2025 (1) TMI 1442 - AT - Service Tax

Refund of amount which the appellant had deposited in compliance to the Stay Order dated 11.11.2013 by the Tribunal - rejection of refund claim on the ground of time limitation - non-submission of the re-conciliation statement of the service tax paid on Renting of Immovable Property Services . Whether the amount of Rs.16, 14, 167/- deposited by the appellant on 19.12.2013 has to be treated towards the service tax liability or as pre-deposit in terms of Section 35F? - HELD THAT - The Tribunal has granted waiver of pre-deposit and stayed the proceedings in terms of the impugned order subject to the condition that the appellant shall remit the requisite amount along with interest within a period of 6 weeks. The order passed is simple and clear that the appellant was required to make the pre-deposit for consideration or appeal and also to avail the benefit of the Stay Order as otherwise they would have suffered the dismissal of appeal. The amount in the form of pre-deposit is also towards the liability of tax to avail the remedy of statutory appeal. Learned counsel for the appellant submitted that Section 35F before substitution by the Act 25 of 2014 (w.e.f. 06.08.2014) required the assessee to deposit the duty demanded or the penalty levied for challenging the impugned order and the appellant was required to make an application for dispensing with the pre-deposit of duty demanded or penalty levied. The appeal under the provisions of Section 35F is a statutory appeal and it is a settled principle of law that a statutory appeal is maintainable subject to the compliance of the conditions laid down in the statue providing the remedy of appeal. Section 35F in unequivocal terms says person desirous of appealing the order demanding the duty is required to deposit the duty/ penalty demanded pending the appeal. in terms thereof the Tribunal directed the appellant to deposit part of the duty amount involved and appellant paid the same in compliance thereof. The interest on delayed refund has been held to be payable to the assessee from the date of deposit in the case of Executive Engineer (Workshop) M. P. Power Transmission Co. Ltd. vs. Commissioner (Appeals) Central Excise Customs CGST 2025 (1) TMI 1254 - CESTAT NEW DELHI till the date of its refund. In similar circumstances where refund was directed to be paid to the assessee we had also granted interest @ 12% per annum. Conclusion - i) The amount deposited by the appellant was a pre-deposit under Section 35F and not a service tax liability. ii) Section 11B s limitation period does not apply to refunds of pre-deposits made under Section 35F. iii) The appellant is entitled to a refund of the pre-deposit amount along with interest at 12% per annum from the date of deposit. The impugned order is unsustainable and is hereby set aside - Appeal allowed.

Summary

The core issues considered by the Tribunal were:

1. Whether the amount of Rs.16,14,167/- deposited by the appellant on 19.12.2013 should be treated as a service tax liability or as a pre-deposit in terms of Section 35F of the Central Excise Act, 1944.

2. Whether the refund claim of the pre-deposit amount was time-barred under Section 11B of the Central Excise Act, 1944.

3. Whether the appellant was entitled to interest on the refund amount from the date of deposit.

In addressing the first issue, the Tribunal examined the legal framework and precedents related to Section 35F of the Central Excise Act. The Tribunal's order dated 11.11.2013 required the appellant to remit Rs.9,66,000/- plus interest as a condition for staying further proceedings. The Tribunal noted that the amount was deposited to avail the remedy of statutory appeal and was not a payment of duty. The Tribunal referred to several decisions, including Barmer Lignite Mining Company Ltd. and Chambal Fertilizers and Chemicals Ltd., which established that amounts deposited during adjudication or investigation are considered revenue deposits, not duty payments.

The Tribunal found that the amount deposited by the appellant was a pre-deposit under Section 35F, not a service tax liability. The Tribunal emphasized that the statutory appeal process requires compliance with conditions laid down in the statute, and the appellant's deposit was in compliance with such conditions.

Regarding the second issue, the Tribunal analyzed whether the refund claim was time-barred under Section 11B. The Tribunal noted that Section 11B's limitation period does not apply to pre-deposits made under Section 35F, as clarified by departmental circulars. These circulars, dated 12.01.2002, 08.12.2004, and 16.09.2014, clarified that pre-deposits are not equivalent to duty payments, and thus, the limitation period for duty refunds does not apply. The Tribunal concluded that the appellant's refund claim was not time-barred.

On the third issue, the Tribunal considered the appellant's entitlement to interest on the refund amount. The Tribunal cited the case of Executive Engineer (Workshop) M. P. Power Transmission Co. Ltd., which held that interest on delayed refunds is payable from the date of deposit. The Tribunal also referenced the Supreme Court's decision in Sandvik Asia Ltd., which recognized the liability of the Department to pay interest on amounts wrongfully withheld. Consistent with its practice, the Tribunal granted interest at the rate of 12% per annum on the refund amount.

The Tribunal's significant holdings included:

- The amount deposited by the appellant was a pre-deposit under Section 35F and not a service tax liability.

- Section 11B's limitation period does not apply to refunds of pre-deposits made under Section 35F.

- The appellant is entitled to a refund of the pre-deposit amount along with interest at 12% per annum from the date of deposit.

The Tribunal set aside the impugned order and directed the Department to refund the amount deposited by the appellant on 19.12.2013, along with interest at the rate of 12% per annum. The appeal was allowed with consequential benefits.