2015 (8) TMI 687 - HC - Service Tax

Denial of refund claim - amount deposited during investigation - Stock Broking service - Valuation - Revenue contending that various charges like Misc. charges, turnover charges, Trade Guarantee Fund (TGF), Investor s Protection Fund (IPF), Stamp duty, Stock Exchange charges, Transaction charges, SEBI fees, Custom Protection Fund (CPF) and Demat charges received by stock brokers shall constitute value of taxable service - Demand of service tax set aside by Tribunal 2012 (6) TMI 364 - CESTAT, New Delhi - Held that - Department conducted an investigation against petitioner alleging non-payment of service tax on the various charges. During investigation, it revealed that service tax on various amounts totaling Rs. 2,46,85,713/- was not paid. Tax which was allegedly due was worked out at Rs. 16,18,761/-. Immediately, when this fact was pointed out, petitioner deposited an amount of Rs. 15,00,000/- and information in this regard was also transmitted to respondent/department vide letter dated April 29, 2005 but subsequently, after conclusion of the investigation, show cause notice dated March 29, 2006 was issued, which ultimately culminated into the demand as adjudicated by concerned authority vide original order dated August 23, 2006. It is also an undisputed fact that order-in-original dated August 23, 2006 has since been set aside by learned Tribunal vide order dated May 7, 2012. Mere pendency of appeal preferred by respondent/department challenging the order passed by Tribunal dated May 7, 2012 was itself no ground to delay the refund of amount of Rs. 15,00,000/- deposited by the assessee during the course of investigation. Since the amount has been unauthorizedly and without any legal basis, been withheld, the respondent was bound to pay interest especially, in the circumstances that amount of Rs. 15,00,000/- was utilised by respondent/department - department is directed to pay interest @15% per annum from the date it became due after excluding 3 months time from the date of passing of order i.e. from August 07, 2012 till February 12, 2014. - Decided in favour of assessee.

Summary

Issues:
1. Writ petition under Articles 226 and 227 for quashing show cause notice and seeking refund.
2. Allegations of non-payment of service tax on various charges against the petitioner.
3. Disputed demand of service tax, penalty, and interest.
4. Orders passed by adjudicating authority, Commissioner (Appeals), and Tribunal.
5. Request for refund of deposited amount and issuance of show cause notice.
6. Contention regarding entitlement to interest on the deposited amount.
7. Interpretation of Section 35F of the Act in relation to refund of pre-deposit.
8. Legal obligation to refund the deposited amount and payment of interest.

Analysis:

1. The writ petition was filed seeking a writ in the nature of certiorari to quash a show cause notice and for a refund of a sum deposited during an investigation. The petitioner, a service provider in the category of Stock Broker Services, was alleged to have recovered certain charges without paying service tax on them. The department calculated the amount to be paid and issued a show cause notice demanding service tax, interest, and penalties.

2. The adjudicating authority confirmed the demand and imposed penalties, which was partially set aside by the Commissioner (Appeals). The Tribunal later allowed the petitioner's appeal and set aside the order passed by the Commissioner of Central Excise (Appeals). Subsequently, the petitioner requested a refund of the deposited amount, which was declined by the department, leading to the filing of the instant petition.

3. The petitioner argued that the show cause notice was issued improperly, and the deposited amount should be refunded with interest. The department contended that the deposited amount did not qualify as a pre-deposit under Section 35F of the Act, hence not entitling the petitioner to interest on it.

4. The Court found merit in the petitioner's contentions, noting that the deposited amount was utilized by the department for over seven years. The Court emphasized that the mere pendency of an appeal by the department was not a valid reason to delay the refund of the deposited amount.

5. The Court held that the department was obligated to refund the amount promptly after the Tribunal set aside the demand. The contention of the department regarding the delay in refund under Section 35F was deemed untenable, and the department was directed to pay interest on the refunded amount.

6. Consequently, the Court disposed of the petition, directing the department to pay interest at the rate of 15% per annum from the date the refund became due, excluding a specified period.

This detailed analysis of the judgment covers the issues involved and provides a comprehensive understanding of the legal proceedings and the Court's decision.