TMI Blog2023 (3) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... /-. As would be seen, the appellant had made it clear in the communication dated 05.09.2019 that it was in the context of the refund application dated 31.01.2018 and the prayer made was to grant refund in view of the decision rendered by the Tribunal in M/S DELHI DUTY FREE SERVICES PVT. LTD. VERSUS COMMISSIONER CGST DIVISION, DELHI SOUTH COMMISSIONERATE [ 2019 (8) TMI 1489 - CESTAT NEW DELHI] . Thus, the proceeding initiated by the Assistant Commissioner by treating the said communication as a fresh refund application was without jurisdiction and consequently all orders passed thereon are without jurisdiction and 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. What is also important to notice in the present case is that while adjudicating the first show cause notice dated 24.08.2018 that was issued to the appellant when the refund application was filed, the Assistant Commissioner had, in the order dated 06.09.2018, after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal-3, Indira Gandhi International Airport, New Delhi the Airport. Variety of imported and indigenous goods are sold by the appellant to outbound and inbound international 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 sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner by order dated 10.12.2020. The appeal filed by the appellant was rejected by the Commissioner (Appeals) by order dated 23.09.2021. ST/51827/2021 has been filed by the appellant before the Tribunal to assail this order dated 23.09.2021. 4. The aforesaid chart briefly mentions the issues involved in the four appeals, namely Service Tax Appeal No. 51853 of 2020, Service Tax 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal filed by the appellant before the Commissioner (Appeals) was rejected by order dated 23.09.2020. This order has been assailed by the appellant in Service Tax Appeal No. 51853 of 2021. Second Period (ST No. 50902 of 2020) 7. Aggrieved by the order dated 06.09.2018 passed by the Assistant Commissioner sanctioning refund for the 2nd period, the Department filed an appeal on 19.12.2018 before the Commissioner (Appeals) 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 appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istant Commissioner to deny the refund are contrary to judicial discipline. With respect to refund for the 1st period, the Tribunal had ordered for refund to be paid and with respect to refund for 3rd period, the Commissioner (Appeals) had ordered for refund with interest. The assessing officer, therefore, could not have denied the refund by issuing show cause notices on the grounds already settled by Appellate orders. In this connection, reliance 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal that limitation would not be applicable, refund was denied by the show cause notice and the order on this ground; (viii) The refund pursuant to order passed by the Tribunal cannot be denied since it cannot be said to be a case of erroneous refund‟ and it is the duty of the Department to comply with the decision of the Tribunal; (ix) The show cause notices have wrongly construed the letters filed by the appellant for the implementation of the order as refund applications; and (x) The show cause notice dated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. 15. A show cause notice dated 24.08.2018 was issued by the Assistant Commissioner in regard to the refund claimed by the appellant through these three applications for the 1st and 2nd periods proposing to deny partial refund claim for the 1st period solely for the reason that it was barred by limitation under section 11B of the Excise Act. A reply was filed by the appellant, but by an order dated 06.09.2018 passed by the Assistant Commissioner, in view of the decision of the Tribunal in Flemingo, the refund claim for the 2nd period was allowed, but the 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 passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 12,77,92,894/-, the appellant preferred an appeal before the Commissioner (Appeals) contending that any amount collected without authority of law has to be refunded to the appellant and, therefore, the limitation prescribed under section 11B of the Excise Act would not be applicable. 19. The Commissioner (Appeals), by order dated 02.02.2019, decided the appeal. The order of the Assistant Commissioner was set aside and the Appeal was disposed of in terms of the observations made in paragraphs 4 (ii) and (iii), which are reproduced below:- 4 ***** (ii) I find that the appellant have been issued the Show Cause Notice dated 24.08.2018 (here-in-after referred to as SCN ) proposing the denial of partial refund claim. On perusal of the show cause notice, I find that the same has been issued on the basis that the sale at duty free shops by the appellant qualifies as export and accordingly, the period of limitation as exists in respect of export related cases would be applicable. However, this fact has not been examined in the impugned order as 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 not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be applicable, but the Commissioner (Appeals) remanded the matter to the Assistant Commissioner to examine whether or not the supply by the appellant would qualify as export of goods, even after noticing the decision of the Tribunal in Flemingo that had held that it would not qualify as export of goods. 21. The said order dated 02.02.2019 passed by the Commissioner (Appeals) was assailed by the appellant before the Tribunal in Service Tax Appeal No. 51447 of 2019 on the ground that not only the said order travelled beyond the charge contained in the show cause notice but limitation would also not be applicable to refund claims submitted by the appellant for the reason that the amount had been collected without authority of law. The Tribunal, in the decision rendered on 14.08.2019, set aside the order dated 02.05.2019 passed by the Commissioner (Appeals) and allowed the appeal by holding that the appellant would clearly be entitled to refund of the amount of Rs. 12,77,92,894/- that was denied to the appellant by the Assistant Commissioner. The relevant portion of the order passed by the Tribunal is reproduced below: 15. It was imperative for the Commissioner to have co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collected without authority of law. Relevant portion of the order is reproduced below:- ***** When once there is lack of authority to demand service tax from the respondent company, the department lacks authority to levy and collect such amount. Therefore, it would go beyond their purview to collect such amount. When once there is lack of authority to collect such service tax by the appellant, it would not give them the authority to retain the amount paid by the petitioner, which was initially not payable by them. Therefore, mere nomenclature will not be an embargo on the right of the petitioner to demand refund of payment made by them under mistaken notion. 24. Thereafter, the Tribunal observed as follows: 28. Learned Authorized Representative of the Department, however, placed reliance upon the decision of the Madhya Pradesh High Court in Vasu Clothing Pvt. Ltd. The Court held that supply made to duty free shop in the form of services by DIAL would not qualify as export of goods. 29. As noticed above this was not even the allegation in the show cause notice and in fact the show cause notice proceeded on the footing that the Appellant qualified as an export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Service Tax Appeal No. 51447 of 2019. The order dated 26.10.2018 passed by the Tribunal on the rectification of mistake application is as follows: 7. Taxable Territory is a semantic contrivance of Finance Act, 1994 consequent upon the paradigm shift to negative list‟ an imperative in the context of an intangible levy on that which, a metaphorical palimpsest, is sensible only in the recipient till then the tax laws to the country did not even require this crutch, It is, therefore, inappropriate on the part of learned Authorised representative to suggest that the Hon'ble Supreme Court in Aban Lloyd Chiles Offshore Ltd. while resolving a dispute on the geographical jurisdiction for levy of tax on tangible goods, did draw the circle within which taxable territory‟ would lie. For the purpose of Finance Act, 1994, with effect from 1st July, 2012, taxable territory‟ has a connotation and India‟ has a distinct definition; the equating of the two may well suit the applicant-Commissioner but inappropriate citing would not advance that cause. 27. The Department had also placed reliance on the decision of the Supreme Court in Hotel Ashoka vs. Assis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant was selling the goods from the duty free shops owned by it at Bengaluru International Airport before the said goods had crossed the customs frontiers. 30. They again submitted that in the course of import‟ means the transaction ought to have taken place beyond the territories of India and not within the geographical territory of India.‟ We do not agree with the said submission. When any transaction takes place outside the customs frontiers of India, the transaction would be said to have taken place outside India. Though the transaction might take place within India but technically looking to the provisions of Section 2(11) of the Customs Act and Article 286 of the Constitution, the said transaction would be said to have taken place outside India. In other words, it cannot be said that the goods are imported into the territory of India till the goods or the documents of title to the goods are brought into India. Admittedly, in the instant case, the goods had not been brought into the customs frontiers of India before the transaction of sales had been taken and, therefore, in our opinion, the transactions had taken place beyond or outside the custom fronti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 31.01.2018. The relevant portion of the communication dated 05.09.2019 sent by the appellant is reproduced below: Subject: REFUND OF SERVICE TAX PAID ON LICENSE FEES. Ref: REFUND APPLICATIONS DATED 31.01.2018. Dear Sir, Please refer to the captioned refund applications dated 31.01.2018 whereby Delhi Duty Free Services Pvt. Ltd. ( us/we ) sought refund of service tax paid on license fees paid to Delhi International Airport Ltd. The details of the said refund applications are as below: S. No. Period Amount 1 October 2016 to December 2016 Rs. 12,77,92,894/- 2. January 2017 to March 2017 Rs. 14,28,46,179/- 3. April 2017 to June 2017 Rs. 12,84,96,629/- While we were granted refund of Rs. 27,84,25,899/- for the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation contemplated in section 11B of the Excise Act would apply to the present refund claims but also proceeded to examine whether the decision of the Tribunal in Flemingo that held that the duty free shops were not situated in a taxable territory was correct or not and after observing that the Tribunal erred in holding that the duty free shops were situated in a non-taxable area, called upon the appellant to show cause as to why refund claim for Rs. 12,77,92,894/- for the 1st period should not be rejected. The relevant portions of the show cause notice are reproduced below: 23. ***** In view of the above observation of the Hon'ble CESTAT, it appears that if the department takes a view that duty free shop and the bonded warehouse is beyond the Customs frontier of India and is outside India (contrary to the Chapter-IX- Warehousing 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of Rs. 12,77,92,894/- for the 1st period was rejected. 41. In the first instance, the Assistant Commissioner proceeded to examine whether duty free shops were situated within the taxable territory and after referring to the decision of the Madhya Pradesh High Court in Vasu Clothing held as follows: 16.19 In view of the foregoing facts and discussion I find that the duty free shops at the Customs area are situated in taxable territory and liable to service tax. Accordingly, the service tax charged by DIAL from DDF and paid to the government was under proper authority of Law and therefore the provisions of Section 11B of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 is rightly applicable in such cases if any refund arises. Accordingly, I find that impugned refund claim is not admissible. 42. As regards the limitation for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... communication dated 05.09.2019 submitted by the appellant for compliance of the order dated 14.08.2019 passed by the Tribunal as a fresh application filed by the appellant for refund of Rs. 12,77,92,894/-. As would be seen, the appellant had made it clear in the communication dated 05.09.2019 that it was in the context of the refund application dated 31.01.2018 and the prayer made was to grant refund in view of the decision rendered by the Tribunal on 14.08.2019. Thus, the proceeding initiated by the Assistant Commissioner by treating the said communication as a fresh refund application was without jurisdiction and consequently all orders passed thereon are without jurisdiction and liable to be set aside. Likewise, the proceeding initiated by the Assistant Commissioner by treating the letter dated 19.06.2020 submitted by the appellant for implementation of the order dated 26.05.2020 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 wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cided. In regard to the decision rendered by the Tribunal on 14.08.2019, the Assistant Commissioner observed that the Tribunal relied upon various case laws to hold that the services rendered by the appellant were not liable to service tax without giving any finding on this issue. In regard to the decision rendered by the Tribunal in Flemingo on 28.09.2017, the Assistant Commissioner observed that the definition of territory‟ under the Customs Act and the Finance Act was not even an issue before the Tribunal, but yet the Tribunal examined it and so it travelled beyond the scope of the appeal. Not only this, the Assistant Commissioner further observed that the Tribunal was not correct in taking such a view and in fact erred in holding/describing the duty free shops at the departure terminal of the International Airport as being within a non-taxable territory, though, 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... country on a hierarchy of courts. If a subordinate tribunal refuses to carry out directions given to it by a superior tribunal in the exercise of its appellate powers, the result will be chaos in the administration of justice and we have indeed found it very difficult to appreciate the process of reasoning by which the learned Judicial Commissioner while roundly condemning the respondent for refusing to carry out the directions of the superior tribunal, yet held that no manifest injustice resulted from such refusal. It must be remembered that the order of the Tribunal dated April 22, 1954, was not under challenge before the Judicial Commissioner. That order had become final and binding on the parties, and the respondent could not question it in any way. As a matter of fact the Commissioner of Income-tax had made an application for a reference, which application was subsequently withdrawn. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l certain observations of the House of Lords in Broom v. Cassell Co.(1) Therein Lord Hailsham, L. C. observed: The fact is, and I hope it will never be necessary to say so again, that in the hierarchical system of courts which exist in this country, it is necessary for each lower tier, including the Court of Appeal, to accept loyally the decisions of the higher tier. Lord Reid added: It seems to me obvious that the Court of Appeal failed to understand Lord Delvin's speech but whether they did or not, I would have accepted them to know that they had no power to give any such direction and to realise the impossible position in which they were seeking to put those judges in advising or directing them to disregard a decision of this House. Lord Diplock observed at p. 874 of the Reports: It is inevitable in a hierarchical system of courts that there are decisions 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 appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate heirarchy. It cannot be too vehemently emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities; The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not acceptable to the department - in itself an objectionable phrase - and is the subject 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had not passed on the cost of service tax to the customers. The Assistant Commissioner also noticed that DIAL had submitted a letter dated 24.08.2018 declaring that it had not claimed refund of service tax. The finding of the Assistant Commissioner on the issue of limitation was set aside by the Tribunal in the decision rendered on 14.08.2019 holding that limitation would not be applicable in a case where tax was realised without authority of law and so the appellant was entitled to refund. Thus, the show cause notice that was again issued by a different Assistant Commissioner on 05.05.2020 when the appellant filed an application for implementing the said decision of the Tribunal, seeks to not only nullify the decision of the Tribunal but also seeks to re-open the issues that had earlier settled by the Assistant Commissioner. 58. What needs to be emphasized at this stage is that two orders had been passed by 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 favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner (Appeals) also placed reliance upon the decision of the Tribunal in Flemingo, the decision of the Supreme Court in Hotel Ashoka and the decision of Bombay High Court in A-1 Cuisine and ultimately concluded as follows: (xi) In view of above, I observe - (i) that a part of the refund claim has already been sanctioned to the appellant by the Adjudicating authority for the period from 01.02.2017 to 30.06.2017 vide the OIO dated 06.09.2018 whereas the appeal filed by the Revenue against such sanction of Refund claim has been dismissed vide the OIA dated 18.05.2020 and - (ii) that appeal filed by the appellant, against rejection of refund claim for the period 01.10.2016 to 31.01.2017 vide the OIO dated 06.09.2018 as being time barred, has been allowed by the Hon'ble CESTAT (New Delhi) vide the judgment dated 14.08.2019. Hence, on the same reasoning, the refund claim in appeal having similar grounds for claiming the refund 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board of Excise and Customs in connection with the return of deposit made under section 35F of the Excise Act or section 129E of the Customs Act. The Board took a decision that not only the pre-deposit amount should be refunded within three months of the decision of appeal in favour of the assessee but also directed that all Commissioners should ensure implementation of the directions. The Board also took a view that any delay beyond three months will be viewed adversely and appropriate disciplinary proceedings will be initiated against the defaulting officers and the amount may also be recoverable from the concerned officers. 63. It is also a fit case where the matter should be referred to the Delhi High Court under section 10 of the Contempt of Court of Act, 1971 for considering whether contempt proceedings should be initiated against Shri Subhash Chandra the Assistant Commissioner, Division-Vasant Kunj, who passed the order dated 10.12.2020 and 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 Dut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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