Custom, Excise & Service Tax Tribunal
Standard Chartered Bank vs Commissioner Central Goods And Service ... on 10 March, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
MUMBAI
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 89089 of 2018
(Arising out of Order-in-Appeal No. MUM-DGPM-WRU/APP-276/2017-18 dated 29.06.2018
passed by the Principal Additional Director General, DGPM, WRU, Mumbai)
Standard Chartered Bank .... Appellants
India Tax Department, 7th Floor, Cresenzo
C-38/39, G-Block, Behind MCA Club
Bandra Kurla Complex, Bandra (East)
Mumbai - 400 051.
Versus
Commissioner of CGST & Central Excise, .... Respondent
Mumbai East 9th Floor, Lotus Info Centre Parel (East), Mumbai - 400 012.
APPEARANCE:
Shri Gopal Mundhra a/w Ms Priyadarshini Shekhawat, Advocates for the Appellants Shri. Adeeb Pathan, Authorized Representative for the Respondent CORAM:
HON'BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL) HON'BLE MR. M.M. PARTHIBAN, MEMBER (TECHNICAL) FINAL ORDER NO. A/85299/2025 Date of Hearing: 20.09.2024 Date of Decision: 10.03.2025 PER : M.M. PARTHIBAN This appeal has been filed by M/s Standard Chartered Bank, Mumbai (herein after referred to, for short, as "the appellants") assailing the Order- in-Appeal No. MUM-DGPM-WRU/APP-276/2017-18 dated 29.06.2018 (hereinafter referred to, for short, as "the impugned order") passed by the Principal Additional Director General, Directorate General of Performance Management (DGPM), Western Regional Unit (WRU), Mumbai. It is also mentioned in the preamble to the impugned order that the Pr. ADG, DGPM, WRU, Mumbai has been appointed as adjudicating authority in the present case, by the Central Board of Excise and Customs in exercise of the powers 2 ST/89089/2018 conferred by section 83A of the Finance Act 1994, as amended, read with Notification No. 30/2005-Service Tax dated 10.08.2005, as amended, and Notification No.16/2007-Service Tax dated 09.04.2007.
2.1 The brief facts of the case are that the appellants herein are engaged in the business of a banking company operating through various branch offices situated across India and having their head office in London, United Kingdom. The appellants provide various services to their customers such as Banking & other Financial Services, Business Auxiliary services, renting of immovable property services, cash management operations, utilities, loans processing, securities services, credit risk control, financial market operations and compliance & assurance, handling transaction processing activities across various product lines including credit cards, personal loans, current account and savings account, mortgage raising and corporate Finance solutions across all its domains. In order to comply with the service tax law, the appellants had taken centralized registration and holding service tax registration certificate No. AABCS4681DST003.
2.2 During the course of EA-2000 audit conducted by the department in respect of the accounts maintained by the appellants for the period 2006- 2007 to 2010-2011, it was found that the appellants did not pay service tax on the interest or discount element on the service provided by the bank in respect of overdraft facility, Cash credit facility or discounting of bills, bills of exchange or cheques. Accordingly, the audit wing of the department wrote to the appellants vide letter dated 16.01.2012 requesting them to pay the amount equal to the CENVAT credit involved in respect of exempted services in terms of Rule 6(3A)(c)(iii) of the CENVAT Credit Rules, 2004. In response the appellants vide their letter dated 14.02.2012 had reiterated their stand that such disputed services are not in the nature of exempt services and there is no need for reversing the amount of CENVAT as contended by the department. However, they also informed that as a special case, with a view to show their bona-fide, their management is considering reversal of unutilized CENVAT credit of Rs. 86.70 crores under protest. Further, the appellants had also informed the jurisdictional authorities that they had paid the amount demanded by the audit wing of the department by reversal of CENVAT credit to the extent of Rs.86,70,43,889/- vide their letter dated 12.03.2012 addressed to the department. Since the appellants believed that they are not required to pay the amount of CENVAT credit as contended by the department, they had 3 ST/89089/2018 also filed a refund application in the prescribed Form-R with the jurisdictional Service Tax authorities by filing their application dated 22.03.2013. The said refund application was disposed of by the Assistant Commissioner, Service Tax-I, Division-II, Mumbai, in rejecting the refund application by passing an Order-in-Original dated 21.06.2013. In rejection of the refund, the original authority had stated that a Show Cause Notice (SCN) dated 08.10.2022 has been issued to the appellants (issued on 07.11.2022) and the same is pending for adjudication with the Commissioner of Service Tax, Mumbai; and the refund application filed with his office on 22.03.2013 on the disputed issue of taxability of some income received by the appellants and admissibility to CENVAT credit for the services so provided, cannot be decided by him and therefore the refund claim for such amount attributable to the above disputed issue is 'pre- mature' and therefore it cannot be processed. Accordingly, he held that the refund claim filed by the appellants is not admitted and is liable to be rejected as pre-mature. However, he gave an option to file the refund claim afresh in accordance with the decision that may be taken by the Commissioner of Service Tax-I, Mumbai in such disputed claim, upon adjudication of the SCN dated 08.10.2022. Being aggrieved with the said order dated 21.06.2013 of the original authority, the appellants had filed an appeal before the Commissioner (Appeals) on 23.08.2013. In deciding the appeal, the Pr. ADG in acting as the First Appellate authority, had passed the impugned order rejecting the appeal filed by the appellants and in upholding the order of the original authority. Feeling aggrieved with the impugned order, the appellants have filed this appeal before the Tribunal.
3.1 Learned Advocate appearing for the appellants had submitted that the disputed issue of demand of CENVAT credit on alleged exempt services under SCN dated 08.10.2022 was adjudicated by the Commissioner, Service Tax-IV Commissionerate, Mumbai in dropping the entire demand of Rs.86,70,43,899/- and did not impose any penalty. He further stated that these facts along with the grounds for claim of refund of CENVAT amount paid under protest, were submitted before the learned first appellate authority; however, the said authority had not considered these aspects in the impugned order. Therefore, he stated that such an order is liable to be set aside and prayed that the appellants be granted refund tax paid under protest along with interest.
4ST/89089/2018 3.2 Learned Advocate further stated that the amount deposited during the investigation proceedings cannot be appropriated unless there is an assessment confirming the demand and therefore, in their case, since the demands have been dropped and no appeal has been filed by the department, the issue has attained finality and the amount paid by them 'under protest' ought to be refunded to them. He further stated that the appellants are not required to file a separate application for such refund; the limitation of time on such refund is not applicable as the same has been paid under protest; principle of unjust enrichment is not applicable in respect of pre-deposits made under protest. In addition to this, learned Advocate stated that the appellants had as a measure of caution had also submitted as a part of appeal papers, the Chartered Accountant's certificate dated 19.09.2024 certifying that the amount of Rs.86,70,43,889/- paid under protest on 21.02.2012 is carried forward in their Balance Sheets as 'receivables' and it continues to stand as an asset on the date. Therefore, he requested that the refund eligible to them should be granted as cash refund in terms of the transitional provisions and on the basis of the decisions/judgements delivered by the Tribunal and the Hon'ble High Courts of Gujarat and Madras.
3.3 Learned Advocate relied upon the following judgments in support of their stand: -
(i) Usha International Vs. Commissioner of Customs(I), Mumbai -
2017 (357) E.L.T. 532 (Tri. - Mumbai)
(ii) Century Metal Recycling Pvt. Ltd. Vs. Union of India - 2009 (234) E.L.T. 234 (P&H)
(iii) Dhariwal Industries Ltd. Vs. Commissioner of Central Excise - 2020 (45) TMI 1348 (CESTAT MUMBAI)
(iv) Jai Mateshwari Steels Pvt. Ltd Vs. Commissioner of CGST, Dehradun - 2022 (63) G.S.T.L. 95 - (Tri. - Del.)
(v) Thermax Limited Vs. Union of India - 2019 (31) G.S.T.L. 60 (Guj.)
(vi) Commissioner of Service Tax, Ahmedabad Vs. Bharat Sanchar Nigam Limited - 2023 (7) TMI 1123 (CESTAT AHMEDABAD)
(vii) Chambal Fertilizers & Chemicals Ltd. Vs. Commissioner of CGST, Udaipur - 2023 (71) G.S.T.L. (Tri. - Del.)
(viii) Commissioner of C. Ex. Lucknow Vs. Eveready Industries India Ltd.
- 2017 (357) E.L.T. 11 (All.)
(ix) CBIC Circular No. 984/08/2014-CX dated 16.09.2014 5 ST/89089/2018
(x) CBIC Circular No.802/35/2004-CX dated 08.12.2004
(xi) CBIC Instructions F. No. 275/37/2000-CX.8A dated 02.01.2002
4. Learned Authorized Representative (AR) appearing for Revenue, reiterated the findings made by the learned Pr. ADG in upholding the original order. He further stated that the appellants had submitted the refund application on 22.03.2013 in respect of the amount paid under protest, even before the issue in dispute could be adjudicated and therefore, he claimed that the impugned order upholding the original order of rejection of refund claim as pre-mature is proper and justified.
5. Heard both sides and perused the records of the case. We have also perused the additional written submissions presented in the form of paper books for this case.
6.1 The issue involved in this appeal is to determine whether the amount paid 'under protest' by the appellants in reversal of CENVAT credit involved in respect of alleged exempted services demanded in terms of Rule 6(3A)(c)(iii) of the CENVAT Credit Rules, 2004, on which subsequently show cause proceedings initiated and the same was dropped by the adjudicating authority, is refundable or not?.
6.2 It can be seen from the factual matrix of the case that the appellants have placed before the learned first appellate authority, the fact that in respect of the demands raised in the SCN dated 08.10.2022 was adjudicated by the Commissioner, Service Tax-IV Commissionerate, Mumbai in order dated 16.01.2017 wherein he had dropped the entire demand of Rs.86,70,43,899/- and did not impose any penalty. This has been recorded at paragraph 5 of the impugned order. However, by relying on the provisions of Section 73(4B) of the Finance Act, 1994, he gave a finding that the Central Excise Officer is required to determine the amount of service tax due under Section 73(4B)(b) ibid within six months/one year, where it is possible to do so; and, at the time of filing the refund application, it was only six months; since the SCN was pending adjudication at that time, the original order holding that the refund claim is pre-mature is correct. As regards the eligibility of refund consequent to order dated 16.01.2017 passed in favour of the appellants on the same issue, the learned first appellate authority held that the same is not being taken up for consideration in the impugned order.
6ST/89089/2018 6.3 In order to address the above issues, we would like to refer to the legal provisions relating to refund under the Central Excise Act, 1944 made applicable to matters of service tax under Section 83 of the Finance Act, 1994, as extracted below.
Finance Act, 1994 Application of certain provisions of Act 1 of 1944.
"Section 83. The provisions of the following sections of the Central Excise Act, 1944 (1 of 1944), as in force from time to time, shall apply, so far as may be, in relation to service tax as they apply in relation to a duty of excise:--
sub-section (2A) of section 5A, sub-section (2) of section 9A, 9AA, 9B, 9C, 9D, 9E, 11B, 11BB, 11C, 12, 12A, 12B, 12C, 12D, 12E, 14, 15, 15A, 15B, 31, 32, 32A to 32P (both inclusive), 33A, 34A, 35EE, 35F, 35FF to 35-O (both inclusive), 35Q, 35R, 36, 36A, 36B, 37A, 37B, 37C, 37D, 38A and
40."
Central Excise Act, 1944 Claim for refund of duty and interest, if any, paid on such duty.
"Section 11B. (1) Any person claiming refund of any duty of excise and interest, if any, paid on such duty may make an application for refund of such duty and interest, if any, paid on such duty to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise before the expiry of one year from the relevant date in such form and manner as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of duty of excise and interest, if any, paid on such duty in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty and interest, if any, paid on such duty had not been passed on by him to any other person :
Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) as substituted by that Act :
Provided further that the limitation of one year shall not apply where any duty and interest, if any, paid on such duty has been paid under protest.
xxx xxx xxx xxx (2) If, on receipt of any such application, the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise is satisfied that the whole or any part of the duty of excise and interest, if any, paid on such duty paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund:
Provided that the amount of duty of excise and interest, if any, paid on such duty as determined by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to--.....
(a)...
(d) the duty of excise and interest, if any, paid on such duty paid by the manufacturer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty] to any other person;...."7
ST/89089/2018 6.4 On careful reading of the above legal provisions governing refund of duty/tax, it transpires that any person claiming refund of any duty of excise/ CENVAT or service tax, is required to make an application in the prescribed form along with documentary or other evidences for such claim and establishing that the amount so paid as duty/tax had not been passed on by him to any other person. Such refund claim shall be filed within the prescribed period of one year from the relevant date, and in case of duty/tax paid under protest, such time limit shall not be applicable. The facts on record clearly indicate that all the above aspects have been duly fulfilled by the appellants while filing the refund application. Since, in the present case the CENVAT duty has been paid under protest; the prescribed time limit for filing refund claim is not applicable.
6.5 Once an application for refund claim has been filed as per law and the same is complete in all respects, then the designated authority i.e., the Assistance Commissioner/Deputy Commissioner, is required to examine and satisfy himself, whether the refund claimed by the applicant is refundable or not. Once the issue is decided with respect to the amount of refund, then the said authority is further required to determine, whether such refund is to be credited to the Consumer Welfare Fund or it is to be paid to the claimant, upon examination of the issue, whether the refundable amount relates to the specified grounds itemized under proviso to sub-section (2) of Section 11B ibid including the issue of 'unjust enrichment angle'.
6.6 From the records placed in the case file, it is not in dispute that the amount of CENVAT credit of Rs.86,70,43,899/- was paid by the appellants under protest pursuant to audit objection and the payment of the same was communicated to the department on 14.03.2022. However, SCN was issued in this case on 08.10.2022 after the payment under protest and a proposal was also made for appropriation of such amount paid by the appellants towards demand of CENVAT credit. The application for refund in the prescribed Form-R was received by the department on 22.03.2023 and the grounds for refund specifically stated that the appellants is of the bonafide belief that the said amount paid in pursuance of audit objection ought not to be reversed and therefore they had filed such refund claim. However, the original authority did not decide the issue of refund claim in terms of Section 11B ibid on the grounds that the issue of dispute on the taxability of some income received by the claimant-appellants and admissibility of CENVAT credit for the services so provided, cannot be decided by a claim for refund;
8ST/89089/2018 further, in this matter as the SCN is pending adjudication with the Commissioner of Service Tax and till that is completed, the refund request cannot be processed and therefore it is pre-mature. Therefore, he rejected the refund claim as pre-mature.
6.7 We find that the application for refund has been held as premature in the impugned order too, by upholding the order of the original authority. The appellant has sought refund of the amounts deposited in pursuance to the audit objection raised by the department, by specifically stating that in their bona fide belief there is no requirement for payment of tax by reversal of CENVAT Credit and therefore they had filed such refund claim. Whether such amount paid under protest, is available for appropriation by the Central Excise/Service Tax authorities or not, would depend upon any confirmation of recovery under Section 11A of Central Excise Act, 1944 or under Section 73 of the Finance Act, 1994, along with interest and penalty, in terms of an order finalizing the assessment to state that such duty/tax is recoverable under appropriate provisions of law. Therefore, we are of the view that without coming to such a conclusion through due process of law, the amount deposited under protest would remain as a duty deposit and therefore the question of rejection of refund as pre-mature, is neither appropriate not it has the sanction of law.
6.8 Even if it was considered essential to retain the amount in deposit till conclusion of adjudication proceedings, it would have been appropriate for the competent authority to have withheld any decision on the application for refund till completion of the process. Under section 11B of Central Excise Act, 1944, rejection of refund claim can arise only on ineligibility in accordance with the provisions wherein. There is no reference to 'premature' claim as ground for rejection of refund.
6.9 It is also a fact on record that demands proposed in the SCN dated 08.10.2002 were dropped in its entirety by the Commissioner of Service Tax- IV, Mumbai vide Order-in-Original 16.01.2017. Thus, the matter with respect to the disputed issues had been finally decided in the Order dated 16.01.2017, and Revenue has nothing more to state as no appeal was filed against such order. In view of the above, we find that the issue with respect to demand of reversal of CENVAT credit against alleged exempted services had attained finality and there is no demand confirmed against such payment made by the appellants under protest. Therefore, we are of the considered view that the facts involved therein being germane to the issue of refund, these should 9 ST/89089/2018 have been dealt with by the first appellate authority in the impugned order, when the same were specifically brought to his attention during the personal hearing. On the other hand, the impugned order did not examine this aspect by specifically stating that the core issue of demand of CENVAT credit is legally sustained or not, is not being taken up for consideration by him in the impugned order. From the above it clearly transpires, that the impugned order has not followed the legal tenets laid down under Section 11B ibid in dealing with the claim for refund of duty/tax. Therefore, we are of the considered view that the impugned order is liable to be dismissed on this ground alone.
7. In this regard, we find that the Co-ordinate Bench of the Tribunal in the case of Persistent Systems Limited Vs. Commissioner of C. Ex. & S.T., Pune-III - 2016 (43) S.T.R. 117 (Tri. - Mumbai) has held that eligibility for refund should have been decided taking into consideration the taxability of the service and the procedures laid down in law relating to tax collection and refund. The Tribunal while remanding the case to the original authority for fresh adjudication had further observed that the duties and responsibility reposed to an authority under the law cannot be brushed aside without discharging the same as provided under the statute, which showed lack of responsibility on such authorities in proper handling the refund claim. The relevant paragraphs of the said order are extracted and given below:
"5. We, therefore, desist from any reference to our decision in the appeal against the confirmation of the demand and will limit ourselves to the issue framed in the foregoing paragraph. Both the lower authorities have rightly noted that there is no provision in law to permit entertainment of the plea of the assessee that the claim be held in abeyance. Yet they, without demur and with ingenuity, have devised the outcome of returning the application for refund without dealing with the ground for such claim - a course of action not thought of in the law and which borders on impossibility of implementation. The same law that did not consider it necessary to provide for keeping a decision in abeyance but has, on the contrary, attached penal consequences to such holding in abeyance also did not provide for returning of a refund claim. The justification put forth by the two lower authorities appears to defy logic.
6. Justification afforded for the act of returning the claim appears to flow from it being 'premature.' Implicit in such a description is the existence of a time period prior to which no claim can be preferred. Again, the statute does not prescribe a near deadline for filing claims. 'Premature' is, therefore, inexplicable and incomprehensible in the context. Such a description would be apt only if an application has been made before taxes or duties were paid which is plainly an absurdity. It would appear that the two lower authorities chose to attach a status to the refund claim that is not contemplated in the statute.10
ST/89089/2018
7. Besides statutory impropriety and fallacious description, a consummation disconnect is also perceptible. The claim having been filed and taken on record, its return can be said to be complete only when its custody is transferred back to the claimant. It is moot whether an order can render it to be so without the willing participation of the claimant in a custodial transaction. That the claimant has been pursuing appellate remedies is a clear indication of lack of such willingness. The orders of the lower authorities would appear to be no whit more than printing on a piece of paper. Can the physical existence of a refund application with the Commissionerate be erased or wished away by an adjudication order? Is there a process contra to revenue recovery that entails the might of the State being resorted to for reposing the custody in the applicant? It would appear not. The 'bell, book and candle' routine does not trespass into the temporal! Tax administrators exercising statutory authority should be cautious in staking the credibility of the institution that they represent.
8. That the appellant is not put to any disadvantage or detriment is not relevant to the circumstances. The claim itself is symptomatic of a lack of faith in the fairness of the institution in dealing with refund claims. Every conceivable reason is assigned to justify the unwillingness to open the purse strings and not the least used are 'limitation' and 'pre-requisite of challenging the assessment.' It would appear that the claim has been filed to forestall recourse to these justifications. That the claim has been filed and that it has been preceded by payment of tax is undeniable. That the content of the order passed in relation to the refund claims is unimplementable is uncontestable. Nevertheless, there is an order and the fallacies therein need to be remedied because we have taken a solemn oath to uphold the laws of the country. The legislative organ of the State has imposed a burden of interest for delays in sanctioning of refund and prescribed a time-frame of three months for processing claims. The impugned order appears to have been conceived as a tool to escape this burden without taking a decision on the refund claim. Such perversion of legislative intent cannot pass unchallenged.
9. The eligibility for refund should have been decided taking into consideration the taxability of the service and the procedures laid down in law relating to tax collection and refund. The form and substance of a disposal in adjudication is vested exclusively in the authority before whom the claim has been preferred and that is a responsibility which should have been responsibly discharged. The order of the original authority has merged with that of the first appellate authority and the merged order lacks legal sanctity for reason cited supra. Accordingly, the return of the refund claim is set aside and the original authority is directed to decide on the refund claim afresh in accordance with the law."
In view of the categorical decision of the Tribunal, in the above case of Persistent Systems Limited (supra), being identical to the above refund case, the issues under dispute in the present case is no more open to debate, and a different view cannot be taken by this Tribunal.
11ST/89089/2018 8.1 We also find that the Tribunal in the case of Chambal Fertilizers & Chemicals Ltd. (supra) have by following the various decisions of the High Courts and Tribunal have held that voluntary deposits made during the pendency of adjudication is pre-deposit of duty and unjust enrichment would not apply while dealing with refund of such duty. The relevant paragraph of the said order is extracted and given below:
"12. The issue as to whether unjust enrichment has to be examined while considering a claim for refund of an amount deposited during investigation or proceedings arose before the Madras High Court in Commissioner of Central Excise, Coimbatore v. Pricol Ltd.2015 (320) E.L.T. 703 (Mad.) Investigations revealed that the assessee had cleared waste and scrap without payment of duty. Adjudication proceedings were initiated but during the pendency of these proceedings, the assessee deposited Rs. 1.55 Crores. A show cause notice dated 2 December, 1998 was, thereafter, issued to the asseesee. After adjudication, the demand was confirmed by Order dated 11 May, 2001 and the amount of Rs. 1.55 Crores deposited by the assessee was directed to be appropriated. The assessee filed an Appeal against the aforesaid Order before the Tribunal. The Appeal was allowed by Order dated 17 December, 2004 and the Order passed by the Adjudicating Authority was set aside. The assessee thereafter filed a claim for refund of the deposit. The said refund was sanctioned by the Assistant Commissioner by Order dated 31 March, 2005. An Appeal was, however, filed by the Department. The Appeal was allowed and a direction was issued to the adjudicating authority to examine the plea of unjust enrichment. Feeling aggrieved by the remand order, the assessee filed an Appeal before the Tribunal. The Tribunal held that there was no case of unjust enrichment on the facts of the case as the assessee had produced a certificate of the Chartered Accountant that refund claim had not been passed on to the customers. Against this order of the Tribunal, the department filed an Appeal before the Madras High Court. The plea of unjust enrichment was examined and the High Court found that it was not a case of refund of 'duty' since the assessee had deposited the 'amount' under protest at the time of investigation. The High Court found that the Courts had consistently taken a view that any amount deposited during the pendency of adjudicating proceedings or investigation is in the nature of deposit made under protest and, therefore, the principles of unjust enrichment would not apply when a refund is claimed for this amount. The relevant portion of the judgement of the High Court is reproduced below:
"7. The first question of law, which is raised, relates to the plea of unjust enrichment and much emphasis is laid on the decision of the Supreme Court in Mafatlal Industries case (1997 (89) ELT 247 (SC)). Relevant portion of the order passed by the Supreme Court in Mafatlal Industries case (supra) has been extracted in the grounds (b) and (c). There is no dispute with regard to the proposition of law as laid down by the Supreme Court. In the present case, as is evident from the records, it is not a case of refund of duty. It is a pre-deposit made under protest at the time of investigation, as has been recorded in the original proceedings itself. In this regard, it has to be noticed it has been the consistent view taken by the Courts that any amount, that is deposited during the pendency of adjudication proceedings or investigation is in the nature of deposit made under protest and, therefore, the principles of unjust enrichment does not apply. The above said view has been reiterated by the High Court of Bombay in Suvidhe Ltd. v. Union of India (1996 (82) ELT 177 (Bom.)), and by the Gujarat High Court in Commissioner of Customs v. Mahalaxmi Exports (2010 (258) ELT 217 12 ST/89089/2018 (Guj.)), which has been followed in various cases in Summerking Electricals (P.) Ltd. v. Cegat, New Delhi (1998 (102) ELT 522 (All.)), Parle International Ltd. v. Union of India (2001 (127) ELT 329 (Guj.)) and Commissioner of Central Excise, Chennai v. Calcutta Chemical Company Ltd. (2001 (133) ELT 278 (Mad.)) and the said view has also been maintained by the Supreme Court in Union of India v. Suvidhe Ltd. (1997 (94) ELT A159 (SC)). There are also very many judgments of various Courts, which have also reiterated the same principles that in case any amount is deposited during the pendency of adjudication proceedings or investigation, the said amount would be in the nature of deposit under protest and, therefore, the principles of unjust enrichment would not apply. In view of the catena of decisions, available on this issue, this Court answers the first substantial question of law against the Revenue and in favour of the assessee."
(Emphasis Supplied)
13. A similar issue arose before the Allahabad High Court in EBIZ. Com Pvt. Ltd. v. Commissioner of Central Excise, Customs & Service Tax and Ors 2016 (9) TMI 1405 = 2017 (49) S.T.R. 389 (All.). The assessee was engaged in the business of developing and selling various online/offline educational software packages. The Anti-Evasion Branch of Central Excise Department, NOIDA conducted a search in its premises on 12 January, 2007 and the assessee deposited an amount of Rs. 25,55,000/-. The assessee also deposited an amount of Rs. 2,59,000/- on 21 March, 2007 towards interest. Thereafter, a show cause notice dated 3 July, 2007 was issued to the assessee demanding service tax. The demand was confirmed, against which an appeal was filed which was dismissed by the Commissioners (Appeals) on 29 August, 2008. The assessee filed an appeal before the Tribunal which was allowed by order dated 23 December, 2012 and the matter was remanded to the Commissioner (Appeals). The Commissioner (Appeals), thereafter, by order dated 29 August, 2012 allowed the appeal and set aside the order passed by the adjudicating authority. The assessee thereafter, filed a refund claim on 27 January, 2014. A show cause notice dated 2 April, 2014 was issued requiring the assessee to explain why the refund claim should not be rejected for the reason that it had not been made within one year. No order was passed and, therefore, a writ petition was filed in the Allahabad High Court. The Allahabad High Court examined the provisions of Section 11AB of the Central Excise Act, 1944, which contemplates that the amount shall be refunded to the assessee provided the incidence of such duty had not been passed on by him to any other person. The Allahabad High Court held that any amount deposited during the pendency of the adjudicating proceedings or investigation is in the nature of a deposit under protest and, therefore, the principles of unjust enrichment would not be attracted. In coming to this conclusion, the Allahabad High Court placed reliance upon the decision of the Madras High Court in Pricol Ltd.
14. The aforesaid decisions of the Madras High Court and the Allahabad High Court in Pricol Ltd. and EBIZ. Com Pvt. Ltd. were followed by the Allahabad High Court in Commissioner of Central Excise, Lucknow v. Eveready Industries India Ltd. 2017 (357) E.L.T. 11.
15. This issue was also examined by the Tribunal in Commissioner of Customs, Bangalore v. Motorola India Pvt. Ltd. 2006 (206) E.L.T. 370 (Tri.
- Bang.). The Tribunal upheld the view of the Commissioner (Appeals) that the power of unjust enrichment would not be applicable for refund of an amount deposited during investigation and the relevant paragraph is reproduced below:
13ST/89089/2018 "10. It is clear that the Commissioner (A) dealt with two refund claims in respect of each of the appeal filed before him. The fact that the amounts were paid during investigation is not in dispute. The duty liability on the Respondents is settled consequent to Commissioner's order dated 6-10-2003 in respect of Appeal No. 44/05. But as regards Appeal No. 45/05, the Respondents filed the refund claim before the Asst. Commissioner as earlier as 9-11-2001 though the Commissioner passed his order on 27-2-2004. The point is that in respect of both the claims, the amounts were deposited during the course of investigation by the DRI. The Commissioner (A) has elaborately discussed the issues and come to the conclusion that the excess amount deposited after taking into account the duty liability determined by the Commissioner is in the nature of a deposit and therefore, the bar of unjust enrichment is not applicable. We agree with the learned Consultant's submission (for the Respondent) that when the duty paid during the pendency of an appeal before the appellate authority is considered as deposit, there is no reason why the amount deposited during investigation cannot be considered as deposit. We also find that the decision of the larger Bench in the case of Jayant Industries (supra) has merged with the Apex Court's decision in the case of ITC (supra). Hence, the bar of unjust enrichment would not be applicable even to the amounts deposited during investigations. The contentions raised by Revenue are not tenable. Hence, we do not want to interfere with the findings of the appellate authority."
(Emphasis Supplied)
16. It is, therefore, clear from the aforesaid decisions of the High Courts and the Tribunal that any amount deposited during the pendency of adjudication or investigation is in the nature of a deposit and, therefore, cannot be considered to be towards payment of service tax or excise duty. The principles of unjust enrichment, therefore, would not apply if a refund is claimed for refund of this amount."
8.2 We find that in the case of Thermax Limited (supra), the Hon'ble High Court of Gujarat have held that the duty paid by the petitioner/appellant which is otherwise not payable shall be treated as voluntary deposit and is to be paid in cash instead of credit in CENVAT account after 01.07.2017. The relevant paragraph of the said order is extracted and given below:
"10. It is thus eminently clear from the aforesaid observations made in the impugned order that the duty, which was paid by the petitioner, which was otherwise not payable on the exported goods and therefore, rebate of such duty was not admissible in terms of Rule 18 of the Central Excise Rules. However, the duty, which was paid by the petitioner is held to be treated as voluntary deposit. As per Section 142(3) of the GST Act, every claim for the refund filed by any person before, on or after the appointed day i.e. 1-7-2017 for refund of any amount of Cenvat credit, duty, tax, interest or any other amount paid under the existing law, should be disposed of in accordance with the provisions of existing law and any amount eventually accruing to such person should be paid in cash. We are of the considered opinion that in view of this clear provision, the Respondent No. 2 ought to have directed the sanctioning Authority to refund the amount of the duty refundable to the petitioner in cash instead of credit in Cenvat Account."
9. In view of the foregoing discussions and analysis, and based on the decisions delivered by the Tribunal and Hon'ble High Court, we find that 14 ST/89089/2018 the order of the original authority has merged with that of the first appellate authority and the merged order, which is impugned herein, lacks legal sanctity for reasons discussed in paragraphs 6.4 to 6.9 above.
10. Therefore, the impugned order is liable to be set aside as it does not stand the scrutiny of law. Accordingly, we set aside the impugned order dated 29.06.2018 and restore the refund claim application to the original authority for disposal on merits of the case, as per law. Needless to state that the material placed on record by the appellants in the appeal filed before this Tribunal, alongwith any additional material to be submitted by them shall be examined by the original authority and a reasonable opportunity for personal hearing shall also be given to the appellants.
11. In the result, the impugned order is set aside, and the appeal is allowed by way of remand to the original authority for a decision afresh on the merits of the case and as per law.
(Order pronounced in open court on 10.03.2025) (S.K. MOHANTY) MEMBER (JUDICIAL) (M.M. PARTHIBAN) MEMBER (TECHNICAL) Sinha