 299.81 crores and Rs. 122.05 crores which were reversed prior to show cause notice cannot be appropriated or included in the demand as per law."

"Section 142(7)(b) of the CGST Act mandates that any amount found admissible in appeals relating to output tax or duty liability initiated under existing law shall be refunded in cash notwithstanding anything to the contrary."

"The Respondent-Department is directed to refund Rs. 256,45,51,029/- in cash along with applicable interest within four weeks."

"The show cause notice dated 13.03.2025 issued by the Respondent proposing to reject the refund granted by the Tribunal is declared null and void and struck down as an abuse of process."

These principles affirm the Tribunal's inherent power under Rule 41 to enforce its orders and prevent abuse of process, clarify the limits on appropriation of reversed credits, uphold the entitlement to cash refund under transitional provisions, and protect litigants from arbitrary administrative action post adjudication. The order also mandates a further inquiry by the revenue on the eligibility of refund of Rs. 122.05 crores to ensure comprehensive resolution of the dispute.