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ST - Refund - When it is held that no Service Tax is payable, whatever has been paid by appellant, whether by way of tax or interest, has to be treated as deposit and amount is to be refunded: CESTAT

By TIOL News Service

MUMBAI, NOV 20, 2014: THE appellant is a distributor for BSNL Prepaid Cellular services etc. and was registered with Service Tax department under the category of ‘franchise service'.

They had deposited an amount of Rs.24,73,590/- during the period 13.1.2009 to 9.11.2009 which included interest. These taxes were paid pursuant to issue of SCN dated 16.10.2008, which was adjudicated vide O-in-O dated 17.8.2009. Although the tax and interest was deposited, the appellant had preferred appeal before the Commissioner (Appeals), who vide an Order dated 15.2.2010 allowed the appeal in favour of the appellant holding that the appellant is a trader in SIM cards and have paid the Sales Tax on such transaction and accordingly, no Service Tax is payable.

Pleased with this order, the appellant applied for refund for the total amount of Rs.24,76,590/-.

The Assistant Commissioner while adjudicating the claim of refund, allowed refund of Rs.23,76,070/- (Rs.18,98,953/- being Service Tax and Rs.4,77,117/- towards interest) observing that as per the order of the Commissioner (Appeals), the amount of Service Tax on the alleged value of Service Tax comes to Rs.18,98,953/- and the interest on such tax comes to Rs.5,74,637/- whereas on scrutiny of the challans it is observed that the appellant had paid Rs.19,96,473/- as tax and Rs.4,77,117/- towards interest and the amount of Rs.97,520/- was rejected. It was observed that the interest paid by the appellant does not tally with the calculation as per the appellate order and thus, the amount was rejected on the ground of mismatch.

Unhappy with this order denying refund of Rs.97,520/- the appellant carried the matter in appeal before the Commissioner (Appeals), who dismissed the appeal on the ground of time bar.

So, the appellant is before the CESTAT and submits that since it is held that no Service Tax is exigible on the appellant, whatever amount was deposited by them acquired the character of deposit and, therefore, the whole amount of Rs.24,76,590/- paid by them is refundable.

The Bench observed -

"6. …I hold that the amounts deposited by the appellant whether by way of tax or interest, it assumed the character of deposit when it was held in its favour that no Service Tax is payable and or exigible. Thus, I hold that the adjudicating authority has erred in rejecting the refund claim of Rs.97,520/- on the ground of mismatch. Thus, the appeal is allowed, the impugned order is set aside and the adjudicating authority is directed to issue the refund of Rs.97,520/- within a period of four weeks from production of a copy of this order."

The appeal was allowed.

(See 2014-TIOL-2308-CESTAT-MUM)


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