2017 (1) TMI 34 - AT - Service Tax

Refund claim of interest - tax and interest paid under protest - foreign agent commission service - issue of taxability pending adjudication - Held that - the matter has to be re-considered for the reason that the refund of interest has been rejected by the refund sanctioning authority solely on the ground that the issue whether appellant is liable to pay, service tax is pending adjudication. It is now settled that appellant is not liable to pay service tax for the period prior to 18.04.2006. In view thereof, I deem it fit to remand the matter to the original authority to re-consider the issue of refund of interest in the present situation - appeal allowed by way of remand.

Summary

Issues:
1. Rejection of refund claim for service tax on foreign agent commission.
2. Dispute over the liability to pay service tax for the period 2005-2007.
3. Rejection of refund claim for interest on service tax paid.

Analysis:
1. The appellant entered into an agreement with a US-based company for assisting in procurement of export orders and paid commission. The Department claimed service tax on the commission, and the appellant paid it under protest. Later, the appellant sought a refund, realizing they were not liable to pay service tax before a certain date. The original authority rejected the refund claim citing pending consideration of the liability issue and lack of TR-6 Challan copy. The Commissioner (Appeals) upheld the rejection, leading to the current appeal.

2. The Department issued a Show Cause Notice for service tax demand from 2005-2007, which was adjudicated in 2012, dropping the demand before a specific date. A separate Show Cause Notice related to the refund claim for interest was also issued. The appellant argued that since the liability issue was settled and no service tax was due before a certain date, they should be eligible for the interest refund. The department supported reconsideration of the refund eligibility based on the settled liability issue.

3. The appellate tribunal agreed that the matter needed reconsideration as the refund was rejected solely due to the pending liability adjudication, which had been resolved in favor of the appellant. The tribunal remanded the case to the original authority to reassess the refund eligibility, providing the appellant with a hearing opportunity. Consequently, the impugned order was set aside, and the appeal was allowed for remand, ensuring a fresh consideration of the refund claim for interest on the service tax paid.