2021 (8) TMI 1113 - AT - Service Tax

Refund claim - Amount deposited during investigation - no SCN issued to the appellant either for appropriation or for rejection of the amount - HELD THAT - It is admitted fact that no show cause notice was issued to the appellant for appropriation of the amount nor for rejection of the refund claim. Therefore, the order of rejection of refund claim is bad in law and against the provisions of Finance Act as well as Central Excise Act,1944 - the amount paid during the course of investigation is only an amount of deposit, the same cannot be formed part of service tax. Therefore, rejection of refund claim by the respondent is without authority of law and the same is refundable to the appellant. The appellant is entitled for refund claim - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim rejection based on lack of show cause notice for appropriation or rejection of amount.

Analysis:
The appellant, a service provider in Himachal Pradesh, filed a refund claim of ?7,41,939 after a deposit of 13 lakhs during an investigation without appropriation or show cause notice. The claim was rejected by the adjudicating authority, stating the appellant was liable for service tax and had paid it correctly. The Commissioner (Appeals) upheld the rejection, citing appropriation under section 73(3) of the Act. The appellant contended that no details or show cause notice were provided for the deposit, making the rejection unlawful. The AR supported the rejection, despite acknowledging the lack of show cause notice. The Tribunal noted the absence of a show cause notice for appropriation or rejection, deeming the rejection unlawful. It held that the deposited amount was not part of service tax, ruling in favor of the appellant for the refund claim.

The Tribunal emphasized that the rejection of the refund claim lacked legal basis and violated the provisions of the Finance Act and the Central Excise Act, 1944. It determined that the amount deposited during the investigation was not part of the service tax liability. Consequently, the rejection of the refund claim was deemed unauthorized by law, leading to the decision in favor of the appellant for the refund claim. The impugned order was set aside, and the appeal was allowed with any necessary consequential relief.

This judgment highlights the importance of adherence to legal procedures, such as issuing show cause notices for appropriation or rejection of amounts, in matters concerning refund claims and tax liabilities. It underscores the necessity for authorities to act in accordance with the law and provide proper documentation and notifications to taxpayers, ensuring fair and just outcomes in tax-related disputes.