CESTAT: In order to Claim Tax Refund Onus lies on Claimant to Prove that Burden of Duty was not Transferred to Third Parties
CESTAT: In order to Claim Tax Refund Onus lies on Claimant to Prove that Burden of Duty was not Transferred to Third Parties
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai bench while granting relief to GAIL India Ltd. (appellant) has observed that claims for refund, even in cases where tax was paid mistakenly under service tax law, should be filed and decided under Section 11B, provided that the claimant can prove that the burden of duty was not passed on to third parties.
The CESTAT coram comprising of Sulekha Beevi (Judicial Member) and M. Ajit Kumar (Technical Member) rejected the original authority’s stance that they could not deviate from the entries in the ST-3 Return.
In the present case, the appellant was engaged in transporting and trading industrial gases through their own pipelines and were liable to pay service tax on the tariff charges.
The tariff charges were fixed by the Petroleum and Natural Gas Regulatory Board (PNGRB). While awaiting approval of the pipeline tariff from PNGRB, the appellant collected provisional rates from their customers along with service tax. They filed a refund claim of Rs. 10,54,78,124/- for the service tax paid on gas transmission charges collected by them from their customers and duly remitted to the Government, during the period 1 April, 2011 to 31 July, 2014.
The refund claim was based on the differential price charges between the tariff already charged by the appellants and the tariff amount received by PNGRB.
Upon reviewing the ST-3 returns of the appellant, the Department discovered that the claimed refund amount had already been adjusted or utilized by the appellant under Rule 6(3) of the Service Tax Rules, 1994.
Consequently, the refund claim was rejected by the original authority. Aggrieved by this decision, the appellant filed an appeal before the Commissioner (Appeals), who subsequently upheld the Order in Original, affirming the rejection of the refund claim.
The CESTAT noted that the ST-3 Returns filed by the appellant showed that the appellant had adjusted an amount of Rs. 11,47,41,041 under Rule 6(3) of the Service Tax Rules, 1994 towards their service tax liability. However, the appellant contended that this was an inadvertent error and that they had actually adjusted only Rs. 66,24,847.
Moreover, the bench noted that the Order in Original thoroughly documented the substantial amount of data presented by the appellant, including statements from their Chartered Accountant to support their claim.
The bench on careful examination noted that no inconsistencies or discrepancies were found in the provided data. However, the rejection of the appellant's claim was primarily based on a single entry in the ST-3 Return, which the appellant claimed was a mistake.
Therefore, the CESTAT was of the considered view that Section 72 of the Finance Act, 1994 provides authority to the central excise officer to conduct best judgment assessment if it is found that the taxpayer had filed a service tax return but had failed to assess the service tax in accordance with the provisions of the Finance Act, 1994.
Additionally, the refund claim of appellant under Section 11B of the Central Excise Act, 1944 was rejected by the Original Authority on the ground that the claim cannot be modified by the appellant to include a totally new ground.
The appellant informed the CESTAT about a subsequent development where the Delhi Tribunal, has held that service tax cannot be levied on the transportation of gas up to the delivery point at the customer's premises as it falls under self-service.
The CESTAT acknowledged that based on this ground, the appellant would be eligible for a refund under Section 11B of the Central Excise Act, 1944.
The bench observed, that although this was a new legal issue that was not examined by the Original Authority, that it was established that claims for refund, even in cases where tax was paid mistakenly under service tax law, should be filed and decided under Section 11B, provided that the claimant can prove that the burden of duty was not passed on to third parties.
Accordingly, the CESTAT held that the appellant’s claim was wrongly dismissed without examining the claim based on verifiable facts and the same was set aside.
