2019 (6) TMI 960 - AT - Service Tax

Refund of excess paid service tax - rejection of refund claim only on the ground that the issue of Service Tax liability on notional interest is pending - HELD THAT - Confirmation of demand of Service Tax on notional interest on security deposit was challenged before the Hon ble High Court and the same is pending before the same but rejection of the refund claim only on the ground that demand is pending in another case is not tenable in law. Further, both the cases are independent, the present case relates to the refund of excess Service Tax paid whereas the demand for Service Tax on notional interest on security deposit is altogether independent litigation which is pending disposal before the Hon ble High Court. Further it is a settled law that refund cannot be denied merely on the ground that some demand is pending in another case which is subjudice before the Court. The rejection of refund claim only on the ground that the issue of Service Tax liability on notional interest is pending is not sustainable in law - appeal allowed - decided in favor of appellant.

Issues:
Appeal against rejection of refund claim due to time bar and unjust enrichment.

Analysis:
The appellant, a Service Tax registrant providing Renting of Immovable Property Service, filed a refund claim of ?8,95,722/- for excess Service Tax payment during 2012-13. The claim was initially rejected as time-barred but was later allowed by the Commissioner (Appeals) who remanded the case for fresh adjudication. The original authority, upon reevaluation, acknowledged the excess payment but rejected the claim citing another demand for Service Tax confirmed in a separate order. The appellant contended that the rejection solely based on the pending demand for Service Tax on notional interest on security deposit was not legally sustainable. The appellant argued that the refund claim and the demand for Service Tax on notional interest were unrelated and independent matters. The Commissioner upheld the rejection based on the pending demand. The appellant challenged this decision in a Writ Petition before the High Court, which was pending. The appellant emphasized that the refund claim was for excess Service Tax paid on rent, distinct from the demand for Service Tax on notional interest.

Upon hearing both parties and examining the records, the Tribunal noted that the appellant had indeed overpaid ?8,66,201/- for 2012-13, leading to the refund claim. The Commissioner (Appeals) had already set aside the time bar and remanded the case for fresh consideration. The original authority confirmed the absence of time bar and unjust enrichment but rejected the claim due to the pending demand for Service Tax in another case. The Tribunal found that the rejection of the refund claim solely based on the pending demand for Service Tax on notional interest was legally untenable. It emphasized the independence of the refund claim and the demand for Service Tax on notional interest, stating that a refund cannot be denied merely due to a pending demand in another case. Consequently, the Tribunal set aside the impugned order, allowing the appeal of the appellant.

In conclusion, the Tribunal ruled in favor of the appellant, overturning the rejection of the refund claim based on the pending demand for Service Tax on notional interest. The Tribunal emphasized the independence of the two matters and the legal principle that a refund cannot be denied solely due to a pending demand in a separate case.

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