Custom, Excise & Service Tax Tribunal
International Merchandising Company vs Gurugram on 30 May, 2025
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 52250 of 2015
[Arising out of Order-in-Appeal No. 24/ST/Appeal-II/SM/GGN/2014-15 dated
09.02.2015 passed by the Commissioner of Service Tax (Appeals-II), Gurgaon]
International Merchandising Company ......Appellant
Building No. 9, Tower A, Fifth Floor,
Cyber City, DLF III,
Gurugram, Haryana
VERSUS
Commissioner of Central Goods & Service ......Respondent
Tax, Gurugram Plot No. 36-37, Sector 32, Gurugram, Haryana APPEARANCE:
Shri Ashok Dhingra and Ms. Sonia Gupta, Advocates for the Appellant Shri Narinder Singh, Authorized Representative for the Respondent CORAM: HON'BLE MR. S. S. GARG, MEMBER (JUDICIAL) HON'BLE MR. P. ANJANI KUMAR, MEMBER (TECHNICAL) FINAL ORDER NO. 60582/2025 DATE OF HEARING: 05.02.2025 DATE OF DECISION: 30.05.2025 S. S. GARG :
The present appeal is directed against the impugned order dated 09.02.2015 passed by the Commissioner (Appeals), whereby the learned Commissioner (Appeals) has rejected the appeal of the appellant and upheld the Order-in-Original.
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2. Briefly stated facts of the present case are that the appellant M/s International Merchandising Company LLC, India (in short 'IMC India') is a diversified sports, entertainment and media entity and registered with the department for various services including Business Auxiliary Service (in short 'BAS') under Chapter V of the Finance Act, 1994. IMC India entered into an agreement dated 05.02.2010 with IMG UK to provide assistance in production of live video coverage of sports events by IMG UK, by procuring various services and arranging facilities from third parties such as transportation, travel, hotel etc whenever required and making payments to third parties, on cost plus markup. IMC India raised 5 invoices on IMG UK for expenses incurred with markup under taxable category of BAS of the Finance Act for the period April 2010 to September 2010. IMC India deposited service tax amounting to Rs.51,83,156/- on 05.06.2010 under reverse charge mechanism and thereafter, IMC India received remittances from IMG UK. Subsequently, IMC India came to know that service provided to IMG UK qualifies as export of service under the Export of Services Rules and is not exigible to service tax; accordingly, IMC India filed refund application dated 30.03.2011 with Assistant Commissioner, Service Tax Division, Gurgaon, seeking refund of Rs.51,83,156/- paid under Section 11B of the Central Excise Act, 1944 as made applicable to service tax in terms of Section 83 of the Finance Act, 1994. Thereafter, IMC India followed up the matter with the Assistant Commissioner for more than two years but the refund was not disbursed. Thereafter, a Deficiency Memo was issued on 23.01.2014 3 ST/52250/2015 communicating certain discrepancies in the refund claim and asking the appellant to submit reply thereto. In response to the Deficiency Memo, the appellant submitted their reply. Thereafter, the Deputy Commissioner vide Order-in-Original dated 11.06.2014 rejected the refund. Being aggrieved by the Order-in-Original, the appellant filed appeal before the Commissioner (Appeals), who vide the impugned order, rejected their appeal holding that since the service has been performed in India, the same does not qualify for export. Hence the present appeal.
3. Heard both the parties and perused the material on record.
4. The learned Counsel for the appellant submits that the impugned order is not sustainable in law and is liable to be set aside as the same has been passed without properly appreciating the facts and the law.
4.1 The learned Counsel further submits that the findings recorded in the Order-in-Original as well as in the Order-in-Appeal, are contradictory. He also submits that the impugned services rendered by the appellant fall under the taxable category of BAS. He further submits that the appellant has declared the service under taxable category of BAS in their ST-3 returns for April 2010 to September 2010, copy of which are also attached, and the same has never been disputed by the authorities below and hence, the classification of the services under BAS is not in dispute and consequently, the services under the agreement to IMG UK amount to export of 4 ST/52250/2015 services under the Export of Services Rules and therefore, the appellant is entitled to refund of service tax paid thereon. 4.2 The learned Counsel further submits that the taxable service of BAS is covered under Section 65(105)(zzb) of the Finance Act and consequently, falls under category (iii) of the Export of Services Rules, for which following two conditions are required to be satisfied for the service rendered on or after 27.02.2010 to qualify as export of services and thereby not exigible to service tax:
Recipient of service is located outside India; and Payment for such service is received by service provider in convertible foreign exchange.
Further, he submits that both the above conditions are fully met in the present case.
4.3 The learned Counsel further submits that it is an accepted principle of law that substantive benefit cannot be denied on account of procedural infractions, if any. For this submission, he relies on the following decisions:
Cochin International Airport Limited vs. CCE & ST, Cochin
- 2021 (51) GSTL 322 (Tri. Bang.) Metlife Global Operations Support Center P. Ltd. Vs. CST, New Delhi - 2021 (46) GSTL 418 (Tri. Del.) Harman Connected Services Corporation India Pvt Ltd vs. Cen. Tax, Bengaluru East - 2021 (49) GSTL 11 (Tri. Bang.) Bharat Electronics Ltd vs. CC, Bangalore - 2017 (352) ELT 245 (Tri. Bang.) 4.4 The learned Counsel further submits that both the authorities below travelled beyond the show cause notice/Deficiency Memo, which is fatal to entire proceedings and the impugned order is liable 5 ST/52250/2015 to the set aside and the refund claim ought to be ordered to be sanctioned and disbursed along with interest. In this regard, he relies on the following decisions:
MIV Logistics Pvt Ltd vs. CC, Cochin - 2020 (374) ELT 277 (Tri. Bang.) Hindustan Aeronautics Ltd vs. CC, Bangalore - 2019 (370) ELT 699 (Tri. Bang.) CCE, Nagpur vs. Ballarpur Industries Ltd - 2007 (215) ELT 489 (SC) CC, Mumbai vs. Toyo Engineering India Limited - 2006 (201) ELT 513 (SC) Caprihans India Ltd vs. CCE - 2015 (325) ELT 632 (SC) CCE vs. Gas Authority of India Ltd - 2008 (232) ELT 7 (SC) 4.5 The learned Counsel further submits that the Deficiency Memo in the present case was issued after 2 years and 10 months of filing the refund claim, whereas, as per the instructions issued by CBIC in the CBIC Excise Manual 2005, the Deficiency Memo should be issued within 15 days.
4.6 He further submits that the appellant is also entitled to interest on the refund.
5. On the other hand, the learned Authorized Representative for the Revenue reiterates the findings of the impugned order and submits that the refund has been rejected by the adjudicating authority which is also upheld by the Commissioner (Appeals) on the ground that services such as transportation, travel, hotel etc involved in the instant case, are covered under category (ii) of Rule 3 of the Export of Services Rules, 2005 and the basic condition for qualifying to export of services under this category, is that the 6 ST/52250/2015 provision of service should be performed outside India, whereas, in the present case, the impugned services have been performed by the appellant within India and the said services do not qualify as export. He further submits that since the appellant in this case had self-assessed the service tax without applying the Notification and the Assessment had not been modified, it cannot be modified now in the refund proceedings and therefore the appellant is not entitled to refund as per the self-assessment made by them, which is not modified. In support of his submission, he relies on the following decisions:
a) Kalyan Toll Infrastructure Ltd vs. CE & CGST, Indore -
Final Order No. 55710/2024 dt. 29.04.2024 in ST/51625 Tri. Del.
b) BT (India) Private Limited vs. Union of India and Ors.
- Decided on 06.11.2023 in W.P.(C) 13968/2021 High Court of Delhi : Union of India & Anr. Vs. BT (India) Private Limited - Decided on 09.12.2024 in SLP (Civil) Diary No. 44385/2024 Supreme Court
c) ITC Ltd vs. CCE, Kolkata-IV - (2019) 17 SCC 46
6. We have considered the submissions made by both the parties and perused the material on record. We find that in the present case, the only dispute is whether the appellant is entitled to refund of the service tax which was wrongly paid by them.
7. As per the learned Counsel for the appellant, the services rendered by the appellant fall in the definition of 'export of services' and therefore, it was not subject to service tax, but the appellant had paid service tax wrongly and later on, the appellant came to know about this mistake and then filed refund claim which was rejected by the authorities below.
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8. Further, we find that in the present case, the appellant is seeking the refund of Rs.51,83,156/- paid under Section 11B of the Central Excise Act as made applicable to service tax in terms of Section 83 of the Finance Act. We also find that the appellant had filed the service tax returns and showed that they had paid the service tax under the category of BAS but those self-assessed service tax returns had not been modified by them before filing the refund application.
9. Further, we find that the identical issue has recently been considered by the Principal Bench of this Tribunal in the case of Kalyan Toll Infrastructure Ltd (supra), wherein the Tribunal has rejected the appeal of the assessee by following the judgment of the Hon'ble High Court of Delhi in BT (India) Pvt Ltd (supra)'s case. Relevant findings of the Tribunal in Kalyan Toll Infrastructure Ltd (supra)'s case are reproduced herein below:
"11. We have considered the submissions on both sides and perused the records. The facts of the case are not in dispute. The appellant rendered a taxable service, self- assessed service tax, paid it, and filed ST-3 returns. While self-assessing, it could have claimed the benefit of an exemption notification which it had not claimed. Neither has the Central Excise officer modified the assessment invoking section 72 of the Finance Act nor has the self- assessment been appealed against before the Commissioner (Appeals).
12. The appellant has directly filed a refund claim after over one year from the payment of service tax and this claim was made under section 11B of Excise Act as made applicable to the Finance Act.
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13. The nature of assessment and refunds were examined by the Supreme Court in Priya Blue Industries vs Commissioner of Customs (Prev) - 2004 (172) ELT 145 (SC) which was a Customs case and Collector of Central Excise vs Flock (India) Pvt. Ltd. which was a central excise case. In both judgments, the Supreme Court held that refund can only be sanctioned in pursuance of the assessment not such as to have the effect of changing the assessment.
14. After these judgments, there have been changes in the law and self-assessments were introduced. The question which arose is if there was only self-assessment and no re- assessment by the officer, if the refund could be sanctioned contrary to the self-assessment. This was answered by a larger bench of Supreme Court in negative in ITC Ltd. vs Commissioner of Central Excise, Kolkata-IV - 2019 (368) ELT 216 (SC). It has been held that all assessments, including self-assessments are appealable and unless the assessment is modified, no refund could be sanctioned so as to change the assessment. The reason for this is the refund proceedings are in the nature of execution proceedings and they cannot be used to re-determine the liabilities. Paragraph 44 of this judgment is reproduced below:
44. The provisions under Section 27 cannot be invoked in the absence of amendment or modification having been made in the bill of entry on the basis of which self-assessment has been made. In other words, the order of self-
assessment is required to be followed unless modified before the claim for refund is entertained under Section 27. The refund proceedings are in the nature of execution for refunding amount. It is not assessment or re- assessment proceedings at all. Apart from that, there are other conditions which are to be satisfied for claiming exemption, as provided in the 9 ST/52250/2015 exemption notification. Existence of those exigencies is also to be proved which cannot be adjudicated within the scope of provisions as to refund. While processing a refund application, re- assessment is not permitted nor conditions of exemption can be adjudicated. Re-assessment is permitted only under Section 17(3)(4) and (5) of the amended provisions. Similar was the position prior to the amendment. It will virtually amount to an order of assessment or re-assessment in case the Assistant Commissioner or Deputy Commissioner of Customs while dealing with refund application is permitted to adjudicate upon the entire issue which cannot be done in the ken of the refund provisions under Section 27. In Hero Cycles Ltd. v. Union of India - 2009 (240) E.L.T. 490 (Bom.) though the High Court interfered to direct the entertainment of refund application of the duty paid under the mistake of law. However, it was observed that amendment to the original order of assessment is necessary as the relief for a refund of claim is not available as held by this Court in Priya Blue Industries Ltd. (supra).
(emphasis supplied)
15. Thus, it was held that through refund proceedings, the assessment (including self-assessment) cannot be modified. Through ITC Ltd., a batch of matters were disposed of. The discussion in this judgment was largely based on the provisions of Customs Act but the principle laid down was clear that refund proceedings are only in the nature of execution proceedings and cannot change the assessment.
16. However, there were conflicting orders of different benches of this Tribunal on whether ITC Ltd would apply to refund applications of service tax where there was only self-assessment. The matter was therefore, referred to the larger bench in Balalji Warehouse. Through a majority decision of two to one, the larger bench decided that ITC Ltd. will not apply to service tax matters. This decision has been relied upon by the appellant before us.
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17. The same question was before the High Court of Delhi in BT(India) Pvt. Ltd. which decision is relied upon by the Revenue before us. The appellant claimed refund under Rule 5 of Cenvat Credit Rules on the ground that it had exported some services and had self-assessed its service tax accordingly and had filed returns. The department rejected the refund holding that the services did not qualify as export of services. Through a detailed order and judgment, the High Court of Delhi held that ITC Ltd. applies to service tax refunds also and the refunds are in the nature of execution proceedings and they have to be as per the assessment (even if it is self- assessment). The relevant portions of this judgment are as follows:
66. In our considered view, 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. As was observed by the Supreme Court in ITC Limited, 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, the same cannot possibly be questioned in refund proceedings. As the Supreme Court had held in the decisions aforenoted, the authority while considering an application for grant of refund neither sits in appeal nor is it entitled to review an assessment deemed to have been made. In fact, the Supreme Court in ITC Limited had described refund proceedings to be akin to execution proceedings.
18. Thus, the legal position is loud and clear. Refund proceedings are in the nature of execution proceedings and they cannot modify an assessment including self- assessment. Refund can only be sanctioned or denied as 11 ST/52250/2015 per the assessment- be it self-assessment by the assessee or the best judgment assessment by the officer. This legal position will not and cannot vary depending on which side it favours. The law laid down in ITC Ltd. and BT (India) Pvt. Ltd. applies whether the claimant will get refund as a result or will be denied refund as a result. In neither case can the refund, which is in the nature of an execution proceeding be used to alter the assessment. Thus, the order of the Larger bench of this Tribunal in Balaji Warehouse interpreting the applicability of ITC Ltd. to service tax matters relied upon by the appellant has been clearly overturned by the High Court of Delhi in BT (India) Pvt. Ltd. Clearly, ITC Ltd. applies to service tax matters also.
19. Since the appellant had self-assessed service tax without applying the notification and the assessment has not been modified, it cannot be modified now in the refund proceedings. As per the self-assessment, the appellant was not entitled to the refund. In view of the above, the appeal is rejected and the impugned order is upheld."
10. Further, we find that the judgment of the Hon'ble High Court of Delhi in BT (India) Pvt Ltd (supra)'s case, has now been upheld by the Hon'ble Apex Court vide its order dated 09.12.2024, wherein the Hon'ble Apex Court has disposed of the Special Leave Petition of the department in terms of the decision in ITC Ltd vs. CCE, Kolkata-IV (supra).
11. In view of our above discussion, we find that the ratio of judgment of Hon'ble High Court of Delhi in BT (India) Pvt Ltd (supra)'s case clearly applies in the present case. Therefore, by following the ratio of the said judgment, we are of the considered 12 ST/52250/2015 view that the appellant is not entitled to refund; accordingly, we uphold the impugned order and dismiss the appeal of the appellant.
(Order pronounced in the open court on 30.05.2025) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) RA_Saifi