2016 (5) TMI 133 - AT - Service Tax

Demand of Service tax - Overseas service under reverse charge mechanism - Deposit of amount of service tax as per the objection raised by the audit officer - Appellant submitted that it is a settled position that refund if any arises against the pre-deposit made during the proceedings shall be refundable as outcome of the adjudication of such demand. The relevant date for the purpose of refund under Section 11B is the date of the adjudication order on the demand case and not from the date of deposit of service tax. Also the amount deposited during investigation is treated as pre-deposit and the same become refundable as and when the case of demand of service tax is finalized. Held that - the demand raised in the show cause notice was dropped by the adjudicating authority and the service tax paid by the appellant is treated as pre-deposit. In case, if any amount deposited during the proceedings of the demand case, refund shall arise only when the demand case is finally decided in favour of the assesse. Though the appellant filed refund claim prior to the dropping of demand but the refund arise from the date of adjudication order by which the demand was dropped. Therefore in any case the date of deposit of service tax cannot be taken as relevant date in terms of Section 11B of the Act. The judgments relied upon by the appellant are applicable as in those judgment it has been held that the refund of any amount deposited during the investigation and proceedings the limitation of 1 year from the date of deposit shall not apply. Therefore, the refund is not hit by limitation. - Appeal allowed by way of remand

Summary

Issues:
- Determination of the relevant date for claiming a refund of service tax deposited by the appellant.

Analysis:
1. The main issue in this case revolves around the appropriate date from which the time period for claiming a refund of the service tax amount deposited by the appellant should be reckoned. The appellant argued that the refund should be considered only after the adjudication of the show cause notice, not from the date of deposit of the service tax. This argument was supported by citing various judgments.

2. The appellant's counsel contended that the amount of service tax was paid based on the audit officer's views, and a show cause notice was subsequently issued. The refund, according to the appellant, arises only after the adjudication of the show cause notice. It was emphasized that any refund arising from the pre-deposit made during proceedings should be granted based on the adjudication of the demand. The date of deposit was deemed irrelevant for the purpose of refund under Section 11B of the Act, as per the appellant's submissions and supported judgments.

3. On the contrary, the Revenue's representative argued that as per Section 11B of the Act, the limitation for filing a refund claim is within one year from the date of service tax deposit. Since the refund claim was filed after one year from the deposit date, the lower authorities rightly denied the refund on the grounds of being time-barred. Additionally, the Revenue suggested that if the appeal was allowed on limitation, the matter should be remanded to address the issue of unjust enrichment not previously considered by the authorities.

4. The Tribunal carefully considered both sides' arguments. It was noted that the service tax was paid based on the audit officer's direction regarding overseas services under the reverse charge mechanism. The appellant was issued a show cause notice for the demanded service tax, which was later dropped by the adjudicating authority following the resolution of the taxability issue. The service tax paid by the appellant was treated as a pre-deposit, and any refund would only arise upon the final decision in favor of the assessee in the demand case. The Tribunal agreed with the appellant that the relevant date for the refund should be from the adjudication order dropping the demand, not the date of deposit. The judgments cited by the appellant were found applicable to the case, indicating that the refund was not time-barred. However, the issue of unjust enrichment was not examined by the lower authorities, leading to the decision to remand the matter solely for verifying whether the refund incidence had been passed on to another party. Ultimately, the appeal was allowed by remanding the case to the adjudicating authority for further examination.