Assessee Must Get Opportunity To Prove Tax Paid In Cash: CESTAT Remands Rs. 4.93 Crore Service Tax Refund Dispute

The Principal Bench of the Customs, Excise and Service Tax Appellate Tribunal has remanded a major service tax refund dispute involving refund claims of more than ₹4.93 crore, directing the adjudicating authority to reconsider the matter afresh after granting the assessee an adequate opportunity to present evidence. The Bench of Dr. Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member) held that the matter required reconsideration by the original authority. The Tribunal refrained from expressing any opinion on the merits of the controversy and left all questions of law and fact open for fresh adjudication. The appeal arose from an order passed by the Commissioner (Appeals), Central Tax-GST, New Delhi, which had upheld the Assistant Commissioner’s decision partially rejecting the refund claim filed by the company. The appellant had sought a refund of ₹4,93,48,563 in service tax. Out of this amount, refund of only ₹10,89,660 was sanctioned on the ground that it had been paid in cash, while refund of ₹4,82,58,903 was rejected. The rejected amount included ₹4,76,18,075 allegedly paid through CENVAT credit and ₹6,40,828 rejected on limitation grounds. According to the appellant, the service tax itself was not payable because the recipient of services, M/s Oil India Ltd., had already discharged the tax liability under the reverse charge mechanism. The company argued that once tax had been paid by the recipient under reverse charge, there was no requirement for the service provider to pay service tax again on the same transaction. However, the Assistant Commissioner while processing the refund claim took the view that if the output service itself was not taxable, the appellant was also not entitled to avail CENVAT credit on input services used for providing such services. Based on this reasoning, a substantial portion of the refund claim was denied. Before the Tribunal, the assessee strongly contended that refund proceedings could not be used as a mechanism to deny CENVAT credit eligibility without issuing a separate show cause notice. The counsel argued that the adjudicating authority exceeded its jurisdiction by examining the admissibility of CENVAT credit while deciding the refund application. The appellant further argued that the entire amount of service tax had actually been paid in cash and not through utilisation of CENVAT credit. On being questioned by the Bench, the counsel submitted that the relevant challans were not immediately available but requested that the matter be remanded so the documents could be produced before the original authority for verification. On the other hand, the department opposed the appeal and relied upon the Supreme Court rulings in Priya Blue Industries vs Commissioner of Customs (Preventive) and ITC Limited vs Commissioner of Central Excise, Kolkata IV to argue that refund proceedings are in the nature of execution proceedings and cannot be used to modify or alter self-assessments already reflected in statutory returns. The department further submitted that the ST-3 returns filed by the appellant had not been challenged or modified through appellate proceedings and therefore refund could not be granted in a manner that effectively altered the tax assessment or CENVAT credit position reflected in those returns. Reliance was also placed on the Delhi High Court judgment in BT (India) Pvt. Ltd. vs Union of India to contend that the principles laid down by the Supreme Court in ITC Limited would equally apply to service tax matters. The Tribunal set aside the impugned order and remanded the matter to the Assistant Commissioner for fresh decision after granting adequate opportunity to the appellant to produce evidence and present its case. Case Details Case Title: M/S. Kazakstancaspishelf India Pvt Ltd Versus Principal Commissioner Of Customs Citation: JURISHOUR-1229-CES-2026(DEL) Case No.: Service Tax Appeal No. 52619 of 2019 Date: 12.05.2026 Counsel For Appellant: Deepak Kumar Khokhar Counsel For Respondent: Jaya Kumari, Authorised Representative Click Here To Read Order Read More: JURISHOUR | TAX LAW DAILY BULLETIN : 12 May, 2026

Assessee Must Get Opportunity To Prove Tax Paid In Cash: CESTAT Remands Rs. 4.93 Crore Service Tax Refund Dispute

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