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2017 (4) TMI 857 - CESTAT HYDERABAD

2017 (4) TMI 857 - CESTAT HYDERABAD - TMI - Refund of interest - demand held as time barred - case of appellant is 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 - Held that: - Merely because an assessee pays an amount prior to the issuance of SCN, or before passing of adjudication order, he cannot be put into a disadvantaged position than an assessee who .....

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ded in favor of assessee. - Appeal No. ST/20178/2014 - A/30461/2017 - Dated:- 7-2-2017 - Ms. Sulekha Beevi, C.S., Member (Judicial) Sh. A.S. Abdul Khader, in person for the Appellant Sh. Arun Kumar, Deputy Commissioner (AR) for the Respondent ORDER [ Order Per : Sulekha Beevi, C. S. ] 1. The above appeal is filed against the order passed by Commissioner (Appeals) who rejected the claim for refund of interest of ₹ 1,64,368/- already paid by the appellant on the demand of service tax of S .....

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2011 was issued covering the above period. After due process of law, the original authority confirmed the demand of service tax of ₹ 13,87,585/- for the period 2006-2007 and 2007-2008. The demand for the period 2005-06 to the tune of ₹ 2,65,129/- was held to be time barred. A penalty of ₹ 20 lakhs was imposed with an option of reduced penalty of 25% of the tax amount. The appellant paid the reduced penalty of ₹ 3,46,896/- (i.e., 25% of ₹ 13,87,585/-). 3. Against thi .....

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evised the refund claim by confining his claim only to the interest and penalty. The original authority sanctioned the refund of penalty to the tune of ₹ 3,46,896/- but rejected the refund claim for interest of ₹ 1,64,368/-. Against this order, the appellant filed appeal before the Commissioner (Appeals) and vide order impugned herein, the Commissioner (Appeals) upheld the same. Hence this appeal. 5. On behalf of the appellant, the party in person Sh. A.S. Abdul Khader appeared and a .....

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aiming 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 2005-0 .....

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arred and therefore only recovery of the amount is barred. As the appellant already paid the service tax and interest voluntarily, and the demand not having been set aside on merits, he is not entitled for refund. When the amount is paid voluntarily the same can be retained by the department as the department is barred only from recovery of the amount. That authorities below have rightly rejected the refund claim for interest already paid by appellant. 7. I have heard the submissions made before .....

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the same. This argument of department is not acceptable in any cannon of fiscal law. If this argument of the department 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 consequen .....

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ation order, he cannot be put into a disadvantaged position than an assessee who pays the amount after the stage of adjudication or at any other appellate stage. In fact the law encourages the payment to be made before initiation of any proceeding. The gist of sub section (3) of Section 73 of Finance Act, 1994 and sub- section (2) of Section 11A of Central Excise Act,1944 is to encourage payment by assesse before initiation of any proceeding and to avoid litigation. Once the department has issue .....

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o recover a civil debt is extinguished by the lapse of time. Thus in the case of time barred civil debt, the remedy in law to recover the debt is extinguished although the right over the debt may still exist. The debtor can make payment of a time barred debt on his own volition which may give rise to extension of limitation period and right of recovery to the creditor. The same analogy cannot be applied to recovery of duty/ tax. The liability to pay tax is derived from Article 265 of the Constit .....

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he demand is time barred it refers to a bar to a legal claim that arises from the lapse of a defined length of time. The essence is that the demand is disallowed or invalidated on the ground that the time limit for raising the demand has expired. When the order of assessment holds the demand to be time barred, in effect, the assessment for that particular year is held as cancelled. 11. In the present case, even though the appellant paid the amount voluntarily prior to issuance of show cause noti .....

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