Customs, Excise and Gold Tribunal - Mumbai
The Commissioner Of Service Tax vs Reliance Communication Ltd. on 15 May, 2008
ORDER M.V. Ravindran, Member (J)
1. This appeal is filed by the Revenue against the Order-in-Appeal No. AT(181)Bel/2007 dated 29.3.2007.
2. The relevant facts that arise for consideration are that the respondents were engaged in providing services under the category Telephone Services, Online Information & Database Access & Retrieval Services, Leased Circuit Service etc. They were registered as a Service Tax assessee and were paying service tax on the taxable value of services provided by them. The respondents filed the refund claim on 23.9.2005 on the ground that they had paid the service tax on Maximum Retail Price (MRP) of the Recharge Coupon Vouchers (RCVs) for their prepaid services but the recharge vouchers had actually been sold to the distributors at a discounted price from the MRP and some recharge vouchers had also been distributed free of cost to distributors/operators. The claim was filed on the ground that the money value of the discount given on the recharge vouchers and that distributed free had not been received by the respondent and hence, service tax is not payable on these as per Explanation (2) of Section 67 of the Finance Act, 1994 and Rule 6 of Service Tax Rules, 1994. The said refund claim was rejected on the ground that the claim was partially time barred under the provisions of Section 11B and also on the ground that the invoices submitted in support of the claim were of Reliance Communications Infrastructure Ltd. and not of the respondents i.e. Reliance Communications Ltd. (previously Reliance Infocomm Ltd.) and the respondents had not issued any invoices as service provider. It was held that the respondents did not submit any document, evidencing "sale" of the vouchers and finally the documents furnished alongwith the claim did not indicate the service tax separately. On an appeal against such rejection of the refund claim, the learned Commissioner (Appeals) held in favour of the respondents. To arrive at such a conclusion, the Commissioner (Appeals) has held that the Reliance Communications Infrastructure Ltd. (RCIL) is an agent and were marketing services provided by Reliance Communications Ltd. (RCL). Hence, the invoices issued by RCIL were on behalf of the RCL. He also held that the invoices annexed to the appeal show the name of respondent in one corner and name and address of RCIL in the other corner, and it also bears service tax registration number of service provider M/s RCL. It was held by the Commissioner (Appeals) that though the amount of service tax payable is not separately indicated in the aforesaid invoices, on scrutiny of the invoices it is seen that the indication of separately mention the value of the services and service tax come into effect from 10.9.2004.
3. After coming to such a conclusion, the learned Commissioner (Appeals) has set aside the impugned order-in-original and allowed the appeal filed by the RCL.
4. The learned Jt. CDR arguing on behalf of the Revenue submits that the entire order is incorrect. The first and foremost submission is that the refund claim, which was submitted by the respondents on 23.9.05 was returned back by the authorities for the reason that the said refund claim was incomplete. He submits that returning of the claim as incomplete it is to be considered that the said refund claim is freshly submitted by the respondents. He submits that such refund claim was resubmitted by the respondents on 6.3.2006. It is his submission that the refund claim, if any, can be entertained only after 6.3.2006. As regards the refund claim after 6.3.2006, it is his submission that the documents provided by the RCL are totally incomplete. He submits that the claim of the respondent that they had paid Rs. 125 crores on PCO service appears to be incorrect and the re-working of the amount of refund claim, if any, based upon the Annual account, as submitted by the RCL and RCIL is totally different. It is his submission that non-issuance of invoices in accordance with Rule 4A by the RCL in itself is enough for the Revenue to hold that the respondent has not issued invoices. It is his submission that under the agreement dated 1.10.2004, RCL and RCIL were acting by letter and spirit, as principals and not as a principal and agent. He assails that part of the agreement to canvas that the arrangement between RCL and RCIL is only on sale between principal to principal. He submits that the unjust enrichment clause is also not satisfied inasmuch as that the financial records of both i.e. RCL and RCIL did not indicate that they have not been expensed out. It is his submission that whatever amount has been paid in excess was already recovered by passing on the incidence of duty to other persons. It was further submitted that the refund claim, which was returned by the Revenue can be taken on record only when all relevant documents are available. For this submission, he relies upon the supplementary instructions No. 2.4 of Chapter 9 of CBEC Supplementary Instructions Manual. He further submits that the said supplementary instructions has been upheld by the Hon'ble High Court of Delhi in the case of Faridabad Iron & Steel Traders v. Union of India as reported at. It is his submission that the such instructions are not in consist with the provisions of Section 11B(1) because the said sub-section requires the refund application to be filed "in such manner as may be prescribed." It is the learned Jt. CDR's submission that the said refund application appearing under provisions of Section 11B has to be read with other provisions. He submits that all these indicate that the application is to be complete when the refund is claimed, it was submitted that in this case, it was not so. Since, the entire application was returned and can be considered as re-submitted only on 6.3.06, he submits that refund claim as filed by the respondent is time barred and the refund amount, if any, requires to be calculated correctly. He draws our attention to payment of service tax which was challenged by the Revenue based on the Balance Sheet figures, which was submitted by the respondent to the lower authorities. It is his submission that doctrine of unjust enrichment having not been satisfied, the admissible refund to the respondent is nil and impugned order is required to be set aside.
5. The learned Counsel, on the other hand, submits that the respondent is a service provider and is legally entitled to file the refund claim. It is his submission that RCL has appointed RCIL as an agent vide marketing agreement dated 1.10.2004. He draws our attention to various clauses of the agreement and submits that each clause indicates that RCIL is not a principal to principal purchaser or seller but is only an agent for selling of the products of RCL. It is his submission that the service tax is to be paid only on the actual amount received from RCIL and PCO service providers. He submits that the PCO cards are given to RCIL, who in turn to gives to all the distributors and sellers at a discounted price. The amount received by the RCIL is transmitted back to RCL. It is his submission that RCIL cannot offer any discount or offer any scheme other than what is offered by the RCL. It is his submission that as per the agreement, RCIL shall raise bills on behalf of RCL. This would indicate that service tax paid by RCL on MRP, is calculated wrongly and excess service tax paid, is not due to the government, as the respondent has not realized the actual value of MRP. It is his submission that though all the invoices issued by the RCIL, the said invoices appear as bill of RCL. He draws our attention to specimen invoices and submits that service tax relating to PCO pre-paid services has been paid to the Central Government.
5.1. As regards the unjust enrichment, it is his submission that there is no question of unjust enrichment as RCIL has raised invoices as an authorized person of service provider i.e. RCL. Hence, amount charged from the distributors being less than the denomination of the value of recharge coupon vouchers, they are eligible for refund of service tax paid in excess. He submits that RCIL billed/invoiced distributors only for the discounted price hence, the question of passing on the burden of the service tax either by the RCL to RCIL or by RCIL to the distributors does not arise. It is his further submission that this point was raised before the adjudicating authority and lower authorities did not dispute this. It is his submission that the lower authorities has not recorded that RCL had passed on burden of the tax to the customers, proves the point that question of unjust enrichment raised in the show cause notice was dropped and hence, the said question was not before the Commissioner (Appeals). Hence, this question cannot be raised by the Revenue before the Tribunal.
5.2 As regards the time bar issue, it is his submission that the RCL filed refund application on 23.9.2005. The said refund application was returned to the respondent vide the letter of the Revenue dated 21.12.2005. The respondent resubmitted the entire set of refund claim on 6.3.2006 by clarifying the deficiencies pointed out by the Revenue. It is his submission that date of submission of original application was on 23.9.05 and in terms of the well settled legal position, it is, the date which should be considered for the purposes of limitation aspect. He relies upon the judgment of Hon'ble High Court of Gujarat in the case of United Phosphorus Ltd. v. Union of India . It was submitted that the "Scope of the CBEC Manual of Instructions" clearly specified that these instructions are supplemental to and should be read in conjunction with the Central Excise Rules, 2002. It is his submission that Manual of Supplementary Instructions are in the realm of administrative guidelines issued for incidental or supplementary matters. The executive directions can and must be consistent with the provisions of the Central Excise Act and Rules thereunder. It is the submission that any interpretation of those instructions contrary to the provisions of the Central Excise Act and Rules would render them unconstitutional and ultra vires the Central Excise Act and Rules. It is the submission that the issue is now well settled by the Hon'ble Supreme Court in the case of ITW Signode v. CCE as reported at . He also relies upon the judgment of the Hon'ble Supreme Court in the case of Orient Paper Mills Ltd. v. UOI as reported at .
6. Considered the submissions made at length by both sides and perused the records. The following three points arise for consideration:
(i) Whether the refund claim, which was returned by the authorities and re-submitted by the respondent, is hit by limitation?
(ii) Whether the respondent is eligible for refund of the service tax as a service provider?
(iii) Whether the respondent has adduced enough evidences to indicate that the refund claim as has been sought by them is fundamentally correct, and finally whether the doctrine of unjust enrichment is satisfied by the respondent?
7. As regards the issue No. 1, it is noticed that the respondent has filed refund claim to the authorities on 23.9.2005. The said refund claim was on the ground that the respondent had sold recharge coupon vouchers to the distributors for the pre-paid PCO and that the respondent had sold RCVs through M/s RCIL. It is undisputed that the respondent is a service provider and engaged in the business of providing telephone services all over India. It is undisputed that the respondent had discharged the service tax liability in this category for the various services provided by them. The refund claim submitted by the respondent on 23.9.2005 was returned back by the authorities on 21.12.2005 directing the respondent to submit evidences regarding the said refund claim. It is the contention of the learned Jt. CDR that once the claim has been returned on 21.12.2005, the subsequent resubmission of refund claim is to be considered as fresh refund claim. We do not agree with this proposition is an identical issue i.e. regarding returning of refund claim, was considered by the Hon'ble High Court of Gujarat in the case of United Phosphorus Ltd. (supra), wherein the Hon'ble High Court held as under:
The applications show that they were made under Section 11B of the Central Excise Act, 1944. Under Section 11B of the Act, any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Commissioner or Deputy Commissioner of Central Excise before the expiry of one year from the relevant date in the prescribed form accompanied by documentary or other evidence as the applicant may furnish, to establish that the amount of duty of excise in relation to such refund claim was collected from or paid by him and that the incidence of such duty had not been passed on by him to any other person. Under Sub-section (2), the Assistant Commissioner or the Deputy Commissioner as the case may be, is empowered to make an order of refund. Any person aggrieved by any order made under Section 11B would be entitled to prefer an appeal under Section 35 of the Act. It is, therefore, incumbent upon the authority to which an application is made for refund to make an order on such application. By the impugned order, the Assistant Commissioner adopted a novel procedure of returning the claim application which is not contemplated by the provisions of the Act or the Rules made thereunder. By returning the application claiming refund under Section 11B which was already filed in the office of the Assistant Commissioner, the officer acted contrary to the provisions of the Act and the Rules under which he was obliged to make an order on the merits of an application for refund. Once any such application is filed before the concerned authority. It becomes a part of the record of the concerned authority and important original record like an application for refund could not have been parted with by the Assistant Commissioner by returning it to the claimant. Returning of such application has a serious consequence, because, the fresh application may not be within time from the relevant date and the claimant would lose a valuable right of filing an appeal, if any adverse order would have been passed on the application rejecting it on the ground of any infirmity that may have been noticed by the authority instead of the unceremonious return of the application. The course adopted by the Assistant Commissioner, of returning the claim application without making an order thereon amounts to refusal to perform the statutory duty imposed on him to consider the application and make an order thereof, in accordance with law.
The impugned order returning the application of the petitioners for refund of claim is, therefore, illegal and void and is liable to be set aside only on the ground that it was the duty of the Assistant Commissioner to have considered the claim application and made an order thereon under the provisions of Section 11B of the Act, and the relevant rules. The impugned order dated 10-1-2003 is, therefore, hereby set aside with a direction that on presentation by the petitioners of the original application dated 20-12-2002 which was returned to them under the impugned order, that application shall be taken on record by the Assistant Commissioner and it shall be duly considered and an appropriate decision be taken thereon in accordance with law after giving adequate opportunity to the applicant to furnish proof, if any, in support of his claim. Rule is made absolute accordingly with no order as to costs.
It can be noticed from the above reproduced portion of judgment, that in an identical situation, the Hon'ble High Court has held that returning the application claiming refund under Section 11B is contrary to the provisions of Act and the Rules. This decision is binding on us as Revenue has not produced any other contrary decision.
8. As regards the reliance placed by the Jt. CDR, on the case of Faridabad Iron & Steel Traders (supra) to canvas the point that the supplementary instructions issued by way of CBEC Manual are binding by virtue of Rule 31, to our mind, while laying down this proposition of law, the Hon'ble High Court of Delhi was not apprised of the law as settled by the Hon'ble Supreme Court in the case of ITW Signode (supra). It cannot be disputed that the Supplementary Instructions Manual are issued under the provisions of Rule 31, but provisions of Rule 3l cannot override the provisions of Section 11B. Section 11B has been interpreted by the Hon'ble High Court. The ratio of the decision of Hon'ble High Court of Gujarat, is directly on the point and applies in all fours to this case. Hence, we hold that the refund claim submitted by the appellant on 6.3.2006 was in continuation to their application dated 23.9.2005 and no part of the refund is hit by the time bar.
9. As regards the second issue, it is undisputed that the respondent RCL was a company providing the services under the category of "Telephone Services" and discharging service tax liability as per marketing agreement dated 1.10.2004. They appointed RCIL as an agent for granting of marketing rights. On perusal of the agreement, the following clauses of the marketing agreement between RCL and RCIL are very important:
2.7 Nothing contained in this Agreement shall deem RCIL to be a telecom service provider and in no circumstances shall RCIL be a reseller of RIC's Services.
3.10 RCIL shall raise bills on behalf of RIC and send the same to the subscribers either electronically or the printed bills through courier or other means as agreed to between the parties. RCIL may raise consolidated statement of charges ("statement of charges") to the subscribers including amounts due, if any, to RCL or to any other company to which RCIL is an agent.
3.12 RCIL shall also undertake the responsibility of collecting on behalf of RIC from the subscribers
(a) all amounts including deposits under the Tariff Plan at the time of subscriber enrolment.
(b) amount due from the subscriber from time to time against bills raised for the Services rendered by RIC.
6.1 RCIL acknowledges that all Proprietary Rights are the exclusive property of RIC and/or its affiliates(s) whether registered under the application law or not. Neither this Agreement nor any rights conferred herein shall in any way give or be deemed to give to RCIL any right, interest or ownership in any of the Proprietary Rights, Proprietary System, promotional advertising or other written material relating to the service, except for the right to use the same strictly in accordance with the terms and conditions of this Agreement.
7.4 In consideration for the compensation available for the marketing services of RCIL, as set forth in this Annexure A, RCIL agrees to distribute PCO and PPT cards without additional compensation and these cards shall be sold to RCIL at the rate at which they shall be sold to subscribers.
(Emphasis supplied) The above said clauses in the marketing agreement are not disputed by the Revenue. The plain reading of the agreement brings out that RCIL is an agent and authorized person of RCL. If that be so, RCIL having raised invoices of RCL, it cannot be said that RCL is not a service provider. In this case, RCIL was authorized by RCL only to issue invoices on their behalf. RCIL has never issued invoices on their own name to the distributors. It is also undisputed that RCV was sold by the RCIL to the distributors at a value which is less than that is printed on them. If that be so, it is the fact that the RCIL has recovered only discounted value from the distributors. Provisions of the Finance Act, 1994 are that the service tax liability on a service provider is only for the amount, which he gets paid. We are of the considered view that the RCL has issued invoices, "though they are issued on their behalf by RCIL" for the RCVs, which were sold to the distributors and the value which was collected by them is the value on which they are liable to pay service tax liability. Much reliance was sought to laid on the spread sheet produced. The learned Jt. CDR took great pain to explain us that the documentary evidences, which were placed before us, do not entitle the respondent a refund of Rs. 40,98,69,855/-. It is his submission that no refund is eligible in this case. We feel that the calculation part for exact amount of refund claim would better left to the adjudicating authority and we find considerable force in the submission of the learned Counsel that the said documentary evidences, which are relied upon by the Jt. CDR were already before the lower appellate authority and he was explained about it, but it is not considered in right perspective. We feel that to arrive at correct amount of refund payable to the respondent, the issue of calculation be better to left to the adjudicating authority himself. Accordingly, we hold that the RCL is a service provider and having paid the service tax liability on the entire MRP of the RCVs, they are eligible for the amount of the refund claim on the amount, which was not realized by them from their distributors. For the limited purpose of correct quantification of refund claim and to remove any anomaly in respect of satisfaction as regards the invoices, matter needs to remanded back to the adjudicating authority and we do so.
10. The learned Jt. CDR forcefully contended that he has taken great pain to bring on record that the refund claim as submitted by the respondent was totally erroneous and no evidence was placed on record by the respondent to show that the said refund claim is correct. As we have held earlier, we would not like to go into the nitty-gritty of the figures, which has been culled out by the learned Jt. CDR. Whether the amount of refund claim is quantified correctly or not, is a prerogative of the adjudicating authority. At the same time, regarding the letter, documents and evidences produced by the Jt. CDR, we find that it definitely requires consideration by the authorities. We have held in the above para that the exact amount of refund claim, which is to be paid to the respondent requires to be recalculated, for which we have already held that the matter to be remanded back to the lower authorities.
11. As regards the unjust enrichment, we find that the respondent had in fact, in their reply, submitted how the doctrine of unjust enrichment does not affect them. We find that the adjudicating authority, while adjudicating the matter at the first instance did not record any adverse findings though being raised in show cause notice. This would mean that the adjudicating authority has held that there is no unjust enrichment.
12. The Revenue has not challenged the question of doctrine of unjust enrichment, not it was contested before first appellate authority, the Commissioner (Appeals), hence the said question cannot be raised before us. We also note that the learned Commissioner (Appeals) has considered the certificate given by the Chartered Accountant and the invoices, before arriving at the conclusion. We also find that the learned Commissioner (Appeals) has very clearly recorded that the respondent RCL and their agent RCIL has received only the amount shown in the invoices and not received amount for the vouchers distributed free, hence, the respondents are eligible for the refund claim. We are in concurrence with the learned Commissioner (Appeals) findings as to the question of doctrine of unjust enrichment does not arise, looking at the market agreement entered into by the RCL and RCIL, we find that the RCIL though an independent entity, is an authorized person to sell RCVs to pre-paid PCO and RCIL has transmitted back the amount received by them from the distributors to RCL. This is not disputed by the adjudicating authority hence, the question of unjust enrichment does nor arise.
13. Accordingly, in view of the reasonings given above, we are of the considered view that the order of the learned Commissioner (Appeals) is correct and a well reasoned one and does not require any interference. The quantification of the refund to the respondents needs to be verified by the lower authorities and the learned Counsel appearing on behalf of the respondent also submits that the said question be better left to the adjudicating authority. Hence, we dismiss the appeal filed by the Revenue and remit hook the matter to the adjudicating authority for a limited purpose of correctly quantifying the amount to be refunded to the respondent.
14. The appeal is disposed off as indicated above.
(Pronounced in Court on 15/05/08)