1. Heard learned counsel for the parties. The learned Custom, Excise and Service Tax, Appellate Tribunal, East Zone Bench, Kolkata was directed to send the statement of case in terms of Section 35H(3) of the Central Excise Act, 1944 by the order of this Court upon which following questions of law have been referred to this Court:-
1(i). Whether the Tribunal was justified in confirming the recovery of the refund from the applicant who, being the transport operator, (Service Provider) admittedly is not liable to pay any service tax whereas TISCO, being the person who availed the services of the transport operator, is liable for payment of service tax under law?
(ii) Whether on the facts and in the circumstances of the case, the Tribunal was justified in law holding the refund to be recovered from the applicant and not from TISCO, especially in view of the fact that the applicant is not an assessee under the Act and TISCO is the assessee?
2. Whether Section 117 of the Finance Act, 2000 had any application to the case of the applicant and whether it was liable to pay interest @ 24% per annum in terms thereof?
3. Whether and in any event, any interest could be demanded from the applicant for the period prior to the setting aside of the refund order dated January 3, 2000 by the Commissioner in exercise of his powers u/s 84 of the Finance Act, 1994 by an order dated November 29, 2001 communicated to the applicant on December 28, 2001?
2. Brief facts of the case are that by Finance Act, 1997, service tax was imposed at the rate of 5% on various persons including Goods Transport Operators who were service providers and such tax was also recoverable by the transport service receivers. Then vide notification No. 42/97 dated 05.11.1997 the liability to pay the tax was restricted on the user of the services of the Goods Transport Operators instead of providers of the said service. The validity of Rule 2 of the Service Tax Rules as amended in 1997 was challenged before the Hon''ble Supreme Court and the Hon''ble Supreme Court in the case of
....... any tax which has been paid by customers or clients of the clearing and forwarding agents or of the goods transport operators shall be refunded within twelve weeks on their making a demand for refund.
The Revenue, finding above direction of the Supreme Court, refunded the tax amount deposited by TISCO to the applicant.
3. However, applicant''s own case is that it did not pay the tax and tax amount was paid by TISCO (the service availer). Since the tax was not paid by the applicant, therefore, it could not have been refunded to the applicant, therefore, applicant obtained a consent letter from the service availer M/s. TISCO and because of that reason the tax deposited by TISCO, was paid to the applicant. Applicant also submitted an affidavit before revenue authority on 29.12.1999 and gave undertaking that amount refunded to the applicant shall be paid back to the Department in case the refund is found to be erroneous. It appears from the order of the CEGAT dated 14.01.2003 that TISCO might have filed an application for refund of said tax amount but learned counsel for the TISCO Sri M.S. Mittal submitted that this observation of the Tribunal is erroneous as TISCO did not file the application. This contention of TISCO is seriously contested by the applicant''s counsel Sri Binod Poddar and submitted that TISCO submitted the application for refund. This fact may not be very much relevant for the purpose of deciding the question referred to us as undisputedly, the tax amount was paid by the TISCO, the service availer and it was refunded to the applicant (service provider), with consent and authorisation given by the TISCO in favour of the applicant.
4. Undisputedly, initially there was liability to pay the tax and this tax was paid by TISCO (the service availer). By virtue of the judgement of the Hon''ble Supreme Court in the case of Laghu Udyog Bharati & Others (supra) the tax collected by the Revenue was required to be refunded and there was specific order of the Hon''ble Supreme Court for refund of the collected tax. This is also not in dispute that amount was not deposited by the applicant who was the service provider, however, applicant''s case throughout was that it worked as agent of TISCO and also obtained the consent letter from TISCO for receiving the amount of the tax. The position changed because of the validating Act which is Finance Act, 2000 whereby the effect of the judgement of the Hon''ble Supreme Court delivered in the case of Laghu Udyog Bharati & Others (supra) had been nullified and specifically Section 117 was enacted which provides for refund of the tax which has been refunded in pursuance of any judgement, decree or order of any court, striking down sub-clauses (xii) and (xvii) of Clause (d) of sub-rule (1) of Rule 2 of Service Tax Rules, 1994 (obviously, by judgment of Laghu Udyog Bharati''s case) before the date on which Finance Act, 2000 received the assent of the President and by Clause (ii) of Section 117 of the Finance Act, 2000, the said amount was made recoverable within a period of 30 days from the date on which the Finance Act, 2000 received the assent of the President and the President accorded assent on 12th May, 2000. Therefore, a duty was cast to refund the amount which may have been paid by virtue of the judgement or decree of any court including the judgement of the Hon''ble Supreme Court rendered in the case of Laghu Udyog Bharati & Others (supra).
5. The contention of the applicant before us is that any notice under the Finance Act, 1997 or the Finance Act, 2000 could have been issued to only the assessee or the person who is covered and governed by the Act of 1997 and 2000. Admittedly, applicant was not liable to pay the tax amount and admittedly the said position continued from the beginning to till date and, therefore, the Department has no authority and jurisdiction to ask the applicant to pay or refund or redeposit the amount which was paid to it on its application. It is also submitted that, accordingly applicant, even TISCO was and is not liable to pay the service tax, therefore, the position emerges is that, according to applicant, there is no service tax liability either of applicant or of even TISCO. Learned counsel for the applicant relied upon the Division Bench Judgement of this Court delivered in the case of Central Coalfields Limited, Ranchi Vs. Central Board of Excise & Customs, New Delhi wherein Section 73 has been considered in detail and it has been held that in a case where there is no liability to file return u/s 70 by a party, then in that situation, no notice u/s 73 of the Act could have been issued to the party and, therefore, no demand can be raised. The Division Bench of this Court in the case of Central Coalfields Limited(supra) considered the various earlier judgements of the Hon''ble Supreme Court which includes the judgement delivered in the case of
6. In view of the above submission, learned counsel for the applicant vehemently submitted that question No. 1 referred to this court is based on undisputed facts. It is not in dispute that applicant is not liable to pay any service tax. It is also not in dispute that TISCO was liable to pay the service tax but in arguments, specifically in the opinion of the applicant, TISCO was and is also not liable to pay the service tax. Then in that situation, in either case, the applicant not being assessee was not being liable to pay service tax and could not have been served with the notice and notice of demand could have been raised against the TISCO, therefore, the notice was wholly without jurisdiction.
7. Learned counsel for the Revenue supported the reasons given by the Tribunal and submitted that the TISCO was liable to pay the tax amount and said tax amount was duly paid by the TISCO. In view of the judgement of the Supreme Court delivered in the case of Laghu Udyog Bharati & Others (supra), the Revenue was under obligation to refund the amount. Till that period, the applicant was nowhere in picture, so far as Revenue is concerned. Upon submitting application by the applicant with affidavit undertaking that in case the amount is paid erroneously, then it will refund back to the Revenue, (sic) amount has been paid to the applicant. It was never the property of the applicant nor it could have been presumed to be property of the applicant. Therefore, the person who took the refund in above peculiar facts and circumstances, was liable to refund the tax amount which he got only by virtue of the judgement of the Supreme Court, effect of which has been nullified by the statutory provision in Finance Act, 2000. At this juncture, learned counsel for the applicant submitted that applicant has already refunded the tax amount; 20 lacs on 26.07.2002, 1 lac on 26.07.2002 and 12 lacs on 04.03.2003. It is submitted that mere refund of that amount by the applicant will not affect the merit of this case.
8. Learned counsel for the TISCO did not question its liability to pay the tax which it has paid for the period pertaining to 16.11.1997 to 01.06.1998. At this juncture, it will be relevant to mention here that one notification dated 02.06.1998 also came in force exempting the payment of tax by the service provider. However, in the facts of the case also that is not much relevant because of the reason that it is the case of the Revenue also that the Revenue never demanded any tax amount from the service provider-applicant nor the service provider-applicant paid the tax amount. The tax amount was paid by the TISCO is not in dispute. The tax amount was refunded to the applicant in view of the consent given by the TISCO.
9. Learned counsel for the TISCO since has not disputed its liability to pay the tax and has not challenged any order creating liability, therefore, it is not relevant in view of the question referred to us to go into this aspect whether the TISCO was liable to pay the tax or not but still in view of the arguments advanced by the learned counsel for the applicant, learned counsel for the Revenue and learned counsel for the TISCO, we are of the considered opinion that in view of the validating Act of 2000, validity of which has been upheld by the Hon''ble Supreme Court in the case of Gujarat Ambuja Cement (Supra), this issue is no more res integra and TISCO being service availer, was liable to pay the tax till said liability was quashed by the Supreme Court''s judgement given in the case of Laghu Udyog Bharati''s Case and thus, liability revived retrospectively by Validation Act of 2000 leaving no area without liability of TISCO for the Service Tax and in this case the tax was paid by the TISCO.
10. In view of the judgement of the Supreme Court validating the provisions of the Act of 2000, the liability of TISCO continued without any break. During the period of the absence of the validation Act i.e., Finance Act, 2000, the amount was refunded. The applicant''s counsel though argued vehemently that TISCO was not liable but the applicant''s stand throughout before all authorities including this reference application itself was very categorical and it has been specifically pleaded that applicant was not liable to pay the tax but TISCO was liable to pay the tax. The afterthought of the applicant taking the plea that TISCO was not liable to pay service tax also is not legally sustainable, therefore, so far as answer to 1st part of question No. 1 is concerned, it can be given that the applicant was not liable to pay the tax and the TISCO was liable to pay the tax which finds support from the judgement of the Supreme Court delivered in the cases referred above. The second part of question No. 1 that even after above view of the applicant, service provider was not liable to pay the tax, whether the Tribunal was justified in confirming the recovery of the said amount from the applicant service provider, is to be considered which will be considered by us.
11. At this juncture, it will be relevant to consider the judgements delivered by this Court in the case of Central Coalfields Limited, Ranchi and the judgement of the Supreme Court delivered in the case of Gujarat Ambuja Cement (supra) and Gujarat Carbon and Industries Ltd. (supra). These judgements have no relevance to the controversy in this case. In these judgements, including the judgement of the Tribunal which has been upheld by the Hon''ble Supreme Court in the case of L.H. Sugar Factories Ltd. & Another (supra), only one issue has been decided against Revenue and that was the issue with respect to the scope and applicability of Section 73 of the Act. In the case of L.H. Sugar Factories Ltd. & Another, the Tribunal, after considering relevant legal position, in para-8 has specifically held that "in view of the above provision, the appellants are deemed to be persons liable to pay service tax and shall pay tax at the rate specified in Section 66" and so far as demand of interest and liability as demanded u/s 73, that has been quashed on the ground that the notice can be given by the authority only to the persons who are under obligation to file the return and have not filed the return, therefore, those judgements nowhere laid down that the service availer is also not liable to pay the service tax. Rather say, Tribunal has specifically held that service availer is and was liable to pay the Service Tax and that finding has not been reversed by the Supreme Court and the Supreme Court in the case of L.H. Sugar Factories case upheld the view of Tribunal relating to scope of Section 73 only.
12. Now the root question which survives is that whether in that fact situation where the applicant was not liable to pay tax and TISCO was liable to pay the tax and paid the tax and that tax has been refunded and paid to the applicant, whether the Tribunal was justified in ordering recovery of the said amount from the applicant service provider.
13. It appears that the arguments have been advanced as though the applicant is sought to be taxed and that is not the correct position. In view of the finding recorded by us also and upholding the contention of even applicant, the applicant was not liable to pay the tax and the TISCO was liable to pay the tax and paid the tax and the amount was refunded to the TISCO, may it be through its agent or may its nominee or may it be any person. Admittedly, the agent/agency continues for specific period and in this case, if the case of the applicant is accepted as has been pleaded even before the authorities, then the applicant acted as an agent of the TISCO and received money which admittedly it had not paid to the TISCO and at the time when the applicant was asked to refund the amount, who was holding the amount certainly and absolutely on behalf of the TISCO. Contrary to it, the applicant''s own pleading is that TISCO wrongly and illegally deducted applicant''s bill amount and paid to the revenue. If it is the case of the applicant, then applicant could have claimed the amount from the TISCO by availing lawful remedy and the Revenue was not in picture at any point of time. The Revenue was not concerned, from where TISCO got the money nor the Revenue accepted said money as against liability of applicant, service provider.
14. It may be true that assessment can be against an assessee or a person who is liable to furnish the return in accordance with the rules and notice can be issued to that assessee only for Charging any tax or for determination of tax or for quantification of tax or for imposition of penalty or interest but in this case, liability is determined and not in question. The amount has been paid to the Revenue and that amount is not refunded because of the setting aside of the order of demand in appeal or otherwise but that amount was refunded which could have been refunded only to that assessee, has been paid to the assessee''s agent but by virtue of the judgement of the Supreme Court and the effect of the Supreme Court''s judgement was nullified by statutory enactment, validity of which has been upheld by the Supreme Court. In that situation, one of the legal proposition applicable is that, one who gets the benefit because of the order of the Court and that order is set aside, he is bound to restore the benefit from whom he got. Therefore, the Tribunal was fully justified in ordering the recovery of the said amount from the person to whom it was paid in view of the judgement of Supreme Court effect of which has been nullified by Finance Act, 2000.
15. Learned Commissioner, Central Excise, Jamshedpur in its order dated 29.11.2001 very rightly observed that the plain and logical consequence of making such law is to restore status quo ante and imposing a duty and obligation on the notices who got the refund under the overruled judgement to pay back that amount. We may take help from Section 144 of the Code of Civil Procedure, which also have the similar provision, which provides that where and in so far as a decree is varied or reversed in any appeal, revision or other proceeding or is set aside or is modified in any suit instituted for the purpose, the Court which passed the decree or order shall, on the application of any party entitled to any benefit by way of restitution or otherwise, cause such restitution to be made. The applicant who got the benefit of the judgement of the Supreme Court delivered in the case of Laghu Udyog Bharati & Others (supra) cannot take the plea that upon ceasing of the effect of the such judgement, he is not bound to restore the position and to return the benefit which it obtained under that overruled legal position.
16. In view of the above reasons, the 2nd part of question No. 1 is answered against the applicant and it is held that the Tribunal was justified in demanding refund of the amount of the tax paid to the applicant from applicant.
17. In view of the above finding, it is held that the Tribunal was justified in holding that the tax amount refunded to the applicant is recoverable from the applicant and question No. 2 is answered against the assessee.
18. So far as the language of Section 117 for the purpose of liability of payment of interest @ 24% is concerned, that is abundantly clear and it is not dependent on any further fact and this liability is statutory liability and therefore, that amount which was refunded, carries an interest according to Section 117 and at the rate as provided in the said Section. The question No. 3 is also answered against the applicant.
19. In view of the valid statutory provision u/s 117 creating liability, which is not dependent upon setting aside of the order of refund, the liability to pay interest is not dependent upon any order passed u/s 84 of the Finance Act, 1994. In view of the above reason, this question is also answered against the applicant.
20. Though we have already considered the case of Gujarat Carbon and Industries Ltd., we are of the considered opinion that the case of Gujarat Carbon and Industries Ltd. was in relation to the imposition of service tax which gives specific power to the Assistant Commissioner of Central Excise who believes that by reason of omission or failure on the part of the assessee to make a return u/s 70 for any prescribed period or to disclose wholly or truly all material facts required for verification of the assessment u/s 71, the value of taxable service for that quarter has escaped assessment or has been under assessed, or any sum has erroneously been refunded. Though we have already observed with respect to the Gujarat Carbon and Industries Ltd. but in view of the argument of the learned counsel for the applicant, it will be appropriate to consider Section 73 of the Finance Act, 1994 and Clause (ii) of Section 117 of the Finance Act, 2000.
Section 73 of the Act of 1994 is as under:--
73. Value of taxable services escaping assessment. - If
(a) the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise has reason to believe that by reason of omission or failure on the part of the assessee to make a return u/s 70 for any prescribed period or to disclose wholly or truly all material facts required for verification of the assessment u/s 71, the value of taxable service for that quarter has escaped assessment or has been under assessed, or any sum has erroneously been refunded, or
(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assistant Commissioner of Central Excise or, as the case may be, Deputy Commissioner of Central Excise has, in consequence of information in his possession, reason to believe that the value of any taxable service assessable in any prescribed period has escaped assessment or has been under assessed, or any sum has erroneously been refunded.
he may, in case falling under clause (a), at any time within five years, and in cases falling under clause (b), at any time within six months from the date for filing the return, serve on the assessee a notice and proceed to assess or reassess the value of the taxable service.
Clause (ii) of Section 117 of the Finance Act, 2000 is as under:-
117. Validation of certain action taken under Service Tax Rules
(ii) any service tax refunded in pursuance of any judgement, decree or order of any court striking down sub-clauses (xii) and (xvii) of clause (d) of sub-rule (1) of rule 2 of the Service Tax Rules, 1994 before the date on which the Finance Act, 2000 receives the assent of the President shall be recoverable within a period of thirty days from the date on which the Finance Act, 2000 receives the assent of the President, and in the event of non-payment of such service tax refunded within this period, in addition to the amount of service tax recoverable, interest at the rate of twenty-four per cent. Per annum shall be payable, from the date immediately after the expiry of the said period of thirty days, till the date of payment.
21. A bare reading of these two provisions will reveal that both Sections deal with two different subjects. Section 73 of the Act of 1994 is specific provision which normally finds place in all taxing statute authorising the taxing officer to see that because of the reason of omission or failure on the part of the assessee to make a return or if he fails to disclose wholly or truly all material fact for verification under the relevant provision of relevant Act and the tax has escaped assessment or has been under assessed or any sum has erroneously been refunded, then in that situation, the said authority may exercise its jurisdiction within the period prescribed by the statute and levy the tax whereas Clause (ii) of Section 117 of Finance Act, 2000 is absolutely independent and separate provision enacted for Special purpose and to overcome the situation created by judgment of Supreme Court decided in the case of Laghu Udyog Bharati''s case.
22. By Clause (ii) of Section 117 it has been provided that in a case service tax has been refunded in pursuance of any judgement, decree or order of any court, striking down sub-clauses (xii) and (xvii) of Clause (d) of sub-rule (1) of Rule 2 of Service Tax Rules, 1994, then Clause (ii) of Section 117 of the Act of 2000 will come into play. There is no relation between two sections which we have referred above and the consequent of non-payment of the amount of Clause (ii) of Section 117 of Finance Act, 2000 is provided in Clause (ii) itself. Clause (ii) of Section 117 of the Act of 2000 is not dependent upon Section 73 of the Act of 1994 nor Section 73 governs Clause (ii) of Section 117 of the Act of 2000. Therefore, in a situation where there is an obligation to file the return then only Section 73 can apply. Here, in this case, it is not the case of omission or failure on the part of the assessee to make a return u/s 70 for any preceding period or and also is not the case of nondisclosure of material facts, wholly or truly, which required verification of the assessment u/s 71 or the value of taxable service for that quarter has escaped assessment or has been under assessed or any sum has erroneously been refunded obviously in a proceeding for assessment of the tax. Therefore, the judgement delivered in the case of Gujarat Carbon and Industries Ltd. has no application to the facts of the case and it may be again mentioned here that the applicant is not the assessee nor liable for the tax but he is being asked to refund the amount which he has received from the account of the TISCO who was liable to pay the tax. The questions are answered accordingly.
