Facts of the Case

  • First Round of Litigation: The petitioner, M/s Delhi and District Cricket Association (DDCA), had deposited excess amounts towards service tax and cesses (Swachh Bharat Cess [SBC] and Krishi Kalyan Cess [KKC]) via cash challans, leaving an unutilized surplus upon the rollout of GST. The petitioner claimed a total refund of ₹2,69,03,927/-.
  • Order-in-Original (03.01.2019): The adjudicating authority sanctioned a service tax refund of ₹2,32,09,285/- but denied refund of ₹36,94,642/- attributable to the cess component without assigning any statutory reasoning or deciding on statutory interest.
  • Appellate Remand Order (30.05.2019): Aggrieved by the denial of the cess refund and non-grant of statutory interest, the petitioner appealed. The Commissioner (Appeals-I) passed a specific remand order directing the adjudicating authority to:
    1. Re-examine records to arrive at the correct figure of unutilized cess.
    2. Provide exact legal reasons for rejecting the refund claim on cash-deposited advance cess.
    3. Adjudicate the claim of statutory interest under Section 11BB of the Central Excise Act, 1944.
  • Second Round / Exceeded Jurisdiction: Following remand, the Assistant Commissioner issued a fresh Show Cause Notice (SCN) dated 20.02.2020 proposing to reject ₹18,21,113/- (Service Tax) and ₹18,73,530/- (SBC & KKC) and levy penalties.
  • Impugned Order-in-Original (30.06.2020): Instead of confining adjudication to the limited remand directions, the Assistant Commissioner reopened the entire assessment, rejected the refund, and issued fresh recovery demands totaling ₹3,18,44,539/- towards short-paid tax, cess, interest, and late fees.
  • Procedural Flaws: The impugned order was passed without carrying out a mandatory pre-Show Cause Notice consultation and without granting a personal hearing to the petitioner. The petitioner subsequently challenged both the SCN and the Order-in-Original via a Writ Petition before the High Court of Delhi.

Issues Involved

  1. Jurisdiction & Scope of Remand: Whether an adjudicating authority can reopen settled assessments and widen the scope of adjudication beyond the specific directions laid down in an appellate remand order passed by the Commissioner (Appeals)?
  2. Breach of Natural Justice & Circular Instructions: Whether an Order-in-Original passed without holding pre-SCN consultation (violating CBEC Master Circular No. 1053/02/2017-CX dated 10.03.2017) and without affording an opportunity of personal hearing is legally sustainable?
  3. Statutory Interest & Estoppel: Whether an undertaking/letter by an assessee stating it will not claim interest operates as an estoppel against statutory interest mandates under Section 11BB of the Central Excise Act, 1944?

Petitioner’s Arguments

  • Exceeding Order of Remand: The petitioner submitted that the first Order-in-Original dated 03.01.2019 had already sanctioned a refund of ₹2,32,09,285/- and the Commissioner (Appeals-I) never set aside this sanction. The remand was strictly limited to examining the calculation/reasons for withholding ₹36,94,642/- and granting statutory interest. Reopening settled tax liabilities was completely ultra vires.
  • Violation of Principles of Natural Justice: The impugned Order-in-Original dated 30.06.2020 was passed without providing any opportunity of personal hearing to the petitioner.
  • Non-Compliance with CBEC Circular: Despite the recovery demand exceeding ₹50,00,000/-, no mandatory pre-SCN consultation was carried out by the revenue authorities, in flagrant violation of Paragraph 5 of CBEC Circular No. 1053/02/2017-CX dated 10.03.2017.
  • Entitlement to Statutory Interest: The refund application was formally submitted on 02.11.2017. Under Section 11BB of the Central Excise Act, 1944, interest automatically triggers upon the expiry of three months from the date of application (i.e., w.e.f. 02.02.2018) until the date of actual payment.
  • Excess Paid Amounts: The unutilized cash deposited in the exchequer was fully verifiable via payment challans provided to the department.

Respondent’s Arguments

  • Non-Submission of Records: The Revenue argued that the petitioner failed to submit a copy of the Personal Ledger Account (PLA) and detailed calculation sheets for the refund claim.
  • Waiver of Interest Claim: The Revenue relied upon a letter dated 07.12.2018 submitted by the petitioner during processing, wherein the petitioner had stated that it would not claim interest on the refund amount.
  • Short Payment of Tax: The Department contended that based on ST-3 return reconciliations for the periods October 2016–March 2017 and April 2017–June 2017, the petitioner had short-paid service tax liabilities, justifying the recovery orders passed.

Court Findings & Order

  • Jurisdictional Excess: The High Court held that the adjudicating authority committed a serious procedural and legal error by expanding the scope of adjudication. Since the Commissioner (Appeals-I) did not set aside the original refund sanction of ₹2,32,09,285/-, the lower authority had no jurisdiction to reopen the assessment or issue fresh recovery orders.
  • Violation of Due Process: The Court affirmed that failing to grant a personal hearing and bypassing pre-SCN consultation (contrary to Circular dated 10.03.2017) rendered the proceedings deeply flawed.
  • No Estoppel Against Statute: The Court firmly rejected the Revenue’s reliance on the petitioner's letter waiving interest. The Court ruled that there can be no estoppel against a statute. Statutory interest under Section 11BB of the 1944 Act triggers automatically upon the expiry of three months from the receipt of the refund application.
  • Sufficiency of Verification: The Court held that non-submission of PLA copies was irrelevant since bank payment challans proving tax/cess deposits were already provided and verifiable by the Revenue.

Directions Issued by the High Court:

  1. Interest on Sanctioned Refund: Revenue directed to pay simple interest @ 6% p.a. on ₹2,32,09,285/- from 02.02.2018 to 03.01.2019.
  2. Remittance of Excess Tax & Cess: Revenue directed to refund the net excess cash balance of ₹36,27,615/-.
  3. Interest on Excess Tax/Cess: The refunded sum of ₹36,27,615/- shall also carry simple interest @ 6% p.a. w.e.f. 02.02.2018 until the actual date of payment.
  4. Timeframe: Directives to be complied with within two weeks from the date of the order.

Important Clarification

Principle of "No Estoppel Against Statute": A written concession or undertaking given by a taxpayer agreeing to forgo interest cannot extinguish statutory rights granted by Parliament. Where Section 11BB mandates interest calculation post-expiry of three months from application date, administrative officers are legally obligated to disburse interest regardless of prior waiver statements.

Sections Involved

  • Section 11B of the Central Excise Act, 1944: Claim for refund of duty/tax.
  • Section 11BB of the Central Excise Act, 1944: Interest on delayed refunds.
  • Section 119 of the Finance Act, 2015: Application of Service Tax provisions to Swachh Bharat Cess (SBC).
  • Section 161 of the Finance Act, 2016: Application of Service Tax provisions to Krishi Kalyan Cess (KKC).
  • Article 226 of the Constitution of India: Writ jurisdiction of High Courts.

Link to download the order -https://mytaxexpert.co.in/uploads/1784625914_1851compressed.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content.The material has been prepared with the assistance of AI tools.