2024 (11) TMI 1232 - AT - Service Tax

Refund of pre-deposit - dispute over inclusion of certain reimbursement expenses such as freight, stationery, printing charges, telephone charges, asset hire, courier, insurance and other taxes while providing Clearing and Forwarding agency services. HELD THAT - Revenue has accepted that once the appeal is decided in favour of the assessee, he shall be entitled to refund of the amount deposited along with interest at the prescribed rate from the date of making the deposit to the date of refund, irrespective whether the order of the Appellate Authority is proposed to be challenged by the Department or not. The amount of 10% of the tax amount deposited by the appellant had become refundable as with the passing of the final order dated 1.5.2019 in their favour by the Tribunal, the entire demand had become annulled. Therefore, conclude that the deposit made by the appellant is not a payment of duty but only a pre-deposit for availing the right of appeal and such amount is bound to be refunded when the appeal is allowed with consequential relief. The impugned order is unsustainable and is hereby set aside. The appellant is entitled to refund of Rs.70,400/- along with interest @6% from the date of deposit till the date of actual refund is made. The Department is directed to release the amount within a period of 4 weeks.

Issues:
1. Rejection of refund claim by the Adjudicating Authority.
2. Dispute over inclusion of reimbursement expenses in Clearing and Forwarding services.
3. Rejection of application for stay of pre-deposit requirement.
4. Interpretation of amount deposited by the appellant as pre-deposit.
5. Refund entitlement of the appellant as per Circular dated 16.09.2014.
6. Legal position regarding pre-deposit not constituting payment of duty.
7. Consideration of interest on refund amount.
8. Applicability of judgments in similar cases to the present situation.

Detailed Analysis:
1. The appellant contested the rejection of their refund claim following the Final Order No.50780/2019, which set aside the duty demand confirmed by lower authorities. The issue revolved around the inclusion of various expenses in Clearing and Forwarding services, leading to a demand of Rs.6,95,965/- and education cess. The appellant's appeal was initially rejected, and subsequent legal proceedings ensued.
2. The appellant's application for stay of pre-deposit was denied, leading to a series of legal actions, including approaching the Chattisgarh High Court and subsequent Tribunal orders. The appellant deposited 10% of the demanded amount as per statutory requirements, which was later considered sufficient towards pre-deposit in a miscellaneous order.
3. The final order dated 01.05.2019 favored the appellant, holding the demand for reimbursement expenses unsustainable. Subsequently, the appellant sought a refund of Rs.70,400/- deposited earlier, which was rejected by the Adjudicating Authority based on the timing of the deposit concerning the stay order.
4. The Tribunal's miscellaneous order clarified that the amount deposited by the appellant was indeed a pre-deposit, as it was considered sufficient towards the requirement. The Circular dated 16.09.2014 emphasized that pre-deposit for an appeal does not constitute payment of duty and should be refunded with interest if the appeal is decided in favor of the appellant.
5. Legal precedents and judgments highlighted the consistent view that pre-deposit is not akin to payment of tax or duty, emphasizing the entitlement to interest on the deposited amount upon a favorable appeal decision. The High Court's decision in similar cases supported the appellant's claim for interest on the refund amount.
6. The judgment concluded that the appellant's deposit was a pre-deposit for appeal purposes, not a duty payment, and thus, the appellant was entitled to a refund of the amount with interest. The impugned order was set aside, and the Department was directed to release the refund amount within a specified timeframe.

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