Commissioner Of Central GST vs. Jay Chemicals Industries LTD.

Held

The High Court disapproved of the CESTAT's procedure in disposing of the appeals without deciding them on merits, granting liberty to approach again after the decision in the Essar Steel India Ltd. case. The Court found this approach to be neither correct nor proper, as it would cause harassment to the assessee and inconvenience to the Department. The Court held that the CESTAT ought to have decided the appeals on merits in view of the binding decisions of the High Court in Cadila Healthcare Ltd. and Astik Dyestuff Pvt. Ltd. Alternatively, if the CESTAT felt it was inappropriate to decide on merits due to the pending Essar Steel India Ltd. case concerning the retrospective applicability of Notification No.2/2016-CE(NT), it should have kept the appeals pending. The Court quashed and set aside the impugned common order of the CESTAT. The appeals were restored to the file of the CESTAT and remanded with a direction to keep them pending until the decision of the High Court in the Essar Steel India Ltd. case. The Court noted that the assessee's counsel also conceded that keeping the appeals pending would have been the correct procedure. The appeals were partly allowed to this extent.

Facts

The Revenue (Commissioner of Central GST) filed these tax appeals challenging common judgments and orders passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The CESTAT had disposed of appeals concerning Cenvat credit of service tax paid on sales commission for various periods. Instead of deciding these appeals on merits, the CESTAT granted liberty to approach it again after the disposal of a pending appeal before the High Court in the case of Commissioner of Central Excise & Customs, Surat-II Vs. Essar Steel India Ltd. The Revenue contended that the CESTAT should have decided the appeals on merits, citing High Court decisions in Commissioner of C.Ex., Ahmedabad-II Vs. Cadila Healthcare Ltd. and Astik Dyestuff Pvt. Ltd. Vs. Commissioner of C.Ex. & Customs. The assessees argued that the applicability of a subsequent notification (No.2/2016-CE(NT)) retrospectively was pending before the High Court in the Essar Steel India Ltd. case, and thus the CESTAT's approach was justified, though they conceded that keeping the appeals pending would have been more appropriate than disposing of them.

Key Issues

1. Whether the CESTAT was legally justified in not deciding the appeals on merits, despite existing jurisdictional High Court decisions in favour of the Revenue (Commissioner of Central Excise, Ahmedabad-II Vs. Cadila Healthcare Ltd. and Astik Dyestuff Pvt. Ltd. Vs. Commissioner of Central Excise & Customs)? 2. Whether the CESTAT was legally justified in passing an order for no recovery or any refund of Cenvat Credit of Service Tax paid on Sales Commission during the period? Contentions of the Revenue: The Revenue argued that the CESTAT ought to have decided the appeals on merits because the issue was concluded in its favour by the High Court's decisions in Cadila Healthcare Ltd. and Astik Dyestuff Pvt. Ltd. The Revenue relied on these High Court judgments. Contentions of the Assessee: The assessees acknowledged that the merits were against them based on the Cadila Healthcare Ltd. and Astik Dyestuff Pvt. Ltd. decisions. However, they argued that the retrospective applicability of Notification No.2/2016-CE(NT), which inserted an explanation to the definition of 'input service', was pending before the High Court in the Essar Steel India Ltd. case. They contended that if the notification was held retrospective, the earlier High Court decisions would not apply, and they would be entitled to Cenvat credit. Therefore, they argued the CESTAT was right not to decide on merits pending the Essar Steel India Ltd. decision. They conceded, however, that keeping the appeals pending would have been a better procedure than disposing of them with liberty to approach later.