Dept. Not Authorised To Retain Service Tax Paid Which Is Otherwise Not Payable, CESTAT Directs Refund With 12% Interest
Mariya Paliwala
9 Feb 2024 6:30 AM GMT
The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that there is a lack of authority to collect such service tax by the appellant. It would not give the Department authority to retain the amount paid, which otherwise was not payable by the appellant. Nothing may act as an infringement on the right of the appellant to demand a refund of payments made by...
The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that there is a lack of authority to collect such service tax by the appellant. It would not give the Department authority to retain the amount paid, which otherwise was not payable by the appellant. Nothing may act as an infringement on the right of the appellant to demand a refund of payments made by them under the mistaken notion.
The bench of Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) has allowed an appeal and sanctioned 12% interest from the date of deposit until the date of actual refund. The provisions of Section 11B/11BB would not be applicable to the deposit as it is not a refund of duty. If the amount is collected without the authority of law, the same has to be refunded with interest.
The appellant/assessee constructed a mall. It availed credit for tax paid on input services. The Commissioner disallowed input credit on the ground that it is not “input service” as defined under Rule 2 of the Cenvat Credit Rules. The appellant deposited the amount “under protest." The appeal filed against the order is allowed by CESTAT, and the matter is remanded for quantification. On remand, the commissioner allows credit. The appellant filed a refund claim for the amount deposited, which was allowed. However, no interest was granted.
The department contended that a refund of duty under Section 11B was sanctioned within three months of the date of application after the passing of an order by the commissioner. Hence, there is no interest under Section 11BB.
The assessee contended that there is no denial that the claim was filed within the permissible time limit and that the clause of unjust enrichment is not applicable to the impugned amount. The interest rate of 12% may be sanctioned on the amount refunded to be awarded from the date of deposit.
The tribunal noted that the adjudicating authority, while denying the entitlement to interest, invoked sections 11B and 11BB of the Central Excise Act. From the bare reading of Section 11B/11BB, it is clear that the provision refers to the claim of refund of duty of excise only; it does not refer to any other amount collected without authority of law. In the case at hand, the amount sought as a refund was the amount paid during the investigation, which is held to not be the liability of the appellant.
The CESTAT found that there is a lack of authority to collect such a service tax by the appellant. It would not give the Department authority to retain the amount paid, which otherwise was not payable by the appellant. Nothing may act as an infringement on the right of the appellant to demand a refund of payments made by them under the mistaken notion.
The tribunal held that the appellant is entitled to interest on the amount of refund sanctioned at the rate of 12% to be calculated from the date of payment until the date of disbursement.
Counsel For Appellant: Bharat Raichandani
Counsel For Respondent: Jaya Kumari
Case Title: M/S. Indore Treasure Market City Pvt Ltd. Vs. Commissioner Of Central Goods And Service Tax And Central Excise, Indore
Case No.: Service Tax Appeal No. 55434 Of 2023
