Patna High Court Orders ₹1.24 Lakh Refund After Service Tax Appeal Pre-Deposit Paid Twice, Grants 12% Interest

The Patna High Court has directed the Central GST and Central Excise Department to refund ₹1,24,175 to a petitioner after finding that the amount paid towards the mandatory pre-deposit for a service tax appeal was deposited twice

The Division Bench of Justice Rajeev Ranjan Prasad and Justice Sunil Dutta Mishra also directed the Department to pay interest at 12% per annum from the date of the second receipt until payment, along with ₹25,000 towards litigation costs.

The Court further permitted the Department to identify the official at whose level the matter remained pending and recover the interest and litigation costs from the erring official.

The petitioner, Shashi Kant Singh, had challenged a service tax demand of ₹16.55 lakh raised by the Joint Commissioner, CGST and Central Excise, Patna-I, by order dated September 14, 2022. He filed an appeal before the Commissioner (Appeals) on November 14, 2022.

For filing the appeal, the petitioner was required to make a pre-deposit of 7.5% of the disputed demand. On June 16, 2023, he deposited ₹1,25,175 through the ICEGATE portal using SBI Internet Banking.

Although the amount was debited from his bank account, the ICEGATE portal displayed a message stating that the client did not exist and that the bank had provided a wrong client ID.

As the payment was not acknowledged and the last date for making the pre-deposit was approaching, the petitioner made a second payment of the same amount through RTGS on the same day.

The petitioner subsequently came to know that both payments had been credited to the Department's account. He raised a grievance through the Centralized Public Grievance Redress and Monitoring System (CPGRAMS). However, he was initially informed that the payment had not been received from the bank's end.

The petitioner thereafter approached the bank and the Department. The State Bank of India subsequently informed him that the payment made through Internet Banking had been duly received by ICEGATE and credited to the Department's account.

Before the High Court, the Department sought to rely upon Section 11B of the Central Excise Act, 1944, contending that the petitioner ought to have made an application under the provision for obtaining the refund.

The High Court rejected the contention, observing that Section 11B deals with claims for refund of excise duty and interest paid on such duty and was not applicable to the petitioner's case.

The Court observed that the Department had not shown bona fides by keeping the matter pending and that the petitioner had been unnecessarily compelled to approach the High Court.

It further observed that the facts were admitted and that, after the Department became aware that the amount had been deposited twice, it was required to refund the excess payment. Instead, the Department kept the matter pending and relied upon Section 11B in its counter affidavit.

"...the department has not shown its bonafide by keeping the matter pending at their end. The things were very simple and immediately after finding the complaints the department was required to refund the money which was deposited twice, but instead the department chose to file a counter affidavit in the garb of Section 11(B) of the Act of 1944.", the Court said.

The Court observed that the Department had not shown bona fides by keeping the matter pending and that the petitioner had been unnecessarily compelled to approach the High Court.

The Court accordingly directed the concerned Department officials to refund ₹1,24,175 along with interest at 12% per annum from the date of the second receipt until the date of payment, within four weeks.

It also awarded ₹25,000 as litigation costs. The writ petition was accordingly allowed.

For Petitioner: Advocate Kumaresh Singh

For UOI: Dr. Anjani Prasad Singh, Central Government Counsel

For Respondent 2 to 4: Senior Standing Counsel Anshuman Singh

For SBI: Advocate Alok Kumar Agrawal