Pranav B Prem

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has ruled that a refund claim cannot be entertained unless the self-assessment order is challenged through a proper appeal. This judgment emphasizes that without modifying the assessment order, any refund sought under the Central Excise Act, 1944, read with the Finance Act, 1994, is legally unsustainable.

Background of the Case

The appellant, engaged in the business of renting motor vehicles, had entered into a contract with the Nuclear Power Corporation of India Limited (NPCIL) to provide buses and motor vehicles. As per the work order, NPCIL deducted and paid service tax on 40% of the abated value under the Reverse Charge Mechanism. NPCIL subsequently required the appellant to pay service tax on the remaining 60% of the value, which was to be reimbursed to the appellant. Following NPCIL's recommendation, the appellant filed a refund claim under Section 11B of the Central Excise Act, 1944, read with Section 83 of the Finance Act, 1994, amounting to Rs. 8,43,105/-. The Adjudicating Authority rejected the refund claim entirely, stating that the appellant was liable to pay service tax on 50% of the value. The first appellate authority partly allowed the refund, leading to the present appeal before CESTAT.

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Tribunal's Observations and Legal Reasoning

The CESTAT bench comprising Ms. Binu Tamta (Judicial Member) and Mr. P.V. Subba Rao (Technical Member) upheld the rejection of the refund claim, relying on binding precedents and a strict interpretation of procedural requirements. The tribunal observed that the appellant had not challenged the self-assessment order under the proper appellate mechanism. Citing the Supreme Court's judgment in ITC Limited v. CCE, Kolkata-IV [2019 (368) ELT 216 (SC)], the tribunal emphasized: "A refund cannot be claimed without first challenging the assessment order under which the tax was paid. Refund proceedings are in the nature of execution proceedings and cannot be entertained without a modification of the original assessment order."  Further, the tribunal relied on the Delhi High Court's judgment in B.T. India Pvt. Ltd. [W.P. (C) 13968/2021], which extended this principle to service tax matters. It reiterated the legal position that refund claims cannot bypass the requirement of challenging self-assessment.

The bench specifically noted: "Without the assessment being modified in appeal, there is no scope for claiming a refund of the tax already paid." In rejecting the appellant's arguments, the tribunal emphasized that the tax was self-assessed and voluntarily paid without any protest. Unless the appellant successfully contested the self-assessment through an appeal, the refund was not legally permissible.

Adjudicating Authority's Findings

The Adjudicating Authority had previously held that the refund was incorrectly filed because the appellant was independently liable for service tax on 50% of the value. The tribunal concurred with these findings and reinforced that self-assessed liabilities carry a legal presumption of correctness unless specifically overturned through the appellate process. The tribunal highlighted: "As per the work order, the assessee was aware of their liability, and the payment was made accordingly. There is no basis to claim a refund without challenging the self-assessment."

Applicability of Section 11B of the Central Excise Act

The tribunal clarified that Section 11B only provides for a refund when the tax is paid under protest or where the assessment is successfully challenged. Since the appellant had neither protested nor appealed the assessment, the statutory conditions under Section 11B were not met. Referring to the statutory framework, the tribunal observed:  "Section 11B operates only where the assessment itself is contested or shown to be erroneous. In the absence of such a challenge, no refund can be entertained."

Distinguishing Case Law

The tribunal rejected the appellant's reliance on other refund-related decisions, stating that those cases involved situations where the assessment was either contested or where the payment was made under protest. In contrast, the present case involved uncontested self-assessments. The judgment reiterated the binding nature of the Supreme Court’s decision in ITC Limited, which clearly bars refund claims without modification of the underlying assessment.

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Conclusion and Decision

In conclusion, the tribunal dismissed the appellant’s claim for a refund, affirming the requirement to challenge self-assessment orders before seeking any refund under the law. The tribunal unequivocally held: "Since the self-assessment order remains unchallenged, the refund claim is not maintainable under the provisions of Section 11B of the Central Excise Act, 1944." The appeal was dismissed in its entirety, with the tribunal affirming the rejection of the refund claim.

Appearance

For Appellant: Shri Vijay Kumar, Advocate .

For Respondent: Ms.Jaya Kumari, Authorised Representative  

Cause Title: Shri R.C Gupta V. Commissioner of Central Excise

Case No: Service Tax appeal 52455 of 2018

Coram: Hon’ble Ms. Binu Tamta [Member (Judicial)], Hon’ble Mr. P.V. Subba Rao [Member (Technical)]

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