The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that service tax, fine, or penalty not considered pre-deposit for filing appeal.
The bench of P.V. Subba Rao (Technical Member) has observed that the distinction between refund of pre-deposit made under section 35F and duty or service tax paid under section 11B is that the pre-deposit under section 35F can be a percentage of duty, fine or penalty. It must be deposited as a pre-condition for filing an appeal. If the pre-deposit is not made, there will be no right of appeal to the person aggrieved by the order. Section 11B, on the other hand, provides for refund of duty or service tax. If an amount is already paid as duty or service tax, it is reckoned while computing if any further amount needs to be paid to meet the mandatory requirement of pre-deposit under section 35F. Merely because such adjustment is made, the amount paid as service tax or fine or penalty does not become pre-deposit under section 35F.
The appellant/assessee, M/s Essjay Telecommunications and IT Services Private Ltd. filed the appeal to assail Order in Appeal passed by the Commissioner (Appeals) rejecting the appellant’s prayer for higher rate of interest of 12% instead of the notified rate of 6% for deposits under section 35FF.
The appellant’s case is that what was deposited by it was not a pre-deposit under section 35F nor was it a service tax but it was only a revenue deposit because it had deposited the amount during the investigation and finally CESTAT decided in favour of the appellant and no service tax was payable. Therefore, the rates of interest notified for refunds under section 35FF do not apply to its case and it is entitled to 12% interest per annum.
The department submitted that the amounts deposited by the appellant were considered towards the pre- deposit under section 35F while admitting the appeal and therefore, the rate of interest of 6% notified by Notification no. 24/2014-CE (NT) dated 12.8.2014 would apply to the appellant as they would apply to any other assessee. The appellant cannot claim a higher rate of interest than what was notified.
The department initiated an investigation against the appellant for suspected non-payment of service tax. During the course of investigation itself, the appellant had deposited some amount towards service tax.
A Show Cause Notice was issued which culminated in an order by the adjudicating authority confirming the demand and appropriating the amount deposited during the investigation towards this confirmed demand. The appellant filed an appeal which was allowed by the tribunal and the demand of service tax by the lower authorities was set aside.
The appellant sent a letter requesting for refund of the amount paid during the investigation which was appropriated by the lower authorities along with interest. The Assistant commissioner sanctioned the refund treating the amount deposited by the appellant as a pre-deposit under section 35F. He also paid interest at the rate of 6% per annum as per payable on such deposits under section 35FF. The appellant filed an appeal before the Commissioner(Appeals) seeking a higher rate of interest at 12% per annum. The appeal was rejected by the Commissioner(Appeals) through the order.
The issue raised was the fundamental question, which raises in this case is how should an amount which has been deposited as service tax, but which subsequently became refundable, consequent upon an order of the tribunal or courts be treated. Will it be a service tax, pre-deposit or just a revenue deposit?
The tribunal has what was paid by the appellant was service tax as determined by the lower authorities in the adjudication proceedings. If there was no further order, nothing would have been refundable. However, the order of the adjudicating authority was modified by this Tribunal setting aside the demand. Therefore, the service tax became refundable as per section 11B and the relevant date for the purpose was the date of the order of the Tribunal. If there was any delay in sanctioning of the refund, interest must be paid as per section 11BB.
Case Details
Case Title: M/S Essjay Telecom And It Services Private Limited Versus Commissioner Of Central Tax & Cgst-, Central Exicse-Delhi
Case No.: Service Tax Appeal No. 50853 Of 2024
Date: 12/03/2025
Counsel For Appellant: Pawan Arora
Counsel For Respondent: V. J. Saharan
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