2022 (3) TMI 330 - HC - Service Tax

Refund or adjustment against pre-deposit - interest on pre-deposit - assessee had not filed grounds opposing these demands in the reply to all the show-cause notice - HELD THAT - In the show-cause notice there were three different independent tax demands. One was for a sum of ₹ 12,62,95,889/- for providing services to use towers by the petitioner. Second one was ₹ 38,57,094/- on account of discrepancy in the taxable value shown in the ST-3 return vis-a-vis financial records and third was of ₹ 3,96,954/- under reverse charge mechanism in respect of goods contract services from 01.07.2012 onwards. The petitioner had filed a detailed reply to the show-cause notice however in the entire reply only opposition was made to the proposed recovery of ₹ 12,62,95,889/-. In other words with respect to the other two heads of ₹ 38,57,094/- and ₹ 3,96,954/- there was no ground to oppose such demands. This reply to the show-cause notice is quite elaborate which is perused with the assistance of learned counsel for the parties and thereby come to this conclusion. The Deputy Commissioner Service Tax could not have on his own interpreted the judgment of the Tribunal as being limited to striking down the demand of ₹ 12,62,95,889/-. Learned counsel for the revenue however vehemently contended that when there was no opposition to other demands in the reply filed to the show-cause notice and when the appeal of the assessee was also confined only to the tax demand of ₹ 12,62,95,889/-, the judgment of the Tribunal must be seen in light of such facts. He may be right in pointing out that the assessee had not filed any grounds opposing these demands in the reply to the show-cause notice and the prayer in the appeal memo is also limited to challenging the principal demand of ₹ 12,62,95,889/-. However it is not open for the subordinate authority to interpret the judgment of the superior Tribunal and bestow unto himself the powers to adjust the pre-deposit amount by coming to the conclusion that the order setting aside the order in original must be given limited effect. The adjustment of the pre-deposit amounts of the petitioner made by the Deputy Commissioner is quashed. The department shall refund the said sum within a period of four months from today - Petition allowed.

Summary

Issues:
1. Challenge to orders passed by the Assistant Commissioner, Central Goods and Service Tax Division.
2. Show-cause notice issued by the Commissioner, Central Excise Commissionerate.
3. Order in original passed by the adjudicating authority.
4. Appeal before the Customs, Excise and Service Tax Appellate Tribunal.
5. Refund application and adjustment of refund against pending recovery.

Issue 1: Challenge to orders passed by the Assistant Commissioner, Central Goods and Service Tax Division

The petitioner, Bharat Sanchar Nigam Limited (BSNL), challenged orders passed by the Assistant Commissioner, Central Goods and Service Tax Division, dated 03.06.2019, 31.01.2019, 22.07.2019, and 16.09.2019. These orders sanctioned refunds and adjusted them against government dues pending for recovery confirmed by an order in original dated 06.08.2015. The petitioner contested these orders, leading to the current challenge.

Issue 2: Show-cause notice issued by the Commissioner, Central Excise Commissionerate

The Commissioner, Central Excise Commissionerate issued a show-cause notice to the petitioner on 20.10.2014, demanding recovery of service tax, interest, and penalties under various sections of the Finance Act, 1994. The adjudicating authority passed an order in original on 06.08.2015, confirming the demands and penalties, which the petitioner appealed before the Customs, Excise and Service Tax Appellate Tribunal.

Issue 3: Order in original passed by the adjudicating authority

The order in original dated 06.08.2015 confirmed service tax demands, interest, and penalties against the petitioner. However, the Tribunal set aside this order, ruling that the show cause notice was time-barred, and the penalties imposed were unjustified due to the absence of taxability issues. Despite this, the Deputy Commissioner attempted to adjust a refund against pending recovery, leading to further legal challenges.

Issue 4: Appeal before the Customs, Excise and Service Tax Appellate Tribunal

The petitioner's appeal before the Tribunal resulted in the order in original dated 06.08.2015 being set aside. The Tribunal found that the show cause notice was time-barred and penalties were wrongly imposed. This decision by the Tribunal formed the basis for subsequent actions by the adjudicating authority and the Deputy Commissioner.

Issue 5: Refund application and adjustment of refund against pending recovery

Following the Tribunal's decision, the petitioner applied for a refund of a pre-deposit amount. However, the Deputy Commissioner proposed to adjust the refund against pending recovery confirmed by the order in original dated 06.08.2015. Despite the Tribunal setting aside the entire order, the Deputy Commissioner adjusted the refund against specific demands, leading to a legal dispute over the interpretation of the Tribunal's judgment and the authority's actions.

In conclusion, the High Court allowed the petition, setting aside the impugned orders and quashing the adjustment of the pre-deposit amounts. The court directed the department to refund the said sum within four months, while acknowledging the department's right to appeal against the Tribunal's judgment to recover taxes if successful in the appeal.