Observations of the hon’ble Delhi High Court:
The hon’ble High Court agreed with the submissions of BT India. The core question of law framed by the hon’ble High Court was in relation to the nature and extent of the power that is available to a refund adjudicating authority, that is, can a refund adjudicating authority undertake a virtual re-assessment to deny a refund claim or not.
A few critical observations are as follows:
a. The judgment of the hon’ble Supreme Court in the case of ITC (supra) was in the context of customs laws. However, the hon’ble Delhi High Court examined the provisions of gthe Customs Act, 1962 (“Customs Act”), the Finance Act and the Central Excise Act, 1944 (“Central Excise Act”), especially the provisions pertaining to assessments and refunds and concluded that the provisions were similar and therefore the observations made in the case of ITC (supra) would be applicable in the present case as well.
b. It was accordingly concluded that self-assessment under Section 70 of the Finance Act is also an ‘assessment’, and it can only be questioned in the manner as prescribed under the statute, that is, either by issuing a show cause notice under Section 73 of the Finance Act or by filing an appeal. Undisputed self-assessed returns cannot be questioned in refund proceedings, the Court held.
c. Grant of a refund in the context of exports is also executionary in nature and the Department is only entitled to verify the genuineness of the claims made and cannot undertake a virtual re-assessment so as to deny the refund.
d. Notification No. 27 / 2012- CE (NT) dated June 18, 2012 (“Notification No. 27”) (on which the Department placed strong reliance) only provides for procedural safeguards to be adopted in terms of determining the quantum of eligible refund. The terms, ‘safeguard, conditions, limitations’, appearing therein have to be given a reasonable interpretation.
e. BT India was never put to notice that it would be treated as an “intermediary.” The deficiency memos did not allude to the same. In any case, a deficiency memo cannot be a substitute for a show cause notice.
Basis the foregoing observations, the writ petition of BT India was allowed, and the Department was directed to process the refund applications in accordance with the law.
Source: Barandbench
