Commissioner Central Goods And Service Tax And Central Excise, Vadodara-I vs. M/S Gulbrandsen Chemicals PVT LTD

Held

The High Court disapproved of the manner in which the CESTAT disposed of the appeals. The Court held that the CESTAT ought to have decided the appeals on merits, given the binding decisions of the High Court in Cadila Healthcare Ltd. and Astik Dyestuff Pvt. Ltd. However, if the CESTAT believed it was inappropriate to decide on merits due to the pending issue of retrospective applicability of Notification No.2/2016-CE(NT) in the Essar Steel India Ltd. case, it should have kept the appeals pending. The Court found the CESTAT's procedure of disposing of appeals without deciding them on merits, with liberty to approach again, to be incorrect, improper, and likely to cause harassment and inconvenience. Therefore, the impugned order of the CESTAT was quashed and set aside. The appeals were restored to the file of the CESTAT and directed to be kept pending until the decision of the High Court in the Essar Steel India Ltd. case. The Revenue was permitted to file an application for early hearing of the Essar Steel India Ltd. appeal. The Court expressly left undecided the merits of the original appeals before the CESTAT.

Facts

The Revenue (Commissioner of Central GST) filed these tax appeals challenging the common judgment and order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The CESTAT had disposed of appeals filed by Jay Chemical Industries Ltd. without deciding them on merits. Instead, the CESTAT granted liberty to approach the Tribunal 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 argued 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 Respondent-assessee conceded that the merits were against them based on the cited precedents but argued that the CESTAT rightly deferred a decision pending the High Court's ruling on the retrospective applicability of Notification No.2/2016-CE(NT) concerning input services.

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 C.Ex., Ahmedabad-II Vs. Cadila Healthcare Ltd. and Astik Dyestuff Pvt. Ltd. Vs. Commissioner of C.Ex. & Customs)? (Question of law) 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 in question? (Question of law) Petitioner's Arguments (Revenue): The CESTAT should have decided the appeals on merits as the issue was concluded in favour of the Revenue by the High Court's decisions in Cadila Healthcare Ltd. and Astik Dyestuff Pvt. Ltd. Respondent's Arguments (Assessee): While acknowledging the High Court's decisions on merits, the Respondent 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. If held retrospective, the earlier decisions would not apply, and the assessee would be entitled to Cenvat credit. Therefore, the CESTAT was correct in not deciding on merits, but should have kept the appeals pending rather than disposing of them.