Department cannot be permitted to take advantage of its own wrong: CESTAT directs Refund of Amount Deposited during Investigation [Read Order]

The Delhi Bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has directed a refund of the amount deposited during the investigation holding that the department could not be permitted to take advantage of its own wrong.

The appellant B.L. Goel & Company is engaged in running Works Contract Services and services of construction of residential complexes during the period 2013-14 till 2017-2018. Show cause notice was issued demanding service tax. During the investigation stage, the appellant had deposited an amount of Rs.29,36,382/-. In the statement recorded by Sunil Goel, Authorised Signatory of the appellant on 22.03.2019, stated that this amount has been deposited mistakenly.

However, in the show cause notice dated 23.04.2019, these amounts deposited were not recognised neither mentioned nor was their proposal for appropriation. During the pendency of the adjudication proceedings, the appellant, in view of the SVLDR Scheme under the Finance Act, 2019, applied for settlement of their tax dues under the show cause notice by filing Form SVLDRS-I on 29.11.2019, mentioning that they have already deposited Rs.29,36,382/-

Form SVLDRS-III was issued by the Department with the remark, “the claim of pre-deposit of Rs.29,36,382.00 could not be verified as per records available and could not be treated as a pre-deposit against the show cause notice for which the SVLDRS-I application had been filed.  Accordingly, the appellant was directed to deposit the full amount without getting credit for the amount of pre-deposit made during the investigation. Thereafter, the appellant applied for a refund of the unadjusted amount of Rs.29,36,382/- and the said refund application was rejected 

Rishabh Jain, on behalf of the petitioner, submitted that the Court below had admitted that the appellant had deposited the amount of Rs.29,36,382/-. Further, admittedly, this amount was not considered for adjustment as the Designated Committed under the SVLDR Scheme stated that they were unable to verify this amount, which is evident from the remarks in SVLDRS Form-III. He further contended that the Department could not be permitted to take advantage of its own wrong.

A Single Bench of Anil Choudhary (Judicial Member), set aside the impugned order and allowed the appeal directing to refund the amount along with interest, observing that

 “The amount remained unadjusted due to the fault of the Department as well as the Designated Committee under the Sabka Vishwas Scheme, who have refused the adjustment of the amount of pre-deposit, stating that the amount is not verifiable. In these circumstances, I hold that this amount remained as the Revenue deposit with the Department and was never adjusted. Further, this amount is not a part of the admitted tax.”

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