CENVAT credit refund can’t be denied in absence of self-assessed ITR that was reexamined: Delhi High Court

CENVAT credit refund can’t be denied in absence of self-assessed ITR that was reexamined: Delhi High Court

States that the income tax department should not have doubted, questioned, or undertaken a merit review

The Delhi High Court has held that a Central Value Added Tax (CENVAT) credit refund cannot be denied in the absence of a self-assessed Income Tax Return (ITR) that was re-assessed or reviewed.

The bench of Justice Yashwant Varma and Justice Dharmesh Sharma observed that a self-assessed ITR also amounted to an ‘assessment’. Unless it was varied or modified in accordance with the relevant statute, it could not be questioned in refund proceedings.

The petitioner/assessee submitted self-assessed ITRs before the Service Tax Commission in terms of Section 70. No further action on those was initiated by the respondents under Section 72 or Section 73.

Section 72 enables the Adjudicating Authority (AA) to undertake a ‘best judgment assessment’ in case an assessee either fails to furnish an ITR or has submitted it but failed to assess the tax payable.

The AA is empowered to ask the assessee to produce the accounts, documents, and evidence, and after providing an opportunity for a hearing, assess the value of taxable service. He should either determine the sum payable by the assessee or the amount liable to be refunded.

The IT department stated that the services rendered by the petitioner would not fall within the ambit of the expression ‘export of services’ as contemplated under Rule 6A of the Service Tax Rules, 1994.

It further held that regarding the broadcasting services, even though the ordering company was based out of Mauritius, the customer operation details indicated the beneficiaries were present in India. Even the satellite services offered by the petitioner were for the channels broadcasted in the country.

The IT department held that under Section 2(105) of the Finance Act, 1994 read with Section 2(16), the services rendered to a head office implied services provided to a branch office or a representative in India. Thus, it fell outside the net of ‘export of service’ as contemplated under the Finance Act and the Service Tax Rules.

Section 73 empowers an AA to place the assessee on notice if it is found that service tax is either not levied or paid or is short levied or erroneously refunded. Section 73(1) then enables the authority to act against the assessee for fraud, collusion, willful misstatement, suppression of facts, or contravention of the provisions of the Act or the Rules with the intent to evade service tax payment.

The power under Section 73(1) could be invoked within 30 months. The expression ‘relevant date’ was defined in Section 73(6). However, when the refund application was made, the power under Section 73(1) could be invoked within a period of 18 months. However, now it can be invoked within five years.

The assessee assailed the order passed by the IT department wherein its applications for refund of unutilized CENVAT credit were negatived. The refund claims were lodged in the quarters - October 2014-December 2014, January 2015-March 2015, and April 2015-June 2015.

The applications were made on the ground that the input services were utilized by the petitioner in connection with the ‘export of services’ including broadcasting, business support, IT software and management, and maintenance or repair.

The assessee contended that an assessment, as contemplated in taxing statutes, would also include a self-assessment.

The court held that unless the self-assessed ITR was questioned or re-assessed and the petitioner’s assertion of the services qualified as an export of service was questioned or negatived, its claim for refund could not be negated.

The judges noted that in the absence of the self-assessed ITR being questioned, reviewed, or re-assessed, the claim for a CENVAT credit refund could not be denied by the respondents.

The bench added that when confronted with the refund application, the respondents could have examined or evaluated whether the provisions of Rule 5 read along with the various prescriptions contained in the 18 June 2012 notification were complied with. The IT department should not have doubted, questioned, or undertaken a merit review of the self-assessed ITR.