2021 (11) TMI 281 - AT - Service Tax

Refund of service tax paid under protest - assessment proceedings were not challenged - service tax was not payable by authorities concerned in an appeal of another assessee of the very same transaction - HELD THAT - Learned commissioner has recorded a specific finding that the payment made by the appellant was not voluntary and is under protest and also that the application for refund is not barred by limitation. The aforesaid findings of the learned commissioner have not been challenged by the department and therefore it attained finality. As per the impugned order of learned Commissioner, tax has been collected in accordance with law i.e. under the enactment itself and no amount is refundable unless a refund can be claimed in terms of the stature/enactment. It is settled position that if the payment made by the assessee is not for any services rendered by him, the amount collected by Revenue as service tax is without authority of law and cannot be termed as tax even and can t be retained by them. Where there is no levy of service tax, amount wrongly paid cannot partake the character of service tax . The authority concerned is duty bound to refund such amount as retention of such amount would be hit by Article 265 of the Constitution of India which bears the heading Taxes not to be imposed save by authority of law and lays down that no tax shall be levied or collected except by authority of law. So the act of the authorities by keeping the deposit is directly in conflict with Article 265. When the amount deposited by the appellant is not a tax and merely a deposit, there is no question of applying the provisions of the Finance Act for its refund. The refund provisions should be interpreted in a reasonable and practical manner and when warranted, liberally in favour of the assessee - appeal allowed.

Summary

Issues:
- Entitlement to refund of service tax paid under protest without challenging assessment proceedings.

Analysis:
1. The appellant, a co-writer of a film, received a payment from a production company for copyright infringement, which was considered a declared service by the tax department under section 66E(e) of the Finance Act, 1994.
2. The appellant paid service tax under protest, claiming it was compensation for damages to copyright and moral rights, not a payment for services rendered.
3. Another co-writer, Mr. Salim Khan, faced a similar situation, paid tax under protest, but later received a refund after successful appeal and clarification that the payment was ex gratia, not for services.
4. The appellant filed a refund claim based on the same grounds, arguing that since Mr. Salim Khan's payment was not taxable, his payment should also be refunded.
5. The tax authorities rejected the appellant's refund claim, stating that he did not pay tax under protest as claimed, and his liability was accepted and closed earlier.
6. The Commissioner upheld the rejection, emphasizing that the appellant did not challenge the earlier closure of proceedings before filing the refund claim.
7. The appellant argued that the differential treatment between him and Mr. Salim Khan was arbitrary and violated constitutional provisions, as the payment made under protest should not be considered tax if no services were rendered.
8. The Tribunal, after considering the arguments and case laws cited, concluded that the appellant's payment was not for services rendered, and therefore, should be refunded as it was merely a deposit made under protest.
9. The Tribunal emphasized that the retention of the amount by the tax authorities without any liability violated constitutional provisions and ordered the refund in favor of the appellant, stating that refund provisions should be interpreted liberally in favor of the assessee.

This detailed analysis of the judgment highlights the key issues, arguments, and the final decision of the Appellate Tribunal CESTAT MUMBAI regarding the entitlement to a refund of service tax paid under protest without challenging assessment proceedings.