Ambuja Cements Ltd. Vs. Commissioner, Service Tax Commissionerate, Delhi
May, 18th 2017
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ SERTA 1/2017
AMBUJA CEMENTS LTD. ..... Appellant
Through: Mr. M.P. Devnath, Mr. Abhishek Anand&
Mr. Yogendra Aldak, Advocates.
SERVICE TAX COMMISSIONERATE, DELHI ....Respondent
Through: Mr. Deepak Anand, Junior Standing
JUSTICE S. MURALIDHAR
JUSTICE ANIL KUMAR CHAWLA
Dr. S. Muralidhar, J.:
1. 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 20th September, 2016 passed by the Customs, Excise and
Service Tax Appellate Tribunal, Delhi (,,CESTAT) dismissing appeal
2. 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 16th July, 1997 and 30th 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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relevant period, the Appellant paid service tax of Rs.35,42,021 for the
period 16th July, 1997 to 30th September, 1999 under the category of
,,Clearing and Forwarding Agent Service on the services so received.
3. In its decision in Laghu Udyog Bharti v. Union of India 1999 (112) ELT
365 (SC), the Supreme Court by its judgment dated 27th 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 23rd August,
1999 Notification No.7/1999-ST was issued with effect from 1st September,
1999 whereby sub-clause (iii) in Rule 2(1)(d) of the Service Tax Rules,
1994 was omitted. Meanwhile on 18th 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 16th July, 1997 to 30th September, 1999.
4. However, by the order dated 24th 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.
5. While the Appellants 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).
6. In view of the retrospective amendments, the Commissioner (Appeals) by
an order dated 12th October 2000, dismissed the Petitioners appeal
confirming the order rejecting the refund claim.
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7. Under the Finance Act 2003, the levy of service tax on recipients of
service with effect from 16th July, 1997 to 16th 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.
8. 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:
"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 16thNovember, 1997, the levy was
exempted for the periodsubsequent to 2ndJune, 1998 in view of the
notificationdated 2ndJune, 1998which is still operative. Yet
therespondents had raised demands for service tax forperiods
subsequent to 2ndJune, 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 16thNovember, 1997 to
2ndJune, 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 thNovember,
2003. In those cases in which the tax mayhave been paid but not
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refunded to the writ petitioners,for whatever reason, there is no
question of levy of anyinterest or penalty at all.
With these clarifications, the writ petitions aredismissed without any
order as to costs."
9. 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 3rd 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 17th March,
10. 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
16th October, 1998.
11. Learned counsel for the Respondent sought to contend that when the
entire paragraph of the decision dated 17th 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 16th October, 1998.
12. The fact remains that the Union of India did not challenge the order
dated 3rd February, 2006 passed by the Supreme Court making a minor but
significant change to its judgment dated 17th 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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13. 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 16th 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 17th March, 2005 read with its order dated 3rd February 2006 has to
be strictly applied.
14. 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.
15. While admitting this appeal on 14th March, 2017, this Court framed the
following question of law:
"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?"
16. 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 1st
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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
17. The Respondent will now refund to the Appellant the refund amount due
for the period 16th October, 1998 to 1st September 1999, together with the
interest due thereon, within a period of four weeks. If there is any non-
compliance with the above directions of the Court, it would be open to the
Appellant to seek appropriate remedies in accordance with law.
CM No.10183/2017 (Exemption)
18. Allowed subject to just exceptions.
ANIL KUMAR CHAWLA, J
MAY 08, 2017
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