2010 (2) TMI 199 - AT - Service Tax

Refund of service tax GTA service - Dec, 97 to Jan, 98 adjustment of refund amount with central excise liability - once the adjustment of the first payment towards Central Excise arrears had been cancelled vide the communication dated 28.6.2000, the amount paid in the first instance as well as the second time was towards discharging service tax liability. Hence claim for refund of an amount of tax paid once over again should have been allowed and the refund claim ought not to have been rejected refund allowed

Summary

Issues:
Claim for refund of service tax payment under 'Goods Transport Operators Service' and 'C&F Agents Service' rejected due to repayment under a wrong category, applicability of Section 117 of the Finance Act, 2000, and rejection upheld by lower appellate authority.

Analysis:

Issue 1: Repayment under a Wrong Category

The appellants challenged the rejection of their claim for a refund of Rs.8,25,709/-, which was paid as service tax under 'Goods Transport Operators Service' and 'C&F Agents Service'. The claim for refund was initially filed based on a Supreme Court decision and was sanctioned by the department, but a portion of the refund was adjusted towards Central Excise arrears and penalty. Subsequently, due to a retrospective amendment in the Finance Act of 2000, the refunded amount was directed to be repaid. The appellants then repaid the amount but under a different category, leading to a show-cause notice proposing rejection of the claim for refund on the ground of incorrect classification. The lower appellate authority upheld this rejection, stating that the amount repaid was towards service tax liability and not refundable.

Issue 2: Applicability of Section 117 of the Finance Act, 2000

The rejection of the refund claim was based on the argument that the amount repaid should be considered as per Section 117 of the Finance Act, 2000, read with Section 11 of the Central Excise Act, 1944. The department contended that the repayment under the wrong category should be adjusted towards the correct service tax liability, and hence, the claim for refund was not valid. However, the appellants argued that once the adjustment of the first payment towards Central Excise arrears was cancelled, the amount paid in both instances was towards discharging service tax liability. Therefore, they contended that the claim for refund of the tax paid again should have been allowed.

Judgment

The Tribunal agreed with the appellants, emphasizing that the amount paid in both instances was towards service tax liability. Consequently, the rejection of the refund claim was set aside, and the appellants were deemed entitled to the refund of Rs.8,25,709/- paid on a specific date. The appeal was allowed, overturning the decision of the lower appellate authority.

This detailed analysis highlights the key issues surrounding the rejection of the refund claim and the legal interpretation of the repayment under a wrong category and the applicability of relevant provisions of the Finance Act, 2000.