LI Network
Published on: November 07, 2023 at 12:28 IST
The Delhi High Court has ruled that a CENVAT credit refund cannot be denied unless the self-assessed return has been questioned, reviewed, or re-assessed.
The court clarified that a self-assessed return qualifies as an “assessment,” and it cannot be disputed in refund proceedings unless modified in line with the prescribed statutory procedure.
The Delhi High Court, presided over by Justice Yashwant Varma and Justice Dharmesh Sharma, emphasized that a self-assessed return is equivalent to an “assessment.” Unless it is altered in accordance with the statutory procedure, it cannot be contested during refund proceedings.
Background:
The petitioner/assessee submitted self-assessed returns to the Service Tax Commissionerate under Section 70.
The respondents did not take any further action regarding these returns, either pursuant to the powers granted by Section 72 or Section 73.
Section 72 allows the Adjudicating Authority to make a “best judgment assessment” if an assessee fails to furnish a return or, after submitting one, fails to assess the tax payable according to the Act’s provisions.
The Adjudicating Authority can request the assessee to produce accounts, documents, and evidence. After providing a hearing opportunity, it can assess the taxable service’s value to the best of its judgment and determine the amount payable by the assessee or the refundable amount.
The department concluded that the services provided by the petitioner did not qualify as “export of services” as defined in Rule 6A of the Service Tax Rules, 1994. This decision was based on the understanding that the services fell within the net of the Finance Act, 1994, and the Service Tax Rules, 1994.
Section 73 empowers an Adjudicating Authority to issue notice to the assessee when it finds that service tax has not been levied, paid, or has been short levied, short paid, or erroneously refunded, especially in cases involving fraud, collusion, wilful misstatement, suppression of facts, or contravention of Act provisions with the intent to evade service tax payment.
The power under Section 73(1) can be invoked within 30 months from the relevant date, and the Proviso to Section 73(1) can be invoked within five years from the relevant date.
The petitioner/assessee contested the department’s order denying its refund applications for unutilized CENVAT credit. The refund claims pertained to different quarters and were based on input services used for the “export of services,” including Broadcasting, Business Support, IT Software and Management, and Maintenance or Repair services.
The court concluded that the self-assessed return should not be denied unless it has been challenged, reviewed, or re-assessed, and the claim of the petitioner, qualifying services as an export of service, has been disputed following the statutory procedure.
In the absence of the self-assessed return being challenged, reviewed, or re-assessed, the respondents had no grounds to deny the CENVAT credit refund. Their examination should have focused on compliance with Rule 5 and related notification prescriptions, rather than questioning the self-assessed return itself.
Case Title: BT (India) Private Limited Versus UOI