2018 (9) TMI 1362 - AT - Service Tax

Tribunal rules adjusting rebate claims against unconfirmed interest impermissible. Upholds due process in tax matters.

The Tribunal upheld the Commissioner (Appeals) decision, ruling that adjusting rebate claims against unconfirmed interest amounts is impermissible. The ... Adjustment of sanctioned rebate against alleged interest - un-adjudicated and un-confirmed Interest - Held that:- There is no dispute on the factual position that the Original Adjudicating Authority sanctioned the rebate claim but adjusted it against the alleged liability towards interest. It is also a fact that there was no interest proceeding initiated against the assessee. In such a scenario, the adjustment of rebate claim against un-adjudicated and unconfirmed interest is not adjustable - Karnataka High Court’s decision in the case of Commissioner of Central Excise, Bangalore-III Vs Stella Rubber Works [2011 (3) TMI 571 - KARNATAKA HIGH COURT] vide which in an identical situation, the Hon’ble High Court held that adjustment of sanctioned rebate claims against the non adjudged interest amount is not permissible. Appeal dismissed - decided against Revenue. Issues involved:Adjustment of rebate claim against alleged interest amount without confirmation of interest liability.Analysis:The case involves an appeal by the revenue against the order passed by the Commissioner (Appeals) regarding the adjustment of a rebate claim against an alleged interest amount without confirmation of the interest liability. The appellant, a manufacturer exporter of Motorcycles, filed rebate claims for goods exported on payment of duty. The Original Adjudicating Authority sanctioned the rebate claim but adjusted it against an amount allegedly owed by the appellant for late deposit of service tax.The Commissioner (Appeals) observed that there were no proceedings initiated against the appellant for confirmation of interest, and no order confirming the interest amount had been passed by the revenue. The appellant disputed the interest liability, leading the Commissioner to set aside the Original Adjudicating Authority's order and direct the revenue to pass a speaking order after considering the appellant's submissions and adhering to the Principles of Natural Justice.The Tribunal found that there was no dispute that the rebate claim was adjusted against un-adjudicated and unconfirmed interest. Citing a decision of the Hon'ble Karnataka High Court in a similar case, the Tribunal held that adjusting sanctioned rebate claims against non-adjudged interest amounts is impermissible. The High Court had criticized the revenue for such actions and imposed costs, emphasizing the importance of refunding legitimate dues promptly. As the issue in the present case was covered by the High Court's decision, the Tribunal rejected the revenue's appeal, affirming the Commissioner (Appeals) decision.In conclusion, the Tribunal upheld the Commissioner (Appeals) decision, emphasizing that adjusting rebate claims against unconfirmed interest amounts is not permissible. The case highlights the importance of following due process and principles of natural justice in such matters to ensure fair treatment of taxpayers.