Refund of service tax under section 73(3) after voluntary payment during departmental enquiry; appeal dismissed on legal grounds

Refund claim concerns service tax paid during a departmental enquiry under the voluntary payment regime; legal point is that voluntary payment made under the statutory provision and communicated with applicable administrative instructions precludes challenge to belated refund where payment was made to comply with inquiry, and such payment does not permit issuance of a show cause notice to negate refund entitlement. Reverse charge allocation and the Place of Provision of Services Rules were considered for taxability determination but did not alter the consequence of voluntary payment. The appeal challenging the administrative denial of refund was dismissed on these legal bases.

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Issues: Whether the appellant is entitled to refund of service tax, interest and penalty paid voluntarily during departmental inquiry for FY 2014-15 and 2015-16, or whether the voluntary payment and intimation under Section 73(3) of the Finance Act, 1994 concludes proceedings and precludes refund.

Analysis: The issue is governed by Section 73(3) of the Finance Act, 1994 which permits a person to pay service tax on his own ascertainment and inform the Central Excise Officer, and provides that on receipt of such information no notice under subsection (1) shall be served in respect of the amount so paid; the proviso preserves the officer's right to determine any short payment and recover it with the limitation period counted from receipt of the information. The appellant paid service tax with interest and penalty during the course of an inquiry and informed the department seeking closure under Section 73(3) and relying on departmental instructions. Prior Tribunal precedent was applied to hold that once proceedings are concluded by voluntary payment and intimation under Section 73(3), the issue stands closed, the department cannot issue a notice in respect of the amount so paid, and the assessee cannot later seek refund of that amount. The appellant's reliance on the Delhi High Court decision cited was found factually distinguishable and inapplicable.

Conclusion: The voluntary payment and intimation under Section 73(3) concludes the proceedings and precludes the refund claim; appeal dismissed. (In favour of Revenue)

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