2023 (1) TMI 742 - AT - Service Tax

Refusal of refund claim - It is further urged that the refund was rejected by the Department on the flimsy grounds, inspite of having accepted the consolidated return - HELD THAT - The appellant have admittedly filed consolidated return for the period April to September, 2010, and were advised not to consider this amount of Rs.39,09,130/- (by challan) towards adjustment of taxes. Further as advised they have applied for refund of this amount as wrongly deposited. Further, the return filed during adjudication proceedings for the Escrow account, where appellant has shown nil taxable receipt and nil tax liability, and the said amount was deposited through challan as excess payment, has not been rejected by the Department. The appellant is entitled to refund of Rs.39,09,130/-. The Adjudicating Authority is directed to grant refund with interest as per rules, within a period of 45 days from the date of receipt of copy of this order - Appeal allowed.

Issues Involved:
- Refusal of refund claim by the appellant for Rs. 39,09,130
- Interpretation of tax liability regarding Passenger Service Fee (PSF) collected by airport operators
- Rejection of refund claim by the Department based on payment source and registration discrepancies

Analysis:
1. Refusal of Refund Claim:
The main issue in this appeal revolved around the refund claim filed by the appellant for Rs. 39,09,130, which was rejected by the lower Court. The appellant, a service provider registered under 'Airport Services,' collected Passenger Service Fee (PSF) and maintained a separate account for security purposes. The confusion arose when the CBDT clarified the treatment of PSF amount received by airport operators as a revenue receipt for income tax purposes. The appellant paid the service tax liability using cenvat credit and cash from the general bank account. Subsequently, a refund was claimed for the excess payment made through cash.

2. Interpretation of Tax Liability on PSF:
The CBDT's clarification regarding the treatment of PSF amount as revenue created a dilemma for the appellant, leading to the refund claim. The appellant was advised to apply for a separate registration number under service tax for the PSF fund, which was granted as 'Escrow PSF (SC).' However, discrepancies arose due to the issuance of registration in an illusory name, causing confusion between 'DIAL' and 'Escrow (SC)' as separate entities. The rejection of the refund claim was based on the source of payment and registration discrepancies, leading to the appellant's appeal.

3. Rejection of Refund Claim by the Department:
The Department rejected the refund claim citing reasons such as payment made from the general account instead of the Escrow account, the alleged separation of 'DIAL' and 'Escrow (SC)' entities, and lack of evidence regarding the utilization of cenvat credit. The lower Court upheld the rejection, prompting the appellant to appeal. The Tribunal, after considering the arguments, acknowledged that the appellant had filed a consolidated return for the relevant period, advised not to include the disputed amount in tax adjustments, and applied for a refund for the excess payment. The Tribunal ruled in favor of the appellant, directing the Adjudicating Authority to grant the refund with interest within a specified timeframe.

In conclusion, the Tribunal allowed the appeal, emphasizing the proper filing of returns, the advice given to the appellant regarding the disputed amount, and the rightful claim for a refund. The judgment clarified the confusion arising from registration discrepancies and upheld the appellant's entitlement to the refund amount of Rs. 39,09,130, with interest as per rules.

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