Refundable Amount Deposited as Service Tax cannot ber Treated as Pre-Deposit u/s 35F Central Excise Act: CESTAT [Read Order]

The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has declared that, as per Section 35F of the Central Excise Act of 1944, the sum submitted as service tax—if refundable—should not be regarded as a pre-deposit.

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Essjay Telecom and IT Services Private Limited, the assessee/appellant in this case, was the subject of an investigation by the Revenue because it was alleged that service tax had not been paid. The assessee had paid a portion of the service tax during the actual investigation. Following the issuance of a Show Cause Notice, the adjudicating body issued an order confirming the demand and allocating the funds submitted throughout the investigation to this verified demand.

Enraged by the ruling, the assessee appealed, and the tribunal granted it, overturning the lower authorities' demand for service tax. The assessee then asked for a reimbursement of the money paid during the investigation—which the lower authorities had appropriated—along with interest.

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The reimbursement was approved by the assistant commissioner, who treated the assessee's deposit as a pre-deposit in accordance with section 35F of the Central Excise Act of 1944. An appeal submitted by the assessee to the Commissioner (Appeals) was denied. Before the Tribunal, the assessee has contested the Commissioner's (Appeals) ruling.

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The question on the Tribunal's agenda was how to handle a sum that was deposited as service tax but later became refundable as a result of a tribunal or court order. Will it be a revenue deposit alone, a pre-deposit, or a service tax?

The bench also believed that the assessee's payment was service tax, as established by the adjudication procedures' subordinate authorities. Nothing would have been refunded if there had been no more orders. However, this Tribunal put aside the demand, changing the adjudicating authority's order. As a result, the service tax was refunded in accordance with section 11B, and the Tribunal's order date was the pertinent date for this purpose.

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The single bench of P.V. Subba Rao (Technical Member) observed that Section 11B allows for duty or service tax refunds. When determining whether any additional funds must be paid to satisfy the section 35F pre-deposit requirement, any sum that has already been paid in duty or service tax is taken into account. The amount paid as service tax, fine, or penalty does not become pre-deposit under section 35 simply because such an adjustment is made.

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A circumstance when the duty becomes refundable due to an order or judgment by the Tribunal or any Court is covered by Section 11B of the Central Excise Act, 1944. According to Central Excise Act, 1944, Section 35F, the Tribunal or the Commissioner (Appeals) would not consider an appeal unless the appellant has deposited 7.5% of the duty.

 Considering the aforementioned, the Tribunal granted the appeal and remanded the case to the Assistant Commissioner for review and approval of the refund under section 11B and interest under section 11BB.

To Read the full text of the Order CLICK HERE

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