2022 (7) TMI 458 - HC - Service Tax

Recovery of erroneous refund of the tax paid - petitioner requested the respondents to sanction interest at 6% on the amount deposited by the petitioner during the investigation prior to issue of the show cause notice - works contract - HELD THAT - Admittedly, only for the period after 1.6.2007 the petitioner was liable to pay service tax. A part of the demand proposing the show cause notice would also have been dropped - The petitioner was liable to pay service tax for the period between 1.6.2007 and thereafter 31.10.2008 under the category of works contract . The demand that was proposed and was confined only to Rs.67,97,827/-. The petitioner has not been paid interest separately on the amount that was deposited pending investigation. To that extent, the petitioner is entitled in interest at the rate of 6% on Rs.57,03,608/- only - The amount of tax which was paid by the petitioner for the subsequent period after 1.6.2007 could not have been refunded. However, curiously it appears to have also has been ordered to be refunded back. This would require a proper examination which fact is not forthcoming either from the petitioner or respondent. The case remanded back to the second respondent to re-examine the issue and pay/adjust interest payable to the petitioner firm and out of the amount paid. If there was an erroneous refund of the tax paid for the period after 31.10.2008, the respondents are directed to take appropriate steps to recover the aforesaid amount from the petitioner - petition allowed by way of remand.

Summary

Issues:
1. Writ of Certiorarified Mandamus sought for calling records of impugned proceedings and interest payment direction.
2. Taxability of service for a specific period.
3. Show Cause Notice for Service Tax demand, appropriation of paid amount, interest, and penalty imposition.
4. Confirmation of demand and penalty by the first respondent.
5. Appeal before Customs, Excise and Service Tax Tribunal leading to relief.
6. Sanctioning of refund without interest payment.
7. Petitioner's request for interest on deposited amount.
8. Legal precedents cited by the petitioner.
9. Discrepancy in the sanctioned refund amount.
10. Liability for service tax for a specific period and refund issue.
11. Lack of appeal by the department affecting petitioner's rights.
12. Entitlement to interest on deposited amount pending investigation.
13. Direction for re-examination by the second respondent and recovery of erroneous refund.

Analysis:
The petitioner filed a writ petition seeking a Writ of Certiorarified Mandamus to obtain records of the impugned proceedings and a direction for interest payment on the amount deposited during the investigation. The petitioner provided works contract services during a disputed period, which became taxable from a specific date. A Show Cause Notice was issued demanding service tax, interest, and penalty. The first respondent confirmed the demand and imposed a penalty. The petitioner appealed before the Customs, Excise and Service Tax Tribunal, which allowed the appeal citing relevant legal precedents. Subsequently, a refund was sanctioned without interest payment, leading to the petitioner's request for interest. The court noted discrepancies in the refund amount and the liability for service tax for a specific period. It highlighted the lack of appeal by the department affecting the petitioner's rights and the entitlement to interest on the deposited amount pending investigation. The court directed the second respondent to re-examine the issue, pay/adjust interest, and take steps for the recovery of any erroneous refund within a specified timeframe after issuing a show cause notice to the petitioner. The writ petition was disposed of with the mentioned directions, without costs.