SERCO GLOBAL SERVICES PVT. LTD. Vs. COMMISSIONER OF C. EX., DELHI-III
LAWS(CE)-2015-3-83
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on March 05,2015

Serco Global Services Pvt. Ltd. Appellant
VERSUS
Commissioner Of C. Ex., Delhi -Iii Respondents




JUDGEMENT

R.K.SINGH,MEMBER (T) - (1.)THIS appeal has been filed against the Order -in -Appeal dated 29 -3 -2012 which upheld the Order -in -Original dated 1 -7 -2011 in terms of which 3 refund claims for the quarters April, 2008 to June, 2008, October, 2008 to December, 2008 and January, 2009 to March, 2009 amounting to Rs. 18,58,858/ -, Rs. 31,25,495/ - and Rs. 25,63,429/ - respectively were disposed of and no amount was sanctioned. Refund claims were filed in terms of Rule 5 of Cenvat Credit Rules, 2004 read with Notification No. , dated 14 -3 -2006. The appellant is registered under the Software Technology Parks of India (STPI) Scheme. In the Software Export Declaration form, it described the nature of services as "Software Development". In an elaborate discussion about classification of the services exported, the primary Adjudicating Authority came to a finding that (i) while maintenance or repair of computer software under Annual Maintenance Contract or otherwise, was taxable under "Management, Maintenance or Repair" service under Section 65(105)(zzg) of the Finance Act, 2004. "management, maintenance or repair" of software other than computer software were correctly classifiable under Information Technology Software services under Section 65(105)(zzzze) which became taxable with effect from 16 -5 -2008 and therefore, the Cenvat credit availed before that date was not admissible and hence was not eligible for refund.
(ii) ST -3 return for June, 2008 did not show unutilized closing balance of Cenvat credit and therefore no refund was admissible.

(iii) The Cenvat credit amount of Rs. 68,27,559/ - was wrongly added by them to their Cenvat Credit Account and therefore the amount of refund of Rs. 56,58,994/ - was adjusted towards the said amount and therefore not disbursed.

The appellant contended that -

(i) Its service was covered under the Management, Maintenance or Repair service during the whole period, (but during the hearing in CESTAT, it conceded that it was not pressing for the refund of amount of Cenvat credit taken before 16 -5 -2008).

(ii) Merely because there was inadvertent mistake in ST -3 return in not showing correct closing balance of Cenvat credit, that cannot be a ground for rejecting their claim for refund when Cenvat credit balance was available in their Cenvat Credit Account.

(iii) It filed revised ST -3 return reflecting the correct Cenvat credit balance before adjudication order was issued.

(iv) In any case the amount of refund should not be adjusted against the dues which had not been determined quasi -judicially and that there had been no show cause notice as to why the so -called wrongly added Cenvat credit balance of Rs. 68,27,559/ - should not be denied and recovered. Indeed, no action has been initiated even for recovery of Rs. 11,68,565/ - which remained as balance after adjusting the refund of Rs. 56,58,994/ - although the primary Adjudicating Authority in para 16.5 of the adjudication order noted as under:

"However, even after such deduction, an amount of Rs. 11,68,565/ - is still payable by the applicant for which separate proceedings may be initiated by the Assistant Commissioner (Division - Gurgaon) as the same cannot be done in the present refund proceedings."

(2.)THE ld. D.R. stated that the Adjudicating Authority was correct in adjusting the amount of refund towards Cenvat credit amount wrongly added in the ST -3 returns.
(3.)WE have considered the contentions of the appellant. In view of concession by the appellant that it was not pressing for refund of the credit taken prior to 16 -5 -2008, we are not dwelling upon the issue of admissibility or otherwise of refund of Cenvat credit taken, prior to 16 -5 -2008, or upon the issue of classification. As regards the ground of rejection of refund for the period 16 -5 -2008 to June, 2008 that the ST -3 return for June, 2008 did not show any unutilized balance of Cenvat credit, it is to be made clear that refund is to be granted on the basis of the Cenvat credit available in the Cenvat Credit Account and not on the basis of the closing balance of Cenvat credit shown in ST -3 Return. Further the appellant submitted revised return showing correct closing balance of Cenvat credit but the same was ignored by the Adjudicating Authority. In this regard, we find that in the case of jagdamba Polymers Ltd. v. C.C.E., Ahmedabad - : 2010 (253) E.L.T. 626 (Tri. -Ahmd.) it has been held by CESTAT that omission to reflect the balance in ER 1 return is only a procedural error for which credit cannot be denied when there is no dispute about its eligibility. In the case of Ceolric Services v. C.S.T., Bangalore - : 2011 (23) S.T.R. 369 (Tri. -Bang.), the Hon'ble CESTAT held as under:
In view of the provision of Rule 7C of the Rules, the revised return cannot be ignored simply on the ground that the same has been filed after a period provided under Rule 7B of the Rules. In these circumstances, we find that the matter requires re -consideration by the Adjudicating Authority in view of the provision of Rule 7C of the Rules. The impugned order is set aside, after waiving pre -deposit of the amount of Service Tax, interest and penalty and the matter is remanded to the Adjudicating Authority to decide the issue afresh after offering an opportunity of hearing to the appellant. The appeal is allowed by way of remand.

Thus, the mistake in ST -3 return was a rectifiable mistake which was indeed rectified by filing revised ST -3 return and as has been held in the case of Ceolric Services (supra) the revised return should not have been discarded as non est. Further, even if the Cenvat credit was considered to have been taken wrongly, disallowing the same requires quasi -judicial process involving issuance of show cause notice followed by a speaking order. In this case, it has obviously not been done. Indeed, we find that even after adjusting the amount of refund of Rs. 56,58,994/ - towards the Cenvat credit amount of Rs. 68,27,559/ - summarily held to be inadmissible, no action has been initiated for recovering the remaining amount of Rs. 11,68,565/ - as noted earlier. It has been held in the case of Hindustan Zinc Ltd. v. C.C.E., Jaipur II - : 2009 (15) S.T.R. 633 (Tri. -Del.) : 2007 (220) E.L.T. 410 (Tri.) that adjustment of refund claim in another pending case is not sustainable. In that case, the Department had adjusted the amount against another case which was pending before Tribunal whereas the appellant obtained stay order. In the case of Metal Forgings v. UOI - : 2002 (146) E.L.T. 241 (S.C.), the Hon'ble Supreme Court held that show cause notice is a mandatory requirement for raising demand and communications, orders, suggestions or advices from Department cannot be deemed to be a show cause notice.

Further, we find that the Commissioner (Appeals) in the impugned order (in para 6) has noted as under:

5. I find that the appellant had not shown all eligible input credits in the Service Tax return for the period April, 2008 to September, 2008. However, the appellant has shown all the past eligible credits not shown in earlier returns in the opening balance in the Service Tax return for the period October -March, 2009. Also the appellant was maintaining the Cenvat credit register during the period April - September, 2008. In view of the said inadvertent errors, the appellant has revised its Service Tax return for the period April, 2008 - September, 2008 and filed the same on 13 July, 2010 in the Gurgaon division. This revised return correctly mentioned that the appellant had a closing balance of Rs. 68,27,559/ - as on September, 2008.

Thus the Commissioner (Appeal) has himself noted that not showing balance of Cenvat credit in the ST -3 return was inadvertent error and the revised return submitted by the appellant correctly mentions the closing balance of Cenvat credit to be Rs. 68,27,559/ - as on September, 2008 and that the appellant was maintaining the Cenvat credit register.

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