2023 (2) TMI 483 - AT - Service Tax

Entitlement to interest - Jurisdiction of Commissioner (Appeals) - absense of protective show cause notice for recovery of interest - deposit made by the appellant during investigation for the refund of the same - whether the appellant is entitled for the interest on such deposit or otherwise? - HELD THAT - As per the facts of the present case , the appellant have paid Rs. 25 Lacs Suo moto during the investigation of the case way back in January and February, 2007. Therefore, the amended provision of 35F /35FF prevailing in 2014 is not applicable in the case of any deposit made prior to enactment of Finance Act, 2014. The CBEC Circular No. 984/8/2014- CX dated 16.09.2014 was also issued with reference to the new provision of 35F/35FF therefore the Adjudicating Authority has gravely erred on applying said Circular. In the present case as regard submission of Learned Counsel that order of Commissioner (Appeals) is not correct and legal on the ground that the department has not issued protective show cause notice for recovery of interest amount which was already sanctioned and paid to the appellant, therefore the order is not sustainable - the Commissioner (Appeals) has decided the appeal against an appealable order passed by the Adjudicating Authority, the non issuance of protective show cause notice does not create any estoppels to the Learned Commissioner (Appeals) for passing the Order in Appeal. Therefore the contention the appellant is not acceptable. The recovery of the erroneous refund is the separate proceeding which is not the subject matter in the present appeal. Therefore the same cannot be dealt with in this case - this is not the case of recovery of erroneous refund whereas the Revenue before the Commissioner (Appeals) had challenged the sanction of interest of Rs. 5,55,093/-. Therefore, the judgment which is on recovery of erroneous refund are not relevant in the present case. The Learned Commissioner has correctly held that the appellant is not liable for interest of Rs. 5,55,093/- in terms of Section 35F - Appeal dismissed.

Issues:
1. Entitlement to interest on refund of pre-deposit amount.
2. Validity of the order sanctioning interest.
3. Applicability of Section 35F regarding interest on pre-deposit.
4. Requirement of protective show cause notice for recovery of interest amount.
5. Interpretation of relevant Circulars and judgments.

Analysis:

Issue 1: Entitlement to interest on refund of pre-deposit amount
The appellant filed a refund claim for a pre-deposit of Rs. 25 Lacs made during an investigation. The Assistant Commissioner sanctioned the refund along with interest. However, the Revenue appealed against the interest component. The appellant contended that no valid order demanding the interest was made, and recovery without a statutory notice under Section 73 of the Finance Act, 1994 was impermissible. The appellant cited various judgments to support their argument, emphasizing the need for a legal basis for recovery of any erroneous refund.

Issue 2: Validity of the order sanctioning interest
The Assistant Commissioner sanctioned interest on the pre-deposit amount from the date of filing the appeal before the Tribunal. The Commissioner (Appeals) allowed the Revenue's appeal, holding the appellant ineligible for interest. The appellant challenged this decision, arguing that the order for recovery lacked a valid legal basis. The Tribunal examined the procedural requirements for recovering an erroneous refund and the relevance of the Circular issued by the Government of India regarding refunds during dispute resolution.

Issue 3: Applicability of Section 35F regarding interest on pre-deposit
The Tribunal analyzed the applicability of Section 35F and Section 35FF of the Finance Act, 1994, which mandated a pre-deposit of 7.5% of the total service tax amount. The Tribunal noted that the Circular specifying interest on pre-deposit was issued concerning the amended provisions introduced in the Finance Budget, 2014. Since the pre-deposit in this case was made before the enactment of the Finance Act, 2014, the Tribunal concluded that the amended provisions did not apply, and the Adjudicating Authority erred in relying on the Circular.

Issue 4: Requirement of protective show cause notice for recovery of interest amount
The appellant argued that the Commissioner (Appeals) erred in not issuing a protective show cause notice for the recovery of interest. The Tribunal clarified that the absence of such notice did not prevent the Commissioner (Appeals) from deciding the appeal. The Tribunal distinguished between cases of recovery of erroneous refunds and challenges to the sanction of interest, emphasizing that protective show cause notices were relevant in the former scenario, which was not applicable in the present case.

Issue 5: Interpretation of relevant Circulars and judgments
The Tribunal examined the Circular issued by the Government of India directing the refund of amounts deposited during dispute resolution with interest upon the appeal's success. The Tribunal emphasized that the Circular's applicability was contingent on the specific circumstances and legal provisions governing the case. The Tribunal upheld the Commissioner (Appeals) decision that the appellant was not liable for the interest amount, concluding that the order was legally sound.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) and dismissed the appeal, finding no legal infirmity in the order sanctioning interest on the pre-deposit refund amount.

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