Case Law Details
Santhosh Eappen Vs Joint Commissioner of Central Tax And Central Excise (Kerala High Court)
Service Tax Refund of Company cannot can be appropriated towards outstanding dues of proprietary concern of Director: Kerala HC
In a very significant ruling Hon’ble Kerala High Court held that there was no illegality in the appropriation of the refund amounts by the department, towards the outstanding dues of the proprietary concern. Appellant being aggrieved by the fact that certain amounts that were refunded to him had been adjusted against service tax dues of a proprietary concern belonging to him. Appellant argued that certain amount that were pre-deposited on behalf of the company in which he is a director, were wrongly remitted by the appellant in his own name. On realizing the said mistake, he approached the department with prayer for refund. In the meanwhile, against a demand that had been raised against his proprietary concern, he had preferred an appeal before the First Appellate Authority and against the dismissal of that appeal a further appeal before the CESTAT. He also made pre-deposit of 7.5%/10% of the outstanding demand in that case as a condition for maintaining the appeal.
Single Judge dismissed the matter by holding that the liability of the proprietary concern was actually the liability of the appellant and in the absence of any provision in the Finance Act, 1994 requiring the issuance of any notice prior to adjusting refund amounts, the action of the department in appropriating the refund amounts against the outstanding dues of the proprietary concern could not be said to be illegal.
Further it was argued by appellant that he already preferred appeal before CESTAT after depositing 10% of the outstanding dues of the proprietary concern, and therefore, was technically entitled to a stay of recovery of balance amounts pending disposal of the appeal.
On further appeal before double bench, it was held that there was no illegality in the appropriation of the refund amounts by the department, towards the outstanding dues of the proprietary concern. The adjustment towards the outstanding demands of the proprietary concern, being in pursuance of an enabling provision under the statute that enables the department to adjust the refund amounts towards the outstanding dues of the proprietary
concern, it would require a positive interdiction by a statute or an adjudicatory forum for preventing the department from resorting to an
enabling provision under the statute. Appeal before DB was dismissed.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
In this Writ appeal, the appellant impugns the judgment dated 17.10.2024 of a learned Single Judge in WP(C). No.20875 of 2024. The brief facts necessary for the disposal of this Writ Appeal are as follows:
2. The appellant had approached this Court aggrieved by the fact that certain amounts that were refunded to him had been adjusted against service tax dues of a proprietary concern belonging to him. It was the case of the appellant that in respect of a company in which he was a Director, certain amounts that were pre-deposited on behalf of the company were wrongly remitted by the appellant in his own name. On realising the said mistake, he approached the department with an application seeking a refund since the amount deposited by him was not credited in the name of the company. In the meanwhile, against a demand that had been raised against his proprietary concern, he had preferred an appeal before the First Appellate Authority and against the dismissal of that appeal a further appeal before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). At the time of preferring the appeal before the First Appellate Authority and the CESTAT, he had also made pre-deposits of 7.5%/10% of the outstanding demand in that case as a condition for maintaining the appeal. Since there was no demand-cum-recovery notice issued thereafter by the Department against the proprietary concern there was no stay petition moved before the CESTAT in which any order was passed by the said forum. The case of the appellant before the learned Single Judge was essentially that, while he was entitled to a refund of the amount erroneously paid on behalf of the company in which he was a Director, and the said refund claim was allowed by the appropriate authority, the department had, without any justification, appropriated that amount towards the liability outstanding from the proprietary concern of the appellant.
3. The learned Single Judge rejected the contention of the appellant by finding that the liability of the proprietary concern was actually the liability of the appellant and in the absence of any provision in the Finance Act, 1994 requiring the issuance of any notice prior to adjusting refund amounts, the action of the department in appropriating the refund amounts due to the appellant towards the outstanding dues of the proprietary concern could not be said to be illegal. The Writ petition was therefore dismissed by the learned Single Judge.
4. Although before us, the learned Senior counsel Sri. Anil D. Nair, duly assisted by Smt. Nivedita A Kamath, on behalf of the appellant would contend that an appropriation of the refund amounts from the appellant towards the outstanding dues of the proprietary concern would militate against the fact that the appellant had already preferred an appeal before the CESTAT by paying 10% of the outstanding dues of the proprietary concern, and therefore, was technically entitled to a stay of recovery of balance amounts pending disposal of the appeal by the CESTAT, in the absence of any provision under the Finance Act, 1994, which provides for an automatic stay against recovery of outstanding dues once the statutory pre-deposit of 10% for entertaining the appeal is paid, we have to agree with the finding of the learned Single Judge that there was no illegality in the appropriation of the refund amounts by the department, towards the outstanding dues of the proprietary concern. The adjustment towards the outstanding demands of the proprietary concern, being in pursuance of an enabling provision under the statute that enables the department to adjust the refund amounts towards the outstanding dues of the proprietary concern, it would require a positive interdiction by a statute or an adjudicatory forum for preventing the department from resorting to an enabling provision under the statute. Such an interdiction being absent in the present case, we are of the view that the judgment of the learned Single Judge does not call for any interference. The Writ Appeal, therefore, fails and is accordingly dismissed.
Before parting with this appeal and taking note of the submission of the learned Senior counsel, we make it clear that in the event of the appellant making an application before the CESTAT for an early hearing of the appeal, the CESTAT shall consider the peculiar facts and circumstances in the instant case and consider taking up the appeal itself for any early disposal.
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