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TMI Blog2017 (4) TMI 857X X X X Extracts X X X X X X X X Extracts X X X X ..... is engaged in providing Franchise Services and is registered with the service tax department. On scrutiny of records, it was noticed and pointed out by department that for the period October 2005 to March 2008 the appellant is liable to pay an amount of Rs. 16,52,714/- towards service tax. The appellant paid the entire service tax as well as interest immediately. However, a show cause notice dated 14.06.2011 was issued covering the above period. After due process of law, the original authority confirmed the demand of service tax of Rs. 13,87,585/- for the period 2006-2007 and 2007-2008. The demand for the period 2005-06 to the tune of Rs. 2,65,129/- was held to be time barred. A penalty of Rs. 20 lakhs was imposed with an option of reduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005-06 is time barred, the department cannot retain the service tax or the interest thereon. That however, the appellant is claiming only the interest portion of the demand which has been held time barred. That interest is of compensatory nature and since the demand itself is held to be time barred, the appellant is not liable to pay the same. The interest cannot be retained by the department. That penalty has been already refunded to the appellant. 6. On behalf of the department, the Ld. AR Sh. Arun Kumar reiterated the findings in the impugned order. It is submitted by the Ld. AR that the demand for the period 2005-06 has been set aside on the ground of being time barred and not on merits of the case. That therefore the liability to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment is to be accepted, then it would place the demand set aside on the ground of time bar and on merits on two footings. If the assessee against whom a show cause notice is issued pays the amount and contests the liability, he will not get refund if the demand is set aside on the ground of time bar only. This means that although the appellate forum allows his appeal with consequential reliefs, the said consequential relief would remain only in paper. Thus the litigation would be a futile exercise for him. In such scenario, the assessee will get refund only if demand is set aside on merits. The Law laid in the provisions contained under Section 11 /11 A of Central Excise Act, 1944 or Section 73 / 87 of Finance Act, 1994 do not speak anyth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reditor. The same analogy cannot be applied to recovery of duty/ tax. The liability to pay tax is derived from Article 265 of the Constitution of India. Acknowledgment of a time barred civil debt (by making part payment) cannot be equated with the payment of tax/duty during proceedings. If tax is paid in excess, the law provides for refund. 10. In the present case, though appellant paid the amount, he has contested the liability both on merits and limitation. On receipt of a Show cause notice he has every right to defend the same. The adjudicating authority held the demand/assessment for the year 2005-06 to be time barred. When the demand is time barred it refers to a bar to a legal claim that arises from the lapse of a defined ..... X X X X Extracts X X X X X X X X Extracts X X X X
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