2013 (10) TMI 1321 - HC - Service Tax

Denial of refund claim - Coercive recovery of service tax - Held that - As such during the pendency of the stay application, respondent No. 2 recovered an amount of ₹ 1,49,92,754/- from the other 9 sanctioned rebate claims of exports of the petitioner and adjusted towards the dues under the OIO. It is required to be noted that as such the petitioner submitted appeals within statutory period of limitation along with stay applications. However, stay applications could not be heard by the learned CESTAT at the earliest. It is not the case on behalf of the respondent that as such there was any deliberate delay on the part of the petitioner in getting the stay applications decided. It is also not the case on behalf of the respondent that the delay in deciding the stay application is attributable to the petitioner. - If the respondent No. 2 would have waited till the stay applications are decided such an eventuality may not have taken place. Be that it may now in view of the disposal of the stay applications subsequently, petitioner is entitled to refund of ₹ 1,39,92,754/- which the respondent No. 2 has recovered by way of adjusting the same from the other 9 sanctioned rebate claims of exports of the petitioner. - Decided in favour of assessee.

Issues:
1. Quashing of recovery order and declaring it illegal.
2. Refund of rebate claims and prevention of coercive recovery.
3. Dispute over recovery action by the Department.
4. Decision on refund after disposal of stay applications by CESTAT.

Issue 1 - Quashing of recovery order and declaring it illegal:
The petitioner filed a petition under Article 226 seeking to quash a recovery order dated 9-7-2013 and declare it illegal. The order demanded a service tax amount, penalty, and interest. The petitioner had also appealed to the CESTAT and applied for a stay on recovery pending appeal. Despite this, the department proceeded with recovery, leading to the petition.

Issue 2 - Refund of rebate claims and prevention of coercive recovery:
The petitioner requested immediate refund of rebate claims and to prevent coercive recovery pending appeal hearings. The Department had already recovered an amount from the petitioner's rebate claims and adjusted it against the dues. The CESTAT directed the petitioner to make a pre-deposit, and the petitioner sought a refund of the remaining amount after this pre-deposit.

Issue 3 - Dispute over recovery action by the Department:
The petitioner challenged the Department's recovery action before the High Court. The Department had adjusted a significant amount from the petitioner's rebate claims towards the dues under the original order, leading to the dispute over the legality and timing of the recovery action.

Issue 4 - Decision on refund after disposal of stay applications by CESTAT:
During the pendency of the petition, the CESTAT disposed of the stay applications and directed the petitioner to make a pre-deposit. The High Court considered the delay in deciding the stay applications and concluded that the petitioner was entitled to a refund of the amount recovered by the Department from the rebate claims, minus the pre-deposit amount. The Court directed the Department to refund the balance amount to the petitioner within a specified timeframe, subject to the outcome of the pending appeals before the CESTAT.

In conclusion, the High Court ruled in favor of the petitioner, directing the Department to refund a specific amount adjusted from the rebate claims. The refund was ordered within a set timeframe, considering the disposal of stay applications by the CESTAT and without prejudice to the ongoing appeals.

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