Custom, Excise & Service Tax Tribunal
Divi'S Laboratories Ltd vs Commissioner Of Central ... on 27 January, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order No .20097 / 2014 Appeal(s) Involved: ST/2533/2010-SM [Arising out of Order in Appeal 04-2010 dated 31/05/2010 passed by Commissioner of Central Excise(Appeals) , HYDERABAD-III DIVI'S LABORATORIES LTD LINGOJIGUDEM, CHOUTUPPAL MANDAL, NALGONDA DIST, AP Appellant(s) Versus Commissioner of Central Excise,Customs And Service Tax - HYDERABAD-III OPP LB STADIUM ROAD, BASHEERBAGH, HYDERABAD, ANDHRA PRADESH 500004 Respondent(s)
Appearance:
Shri B. Venugopal, Advocate SWAMY ASSOCIATES G-8, FORTUNA ICON APARTMENTS, JODIDHAR ASWATHAPPA FARM, BEHIND NAGARJUNA, SAHAKAR NAGAR, BANGALORE KARNATAKA 560092 For the Appellant Shri A.K.Nigam, Addl. Commissioner(AR) For the Respondent CORAM: HONBLE SHRI B.S.V. MURTHY, TECHNICAL MEMBER Date of Hearing: 27/01/2014 Date of Decision: 27/01/2014 Order Per : B.S.V MURTHY During the period from 01/04/2004 to 14/03/2005, the appellants had received consideration for the services under the head of scientific & consultancy services provided by them to various clients abroad. During the course of audit of the appellants records, it was found that the appellants had not paid service tax on the consideration so received and based on an audit objection, the appellants deposited the entire amount of service tax of Rs.33,95,439/- on 20/07/2007. Subsequently, on 02/07/2008, the appellants filed a refund claim for the entire amount taking a view that they were not liable to pay service tax at all since according to them the entire amount was received during the period when Export of Service Rules were not in force. During the period under consideration, if consideration was received in convertible foreign currency, that was sufficient for the purpose of treating the service as an export of service. Further the appellants also entertained a view that they were eligible for exemption provided for services which are exported in view of the provision above.
2. The refund claim was considered by the lower authorities and the same has been rejected by both lower authorities. The original adjudicating authority rejected it on the ground of unjust enrichment. According to the original adjudicating authority, the appellants had shown the service tax payments made by them as expenditure in their balance sheet during the year 2007-2008 and therefore he entertained a view that the appellants have failed to cross the hurdle of unjust enrichment since by showing it an expenditure in the balance sheet and accounts, the amounts said to have been passed on. The submission made by the appellants that they have had actually shown the amount as receivable in the year 2008-09 after filing the refund claim and the Chartered Accountant certificate produced by them evidencing this was rejected on the ground that the same does not categorically say that the appellants have not passed on the tax element to their customers. On an appeal filed by the appellants, the Commissioner (Appeals) has concluded that since the original adjudicating authority has not at all considered the issue on merits, he is not going into merits at all. As far as unjust enrichment is concerned, he agreed with the lower authority.
3. The learned counsel for the appellant submitted that on merits, the issue can be considered to have been settled in view of the fact that the Commissioner (Appeals) has taken the view that original authority did not go into merits and therefore he would not consider and Revenue is not in appeal against this decision. Therefore as regards merits, the issue cannot be considered at his stage. As regards unjust enrichment, he would submit that none of the citations cited by the learned Commissioner(Appeals) are applicable to the facts of this case and the decision of the lower authority is based on the decision of the Tribunal in the case of Rajasthan Spg. & Wvg. Mills Ltd. Vs. CCE, Jaipur-II [2007)194) ELT 254 (Tril. Del.)] to support the case of the Department that once expenses are debited to Profit & Loss account, the same has to be treated as expenses passed on to the customers and therefore it cannot be said that unjust enrichment hurdle has been crossed. He submits that in this decision no such ratio emerges from the order. In that case, the Tribunal did not come to any conclusion but remanded the matter to the original adjudicating authority with a direction to the appellant to satisfy the adjudicating authority that they have not claimed the amount from the customers and they have not charged the amount in their Profit & Loss account as expenses. It cannot be said that the ratio of this decision is entirely in favour of the Revenue as submitted by the Revenue. At this stage, learned AR is not able to show any contrary decision.
4. I also find myself in agreement with the submission that the 5 decisions cited by the learned Commissioner (Appeals) are not really applicable to the facts of this case since in all those cases the issue involved was issue of credit notes and post clearances/removal adjustments with the customer etc. Two of the decisions also lay down the ratio that unjust enrichment hurdle has to be crossed irrespective of the requirement of the statute or otherwise. In this case, it is nobodys case that appellant need not cross the unjust enrichment hurdle.
5. The question that is required to be dealt with is whether the appellant is able to show that there is no unjust enrichment involved in this case. Admittedly, the appellant exported the services with a belief that they are exempt and no service tax was payable. Subsequently, when it was pointed out by the audit, the amount was paid. It was shown as expenditure in the books of accounts in the year 2007-08 during which the amount was paid to the Revenue. The only objection that has been taken is that the amount was shown as receivable only when a refund claim was filed in next year and not in the same year. Just because it was not shown as receivable in the year of payment, whether it can be treated as passed on to the customers, is the question. In fact, it requires a costing exercise to find out whether the appellant has taken the expense into account while calculating the cost of their services or goods manufactured by them and provided to the customers. This exercise has neither been done by the audit or by the assessee. Appellant relies upon the Chartered Accountants certificate which simply says that the amount is shown as receivable in the next year and shown as expenditure for the previous year which basically does not need any expertise from the Chartered Accountant. Unfortunately, the appellant has not been able to obtain any certificate from the Chartered Accountant showing that the appellant has not passed on the service tax liability to the customers. I find that in this case, objection of the Revenue is only that Chartered Accountants certificate produced does not categorically say that the appellants have not collected the amount from their customers and in the absence of specific certification without any other verification, claim has been rejected. The matter relates to the year 2007-08 and 2008-09 and it is already more than 4 years over. Under these circumstances, in my opinion, if the appellant is able to produce the Chartered Accountants certificate saying that the appellants have not passed on the amount shown as expenditure in the year 2007-08 to their customers is produced, that should be sufficient for considering that the appellants have crossed the hurdle of unjust enrichment.
6. I find myself in agreement with the submissions that the original adjudicating authority to whom the matter is being sent back for fresh consideration for the purpose of considering unjust enrichment in view of the observation above, cannot go into any other issues. This is in view of the submissions made by the learned counsel that Commissioner (Appeals) has specifically considered the issue on merits and has held that he is not considering the issue on merits since the original adjudicating authority has not considered the same. Even though in my opinion, this observation is not entirely correct yet as submitted by the learned counsel, in the absence of any appeal against this observation of the Commissioner (Appeals), I cannot allow the original adjudicating authority to go into merits of this claim afresh. At the same time, I leave it to the conscience of the assessee as to whether the service tax amount which was in fact payable to the exchequer should be paid or not. This is because a portion of the amount was payable since it was paid after the Export of Services Rules came into effect according to me. In the show-cause notice, in respect of last two entries Sl.No.15 & 16, the last column shows the dates in April 2005. In view of the fact that Export of Service Rules came into statute from 15/03/2005 and prior to that date the services exported were only exempt, the liability would arise based on the date of receipt of the consideration and not the date of rendering of service. The learned counsel fairly agreed that this would be the correct interpretation of law. Nevertheless, he also submitted that the date shown in the last column of the statement in respect of sl.no.15&16 are dates of certificate and not the date of receipt of consideration. Nevertheless if the dates of receipt are in April 2005, the amount of service tax paid by the appellant has been paid correctly and the appellant would not be eligible for the refund. As earlier stated above, I leave it to the appellant to verify and find out whether they are eligible to refund and whether they should claim such amounts as refund or not.
7. In view of the above observations, appeal is decided in above terms and the matter is remanded to the original adjudicating authority for the limited purpose of deciding about unjust enrichment and sanctioning the refund claim as per the above directions.
(Order dictated and pronounced in open court) B.S.V MURTHY TECHNICAL MEMBER Raja.
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