HC instructs refund of Service Tax paid under Promoter with interest

Team HR Services Private Ltd Vs Union of India & Anr (Delhi High Court)

The issue under consideration is relating to the writ petition filed for seeking refund of pre-deposit of Service Tax  alongwith interest. Question is whether petitioner will get the refund or not?

In the present case, the officers of the Service Tax Commissionerate conducted an audit or investigation and a deposit of Rs. 2,38,00,000/- was made by the petitioner under protest, under pressure from the officers during the audit/investigation of the service tax records, as the officers insisted on the deposit by the petitioner, even without issuing any notice to show cause to the petitioner. The Service Tax Department issued a show-cause notice to the petitioner, demanding service tax of Rs.4,66,39,061/- for the period, admitting that the petitioner there out of had already deposited Rs.2,38,00,000/- under protest. The Commissioner (Adjudication) Service Tax passed the order in respect of the show cause notice, confirming the demand with interest and penalty and appropriated the amount of Rs.2,38,00,000/- aforesaid towards the same.

High Court states that, the counsel for the respondents has only placed before us what is recorded in the final rejection refund order but reasoning wherein is illogical and contrary to the expected conduct from the State and unjustifiable. The said order does not disclose any ground or statutory provision whereunder the respondents State are entitled to retain the said amount of Rs.2,38,00,000/-. It is thus not as if, HC ought not to exercise their implicit discretion in exercising writ jurisdiction for the reason of any statutory remedy being available to the petitioner. When it is so and when the reasons disclosed in the order refusing refund are found to be illogical and de hors the statutory provision and further when it is found that the respondents State are illegally withholding money, a case for issuing a mandamus as sought is made out.

Hence HC passed the order stating that the respondents are expected to at least now, on or before 15^th July, 2020 refund the amount of Rs.2,38,00,000/- with interest @ 6% per annum from 1^st November, 2006 to 31^st May, 2018 and with interest @ 7.5% per annum from 1^st June, 2018 till the date of refund on or before 31^st July, 2020. However, if the said amount is not refunded by 15^th July, 2020, the rate of interest with effect from 1^st August, 2020 shall stand enhanced to 12% per annum. A mandamus to the said effect is issued to the respondents GST Department.

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