Allowed

Ambuja Cements Ltd. v. Commissioner,Service Tax Commissionerate,Delhi

Delhi HC8 May 2017SERTA/1/2017

Case brief

AI extract

What is this about?

The High Court allowed the appeal against the Service Tax Commissioner, holding that the appellant was entitled to a refund for the period between October 16, 1998 and September 1, 1999. The Court relied on Supreme Court decisions clarifying the exemption for clearing and forwarding agents post-October 16, 1998, setting aside orders of lower appellate authorities and directing the refund of tax an

What did the court decide?

The respondent is directed to refund the service tax amount due for the period 16.10.1998 to 01.09.1999 together with interest within four weeks.

Ambuja Cements Ltd. Vs Commissioner,Service Tax Commissionerate,Delhi — Delhi HC (2017) — LawSathi Research

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$~22

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* IN THE HIGH COURT OF DELHI AT NEW DELHI

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+ SERTA 1/2017

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AMBUJA CEMENTS LTD. ..... Appellant Through: Mr. M.P. Devnath, Mr. Abhishek Anand& Mr. Yogendra Aldak, Advocates.

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versus

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COMMISSIONER, SERVICE TAX COMMISSIONERATE, DELHI ....Respondent Through: Mr. Deepak Anand, Junior Standing Counsel.

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CORAM: JUSTICE S. MURALIDHAR JUSTICE ANIL KUMAR CHAWLA

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O R D E R

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% 08.05.2017 Dr. S. Muralidhar, J. :

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This is an appeal under Section 35G of the Central Excise Act, 1944 („CE Act‟) read with Section 83 of the Finance Act, 1994 („FA‟) against the final order dated 20^th September, 2016 passed by the Customs, Excise and Service Tax Appellate Tribunal, Delhi („CESTAT‟) dismissing appeal No.ST/A/53726/2016-CU(DB).

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The facts in brief are that the Appellant/Assessee is inter alia engaged in the manufacture of clinker and cement falling under Chapter heading 25 of the CE Tariff Act, 1985. Between 16^th July, 1997 and 30^th September, 1999, the Appellant received „Clearing and Forwarding Agent Service‟ from various services providers. In terms of the provisions that existed during the

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SERTA 1/2017 Page 1 of 6

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relevant period, the Appellant paid service tax of Rs.35,42,021 for the period 16^th July, 1997 to 30^th September, 1999 under the category of „Clearing and Forwarding Agent Service‟ on the services so received.

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In its decision in Laghu Udyog Bharti v. Union of India 1999 (112) ELT 365 (SC) , the Supreme Court by its judgment dated 27^th July, 1999 held that the person who is receiving services cannot be made responsible for filing returns and paying tax. To overcome the said judgment, on 23^rd August, 1999 Notification No.7/1999-ST was issued with effect from 1^st September, 1999 whereby sub-clause (iii) in Rule 2(1)(d) of the Service Tax Rules, 1994 was omitted. Meanwhile on 18^th November, 1999, following the judgment of the Supreme Court in Laghu Udyog Bharti ( supra ), the Appellant filed refund claim of Rs.35,42,021 being the service tax paid during the period 16^th July, 1997 to 30^th September, 1999.

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However, by the order dated 24^th January, 2000, the Assistant Commissioner rejected the refund claim on account of unjust enrichment. The amount was asked to be transferred to the Government welfare fund.

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While the Appellant‟s appeal was pending before the Commissioner (Appeals), by the Finance Act with effect from 13^th May, 2000 a retrospective amendment was made to the FA, 1994 to overcome the effect of the decision of the Supreme Court in Laghu Udyog Bharti (supra).

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In view of the retrospective amendments, the Commissioner (Appeals) by an order dated 12^th October 2000, dismissed the Petitioner‟s appeal confirming the order rejecting the refund claim.

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Page 2 of 6

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SERTA 1/2017

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Under the Finance Act 2003, the levy of service tax on recipients of service with effect from 16^th July, 1997 to 16^th October, 1998 was validated. Aggrieved by the above amendment many of the Assessees including the Appellant herein filed writ petitions directly in the Supreme Court under Article 32 of the Constitution.

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By its judgment dated 17th March 2005 in a batch of cases in which the lead case was The Associated Cement Cos. Ltd. v. Union of India [WP (C) No.411/2000] and which included WP (C) No.539/2000 filed by the Appellant herein (earlier known as Gujarat Ambuja Cement Ltd.), the Supreme Court inter alia rejected the challenge to the constitutional validity of the amendments. The Supreme Court further observed as under:

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“Although the challenge to the constitutional validityand legality of the levy of service tax is rejected, thewrit petitioners have some subsidiarycomplaints. Theysay that although the levy of service tax from the usersof the services rendered by the goods transportoperators was introduced with effect from 16^th November, 1997, the levy was exempted for the periodsubsequent to 2^nd June, 1998 in view of the notificationdated 2^nd June, 1998which is still operative. Yet therespondents had raised demands for service tax forperiods subsequent to 2^nd June, 1998. It has beenconceded by the Union of India that the amendmentsmade in the Act would have to be read along with thenotifications so that the levy and collection of servicetax would be only in respect of services rendered bygoods transport operators between the period from 16^th November, 1997 to 2^nd June, 1998. Similarly there canbe no tax liability on users of the services of the clearing and forwarding agents beyond 1.9.1999 when by notification No.7/99 dated 23.8.99, the levy of servicetax on the services provided by clearing and forwarding agents were exempted. Furthermore the liability to payinterest or penalty on outstanding amounts will arise only if the dues are not paid within the period of two weeks from the order passed by this Court on 17^th November, 2003. In those cases in which the tax mayhave been paid but not

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Page 3 of 6

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SERTA 1/2017

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refunded to the writ petitioners,for whatever reason, there is no question of levy of anyinterest or penalty at all.

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With these clarifications, the writ petitions aredismissed without any order as to costs.”

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Subsequently the Supreme Court disposed of an application filed being IA No.3/2005 in WP(C) No.450/2000 ( Birla Corporation Limited v. Union of India ), on 3^rd February 2006 and directed substitution of the words “beyond 01.09.1999” with the words and figures “beyond 16.10.1998” occurring in the penultimate paragraph of the decision dated 17^th March, 2005.

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The net effect of the said change was that there could be no service tax liability on user of the services of clearing and forwarding agents beyond 16^th October, 1998.

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Learned counsel for the Respondent sought to contend that when the entire paragraph of the decision dated 17^th March, 2005 of the Supreme Court is read as a whole then it was plain that the intention was not to exempt from payment of tax the users of services of clearing and forwarding agents beyond 16^th October, 1998.

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The fact remains that the Union of India did not challenge the order dated 3^rd February, 2006 passed by the Supreme Court making a minor but significant change to its judgment dated 17^th March, 2005. The Supreme Court was clear that the exemption from payment of service tax on services provided by clearing and forwarding agents stood exempted from 16^th October, 1998 itself.

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Page 4 of 6

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SERTA 1/2017

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In the light of the above decision of the Supreme Court as clarified by its order dated 3rd February 2006, there can be no manner of doubt that the Appellant would be entitled to refund of the service tax for the period beyond 16^th October, 1998. Since there is no ambiguity in the order of the Supreme Court and the Union of India has not sought any further clarification, the law as explained by the Supreme Court in its judgment dated 17^th March, 2005 read with its order dated 3rd February 2006 has to be strictly applied.

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It was submitted that the Appellant ought to have appealed against the dismissal of its appeal and not straightway approached this Court with the petition under Article 226 of the Constitution. It is seen that the Petitioner was before the Supreme Court with its petition under Article 32 of the Constitution, which was a remedy available to the Petitioner and rightly availed by it. Merely because it did not choose to exhaust a statutory remedy which was also available, does not preclude the Appellant from seeking legal redress by filing a writ petition directly in the Supreme Court.

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While admitting this appeal on 14^th March, 2017, this Court framed the following question of law:

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“Whether the CESTAT erred in upholding the denial of refund claimed by the appellant for the period16.10.1998 to 01.09.1999 in respect of service tax paidby it?”

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In view of the above discussion, the Court answers the above question in the affirmative by holding that the CESTAT erred in upholding the denial of refund claim by the Appellant for the period 16^th October, 1998 to 1^st SERTA 1/2017 Page 5 of 6

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Page 5 of 6

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September, 1999 in respect of service tax paid by it on the clearing and forwarding services availed by it. The impugned orders of the Commissioner (Appeals) and CESTAT are hereby set aside. The appeal is allowed in the above terms but in the circumstances with no orders as to costs.

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The Respondent will now refund to the Appellant the refund amount due for the period 16^th October, 1998 to 1^st September 1999, together with the interest due thereon, within a period of four weeks. If there is any noncompliance with the above directions of the Court, it would be open to the Appellant to seek appropriate remedies in accordance with law.

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CM No.10183/2017 (Exemption)

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Allowed subject to just exceptions.

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S.MURALIDHAR, J ANIL KUMAR CHAWLA, J

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MAY 08, 2017 b’nesh

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Page 6 of 6

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SERTA 1/2017

Ambuja Cements Ltd. v. Commissioner,Service Tax Commissionerate,Delhi

Case brief

What is this about?

What did the court decide?

Ambuja Cements Ltd. v. Commissioner,Service Tax Commissionerate,Delhi

Case brief

What is this about?

What did the court decide?

What the court decided

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