2022 (11) TMI 797 - AT - Service Tax

Refund of pre-deposit made under Section 35F by way of reversal in GST-ITC credit - rejection on the ground that 7.5% was paid by way of reversal in the GST-ITC account - HELD THAT - There is no dispute that the appellant have made pre-deposit in terms of Section 35F for entertaining the appeal by the Commissioner (Appeals). The learned Commissioner (Appeals) also entertained the appeal on payment of 7.5% though the same was reversed in the GST-ITC account. This clearly shows that the Commissioner (Appeals) has accepted the 7.5% reversal in GST-ITC as per-deposit in terms of Section 35F. The Commissioner (Appeals) has upheld the order-in-original and rejected the appeal which is contrary to his findings. Since the Commissioner (Appeals) has agreed that the appellant is eligible to avail the credit in their electronic credit ledger the appeal should not have been rejected, whereas the refund should have been allowed if not in cash, but atleast by way of credit in their electronic credit ledger. This is an apparent error in the order of the Commissioner which needs to be rectified - matter remanded to the Commissioner (Appeals) to give a clear order considering his own finding that the appellant is eligible to avail the credit in their electronic credit ledger. Appeal allowed by way of remand.

Summary

Issues:
1. Entitlement for refund of pre-deposit under Section 35F through reversal in GST-ITC credit.

Analysis:
The appellant sought a refund of the pre-deposit made under Section 35F through reversal in GST-ITC credit. The appellant's advocate argued that since the pre-deposit was made against filing an appeal and succeeded, the refund should be granted. He cited relevant judgments to support this claim. On the other hand, the Revenue's representative contended that the credit of the pre-deposit amount was allowed in the electronic credit ledger by the Commissioner (Appeals), indicating that the appellant had no basis for grievance. The Revenue also referred to a Division Bench decision stating that pre-deposit cannot be made through debit in ITC.

Upon reviewing the submissions and records, the Member (Judicial) noted that the appellant had indeed made the pre-deposit as required by Section 35F for the appeal before the Commissioner (Appeals). The Commissioner (Appeals) accepted the appeal upon payment of 7.5%, even though it was reversed in the GST-ITC account. The Commissioner's clear finding acknowledged the pre-deposit made by the appellant, making them eligible to avail credit in their Electronic Credit Ledger. However, despite this finding, the Commissioner (Appeals) upheld the original order and rejected the appeal, which was deemed contradictory. The Member (Judicial) emphasized that since the Commissioner had recognized the appellant's eligibility for credit in the electronic ledger, the appeal should not have been dismissed. The judgment concluded by setting aside the impugned order and remanding the matter to the Commissioner (Appeals) for a clear decision in line with the appellant's eligibility for credit. The appeal was allowed by way of remand, highlighting an error in the Commissioner's order that needed rectification.