The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai, has held that excess service tax paid during an investigation can be treated as the mandatory pre-deposit required for filing an appeal. 

The bench of Dr. Suvendu Kumar Pati (Judicial Member) has observed that the amount available exceeded the required deposit, the Tribunal set aside an order rejecting the taxpayer’s appeal and directed the Commissioner (Appeals) to hear the matter afresh on merits.

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The dispute arose after the Superintendent of the jurisdictional range office issued a letter dated January 23, 2019, seeking payment of service tax dues up to June 2017. The letter did not specify the amount payable and also asked the taxpayer to furnish copies of relevant returns, if filed.

According to the appellant, he calculated his total tax dues at ₹3,13,191 and made payments on various dates in 2019, with the last payment made on June 24, 2019.

His counsel submitted that the liability up to March 2017 comprised ₹2,08,336 in tax and ₹12,226 in interest. For the final quarter, April to June 2017, the appellant sought relief under the Sabka Vishwas (Legacy Dispute Resolution) Scheme. An SVLDRS Form-3 was issued determining the amount payable at ₹1,80,136.

However, the appellant claimed that he could not pay the scheme amount within the prescribed time because the Reserve Bank of India had imposed a moratorium on Punjab and Maharashtra Co-operative Bank, where his funds were held.

The appellant informed the Commissioner (Appeals) of this difficulty through a letter dated March 30, 2022. His counsel argued that the letter inadvertently mentioned only ₹2,20,562 as the payment made, without identifying another ₹92,629 claimed to be available as an advance for adjustment towards the appeal pre-deposit.

The Commissioner (Appeals) nevertheless rejected the appeal for non-payment of the mandatory pre-deposit, relying on the adjudicating authority’s observation that the payments had been appropriated towards earlier tax liabilities.

The Department opposed the appeal before the Tribunal. Its authorised representative acknowledged that the Superintendent’s demand letter did not quantify the liability and that the relevant paragraphs of the adjudication order did not specify the amount paid.

However, the Department relied on the appellant’s reply to the show-cause-cum-demand notice dated June 21, 2022. It argued that the appellant had himself described ₹3,13,191 as the amount due, leaving no outstanding balance available for adjustment towards the pre-deposit.

On that basis, the Department sought to defend the Commissioner (Appeals)’s order.

The Tribunal examined five challans showing payments totalling ₹3,13,191, along with the appellant’s sales register and written submissions.

The sales register for October 4, 2016, to March 31, 2017, reflected a calculated amount of ₹2,83,830. The Tribunal noted that nearly the same figure had been determined by the adjudicating authority. Separately, the appellant’s written summary recorded the tax due as ₹2,83,774.

The Tribunal observed that the appellant may have incorrectly calculated the liability for that period at ₹3,13,191. Even on the figures examined by the Tribunal, a balance exceeding ₹29,000 remained available.

Against this, the mandatory pre-deposit at 7.5% of the adjudged amount of ₹1,80,136 worked out to approximately ₹13,510. The available balance was therefore sufficient to meet the requirement.

Relying on Board Circular No. 984/08/2014-CX dated September 16, 2014, the Tribunal held that an amount paid during investigation could be treated as the pre-deposit for filing an appeal.

The Tribunal concluded that adequate pre-deposit had already been made when the appeal was filed before the Commissioner (Appeals).

It further observed that the appellate authority should have decided the appeal through a reasoned order stating the points for determination, its decision on those points and the reasons supporting that decision.

The Tribunal also recorded that the appellant had made another pre-deposit before CESTAT amounting to 10% of the adjudged amount.

Accordingly, it set aside the Commissioner (Appeals)’s order dated February 21, 2024, and remanded the matter for a de novo hearing with due notice to the parties. The Commissioner (Appeals) was directed to reconsider the dispute without reopening the pre-deposit issue.

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