2011 (11) TMI 202 - AT - Service Tax

Power of Commissioner to demand interest on erroneous refund show cause notice mentions charging of interest u/s 75 Section 75 relates to Interest on delayed payment of Service Tax - Explanation I to Section 73(3) of Finance Act, 1994 provides for recovery of interest of erroneous refund - Held that - Once the interest is payable according to the Statute, it cannot be said that any prejudice has been caused to the appellant to defend their case against recovery. Just by quoting of wrong Section of law, it cannot be said that substantive right of the Revenue or public interest can be ignored and unless the appellant is able to show that prejudice has been caused to him by relying upon the non-applicable Section, such demand cannot be set aside.

Summary

Issues:
Refund claim rejection and interest demand under Section 75 of Finance Act, 1994.

Refund Claim Rejection:
The Appellate Tribunal CESTAT, Ahmedabad addressed a case where a refund claim of Rs.29,635/- was initially sanctioned but later revised by the Commissioner under Section 84 of Finance Act, 1994, deeming the refund inadmissible. The appellant had paid Service Tax on terminal handling charges related to exports, which was not on a notified service under Notification No.41/2007-ST. The appellant's counsel acknowledged the non-admissibility of the refund due to the nature of the service. The Tribunal found the appellant failed to establish a case for the refund.

Interest Demand under Section 75:
Regarding the demand for interest under Section 75 of the Finance Act, 1994, the appellant argued that interest could not be demanded when the Commissioner was exercising powers under Section 84. The Tribunal analyzed the provisions of Section 75, which pertains to interest on delayed payment of Service Tax. The Show Cause Notice issued under Section 84 mentioned the erroneous refund and the demand for interest under Section 75. Despite the incorrect application of Section 75, the Tribunal emphasized that the appellant had the opportunity to contest the interest demand and show why it should not be paid. The Tribunal concluded that the demand for interest could not be set aside solely based on the misquoting of the law without demonstrating prejudice to the appellant's case or substantive rights of the Revenue.

In the final judgment, the Appellate Tribunal CESTAT, Ahmedabad rejected the appeal by the appellant, citing no merits in their arguments regarding the refund claim rejection and interest demand under Section 75 of the Finance Act, 1994.