2009 (12) TMI 329 - AT - Service Tax

Refund- the issue involved in this case is regarding the deduction of the amount of interest payable on the Service tax arrears from the amount of refund due on the pre-deposit paid by the appellant. Appellants preferred an appeal before the learned Commissioner (Appeals). Held that- Service tax amount payable, provisions of Section 87 were on statute. If that be so, invoking provision of Section 11 for recovering the interest amount due on the Service tax liability seems to be inappropriate and beyond the provisions of law. Provisions of Section 11 of Central Excise Act, 1944, will be applicable, only, if dues arise out of proceedings under the Central Excise Act, 1944. Accordingly, in view of these findings, set aside the impugned order and allow the appeal.

Summary

Issues:
Deduction of interest payable on Service tax arrears from the refund due on pre-deposit.

Analysis:
The appellants, manufacturers of Paper and Paper board, filed a refund application for pre-deposit amounts totaling Rs. 25,00,000 made in compliance with appellate orders. The Assistant Commissioner, while sanctioning the refund, deducted arrears of interest of Rs. 18,17,484 payable by the appellant on Service tax for Goods transport services and C&F Agents. The appellants were issued a show cause notice for adjustment of this amount from the refund claim. The Commissioner (Appeals) upheld the deduction, leading to this appeal.

The main issue in this case is the deduction of interest payable on Service tax arrears from the refund due on the pre-deposit. The appellant argued that Section 11 of the Central Excise Act, invoked for recovery of interest, cannot be applied as the interest amount is not a confirmed due. The Revenue contended that the interest was correctly adjusted as it pertained to delayed payment of Service tax upheld by the Supreme Court. The Tribunal examined the records and relevant provisions to reach a decision.

Upon considering the submissions and records, the Tribunal found that the refund of Rs. 25,00,000 was due to the appellant, while the interest of Rs. 18,17,484 arose from a Service tax dispute under the Finance Act, 1994. The Adjudicating Authority had adjusted the interest amount under Section 11 of the Central Excise Act, 1944. However, the Tribunal noted that Section 87, introduced in 2006, outlined procedures for recovery of amounts due to the Central Government, which were applicable at the time of the adjudication order. Therefore, invoking Section 11 for recovering interest on Service tax liability was deemed inappropriate and beyond the provisions of law.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, providing consequential relief as necessary. The judgment highlighted the importance of applying relevant statutory provisions for recovery of dues, emphasizing the need for adherence to the correct legal framework in such matters.