2016 (9) TMI 1405 - HC - Service Tax

Refund of excess service tax paid - entitlement to interest - Held that - If an amount is paid by an assessee in duly of excise pursuant to a liability created under a Statute or by statutory order passed by competent authority and such demand is later found illegal Section 11 AB contemplates that amount received shall be refunded to assessee provided that the incidence of such duty had not been passed on by him to any other person - In the present case the amount in question refund whereof is claimed was not paid. It is not such amount of duty which was deposited by assessee. To check evasion of Excise duty or Service Tax raid was conducted on 12.1.2007 when during raid sum of Rs. 25, 55, 000/- was got deposited. Amount of interest thereon was subsequently realized from petitioner on 29.3.2007 i.e. before issue of notice on 3.7.2007. Such deposit was involuntary by petitioner since no one shall deposit a huge money without creation of liability in law. Such an amount has been held to be a pre-deposit and principles of unjust enrichment has been held inapplicable in such cases. Circular No. 802/35/2004-CX MANU/EXCR/0037/2004 dated 8.12.2004 provides that against an order whereunder refund is admissible to an assessee with regard to the pre-deposit if an appeal is pending that shall not be taken as justification for denying refund. Interest on delayed deposit or refund - Held that - a Division Bench of Delhi High Court in Surinder Singh v. Union of India 2006 (11) TMI 12 - HIGH COURT DELHI relying on Supreme Court judgment in Prince Khadi Woollen Handloom Producers Cooperative Society v. CCE 1996 (11) TMI 72 - SUPREME COURT OF INDIA said that State if has wrongly collected a tax from a person and even if there is no specific provision still is liable to refund tax alongwith interest. The consensus of the authorities of various High Courts as well as Supreme Court is that any amount received by Revenue as deposit or pre-deposit i.e. unauthorizedly or under mistaken notion etc. cannot be retained by Revenue since it has no authority in law to retain such amount and it must be refunded with interest. Petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Entitlement to refund of excess paid Service Tax.
2. Applicability of Section 11B of the Central Excise Act, 1944.
3. Entitlement to interest on the refunded amount.
4. Applicability of principles of unjust enrichment.

Issue-Wise Detailed Analysis:

1. Entitlement to Refund of Excess Paid Service Tax:
The petitioner sought a writ of mandamus for the refund of excess Service Tax paid, amounting to Rs. 25,55,000/- along with interest. The Anti-Evasion Branch of Central Excise conducted a search and coerced the petitioner into depositing the Service Tax and interest. The petitioner argued that this amount was retained unauthorizedly and illegally by the respondents. The Tribunal and Commissioner (Appeals) ultimately found the demand for Service Tax unjustified and ordered the refund.

2. Applicability of Section 11B of the Central Excise Act, 1944:
The respondents contended that Section 11B, which requires a refund application within one year, was not applicable since the petitioner paid the tax voluntarily and not under protest. The court, however, found that the amount paid by the petitioner was under coercion and thus considered a pre-deposit. Section 11B was deemed applicable, and the court emphasized that the petitioner had not passed on the tax burden to any other person.

3. Entitlement to Interest on the Refunded Amount:
The court examined whether the petitioner was entitled to interest on the refunded amount. It referred to various judgments and CBEC circulars, concluding that any amount deposited during adjudication or investigation is considered a pre-deposit and should be refunded with interest. The court cited the Supreme Court's decision in Commissioner of Central Excise, Hyderabad v. I.T.C. Ltd., which mandated interest on such pre-deposits.

4. Applicability of Principles of Unjust Enrichment:
The court rejected the argument of unjust enrichment, stating that the principles of unjust enrichment do not apply to pre-deposits made under protest. The court relied on several precedents, including the Madras High Court's decision in Commissioner of Central Excise, Coimbatore v. Pricol Ltd., which held that amounts deposited during investigation are not subject to unjust enrichment principles.

Conclusion:
The court directed the respondents to refund the entire amount to the petitioner with interest at the rate of 12% per annum, calculated from three months after the Commissioner's order until the actual payment. The petitioner was also awarded costs of Rs. 50,000/-. The judgment underscored the illegality of retaining amounts collected under coercion and the necessity of refunding such amounts with appropriate interest.