* IN HIGH COURT OF DELHI AT NEW DELHI % Date of decision: 10th June, 2020. + W.P.(C) 13114/2019 & CM No.7430/2020 (for directions) TEAM HR SERVICES PRIVATE LTD. ..... Petitioner Through: Mr. J.K. Mittal, Ms. Vandana Mittal and Ms. Aarti Sharma, Advs. Versus UNION OF INDIA & ANR ..... Respondents Through: Mr. P.S. Singh, Adv. for R-1. Mr. Kuldeep Singh, Mr. Gurmeet, Advs. for R-2 with Ms. Niharika Gupta, Assistant Commissioner, Division-Nehru Place, Central GST, Delhi East Commissionerate. CORAM: HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW HON'BLE MS. JUSTICE ASHA MENON [VIA VIDEO CONFERENCING] RAJIV SAHAI ENDLAW, J. 1. This petition under Article 226 of Constitution of India seeks mandamus, directing Assistant Commissioner, Central Tax, GST- Delhi East, GST Division, to forthwith refund with interest, pre-deposit of Rs.2,38,00,000/- made by petitioner; it is stated that appeal preferred by petitioner against order dated 3rd October, 2011 passed by Commissioner, has been finally allowed by Tribunal by order dated 22 nd February, 2018 and revenue appeal preferred whereagainst by W.P.(C) 13114/2019 Page 1 of 14 respondents to this Court i.e. SERTA No.23/2018, has been dismissed on 24th August, 2018, declaring that respondents had no right to retain said money of petitioner. 2. It is case of petitioner, (i) that audit/investigation was conducted by officers of Service Tax Commissionerate, New Delhi, from 24th July, 2006 to 28th July, 2006, for period 1st July, 2003 to 31st March, 2005 and deposit of Rs.2,38,00,000/- was made by petitioner on 27th October, 2006, under protest, under pressure from officers during audit/investigation of service tax records, as officers insisted on deposit by petitioner, even without issuing any notice to show cause to petitioner; (ii) that petitioner, vide letter dated 30th October, 2006, informed respondents that deposit made on 27th October, 2006 was under protest and vide letter dated 26th February, 2007, informed Joint Commissioner of Service Tax of same and that despite lapse of few months from date of deposit, show cause notice had not been received; (iii) that Service Tax Department issued show cause notice dated 28th July, 2008 to petitioner, demanding service tax of Rs.4,66,39,061/- for period of 1st July, 2003 to 31st March, 2005, admitting that petitioner thereoutof had already deposited Rs.2,38,00,000/- under protest on 27th October, 2006; (iv) that Commissioner (Adjudication) Service Tax, New Delhi passed order dated 3rd October, 2011 in respect of show cause notice dated 28th July, 2008 aforesaid, confirming demand with interest and penalty and appropriated amount of Rs.2,38,00,000/- aforesaid towards same; (v) that petitioner preferred appeal before Customs, Excise & Service Tax Appellate Tribunal (CESTAT)/Tribunal along with application for interim stay; Tribunal by order dated 24th W.P.(C) 13114/2019 Page 2 of 14 September, 2012 allowed stay application, by waiving of pre-deposit of balance amount owing to deposit by petitioner, though under protest, of said sum of Rs.2,38,00,000/- and vide subsequent order dated 15th October, 2013, it was clarified that stay would continue to operate till pendency of appeal; (vi) that vide Circular No.984/08/2014-CX dated 16th September, 2014 issued by Central Board of Excise and Customs, Department of Revenue, Ministry of Finance, it was clarified that when appeal is decided in favour of assessee, assessee is entitled to refund of amount with interest under Section 35FF of Central Excise Act, 1944 and such refund should be made within fifteen days of receipt of letter seeking refund, irrespective of whether Department was proposing to challenge said order; (vii) that vide Master Circular No.1053/02/2017- CX dated 10th March, 2017 issued by Board, it has further been clarified that when appeal is decided in favour of assessee, assessee is entitled for refund of amount deposited along with interest, from date of making deposit till date of refund and such deposit is not payment of duty and will not be governed by provisions of Section 11B of Central Excise Act; (viii) that Tribunal, vide final order dated 22nd February, 2018 allowed appeal aforesaid of petitioner, on ground that demand was barred by limitation; (ix) that petitioner vide application dated 2nd May, 2018 sought refund of Rs.2,38,00,000/- deposited on 27th October, 2006; (x) that respondents challenged order dated 22nd February, 2018 of Tribunal before this Court by filing SERTA No.23/2018, which was dismissed by this Court vide order dated 24th August, 2018, on ground that no question of law arose; resultantly, order of Tribunal allowing appeal of petitioner was affirmed; (xi) W.P.(C) 13114/2019 Page 3 of 14 that petitioner again, on 11th March, 2019 sought refund of amount aforesaid and on refund not being made, submitted reminders dated 16th April, 2019, 14th May, 2019 and 12th June, 2019; and, (xii) that respondents, on claim of petitioner for refund, conducted hearing on 20th August, 2019 but still failed to refund said sum of Rs.2,38,00,000/- to petitioner. 3. petition came up first before this Court on 13th December, 2019 and thereafter on 17th December, 2019, when notice thereof was issued and it was ordered that in case amount sought by petitioner is refundable, respondents should ensure that amount is refunded with interest within four weeks therefrom. However, till 25th February, 2020, neither refund had been made nor any action taken pursuant to order dated 17 th December, 2019. During hearing on 25th February, 2020, counsel for respondents assured this Court that refund orders will be issued by next date of hearing. Finding that there was no compliance, neither of order dated 17th December, 2019 nor of order dated 25th February, 2020, vide order dated 3rd March, 2020, contempt notice was issued to respondents, clarifying that in case amount due to petitioner was refunded with interest within one week therefrom, contempt notice shall stand automatically discharged. matter could not be taken up on next date i.e. 16th March, 2020, owing to prevalent Covid-19 situation. 4. petitioner filed CM No.10820/2020 for early hearing and which was taken up on 13th May, 2020. It was stand of counsel for respondents on that date that reasons for not complying with orders were set out in counter affidavit which remained to be filed. Vide order W.P.(C) 13114/2019 Page 4 of 14 dated 13th May, 2020, counter affidavit was permitted to be filed and application for early hearing allowed and writ petition posted for hearing for today. 5. respondents, in their counter affidavit have pleaded (a) that show cause notice dated 28th July, 2008 proposing demand of Rs.4,66,39,021/- along with interest and penalty was issued to petitioner and out of which sum of Rs.2,38,00,000/- had been deposited by petitioner under protest; (b) that on said show cause notice being adjudicated in favour of petitioner, on 12th March, 2019, refund application was filed by petitioner; (c) that refund sanction order was drafted by then Assistant Commissioner but negative observations were raised by pre-audit branch, Central GST Commissionerate, Delhi East and hence refund application was rejected; (d) that petitioner was informed of said rejection of refund and was given opportunity of personal hearing on 20 th August, 2019, before processing refund application; (e) that final rejection refund order signed on 13th September, 2019 was dispatched to petitioner on 19th September, 2019 but was received back undelivered; (f) however, on 19th September, 2019 itself petitioner was telephonically communicated final rejection refund order dated 13th September, 2019; (g) that petitioner has concealed said facts; and, (h) that refund application having been adjudicated vide final rejection refund order dated 13th September, 2019, same has attained finality and only remedy available to petitioner is of filing of statutory appeal thereagainst before competent authority. W.P.(C) 13114/2019 Page 5 of 14 6. perusal of final rejection refund order dated 13th September, 2019 shows that same also does not dispute that sum of Rs.2,38,00,000/- deposited by petitioner on 27th October, 2006 was under protest and said order records, (I) that on petitioner preferring appeal to CESTAT, because petitioner had already deposited more than 50% of tax element, though under protest, condition of pre-deposit was waived; (II) that CESTAT set aside impugned order dated 3rd October, 2011 only on question of limitation; (III) that petitioner had filed refund claim well within prescribed time; (IV) that vide Circular dated 16th September, 2014, where appeal is decided in favour of assessee, assessee shall be entitled to refund of amount deposited along with interest at prescribed rate from date of making of deposit to date of refund; (V) that appeal preferred by petitioner had been decided in favour of petitioner only on question of limitation; (VI) that amount of Rs.2,38,00,000/- had been deposited by petitioner, under protest, during course of audit/investigation and not by way of pre-deposit pursuant to appeal before CESTAT thus Circular dated 16th September, 2014 was not applicable to facts, though pre-deposit for filing appeal is not payment of duty but deposit by petitioner of Rs.2,38,00,000/- was not by way of pre-deposit and CESTAT had allowed appeal of petitioner only on limitation, though not finding petitioner to be having case on merit; (VII) that even High Court in its order dated 24th August, 2018 had not gone into merits of case; (VIII) that thus deposit of Rs.2,38,00,000/- by petitioner, though under protest, was made against service tax liability and which liability had not been decided in any of Court s orders; (IX) that W.P.(C) 13114/2019 Page 6 of 14 therefore claim of refund of amount of Rs.2,38,00,000/- was not admissible; (X) that none of judgments cited by counsel for petitioner dealt with treating amount deposited by way of tax, though under protest, to be pre-deposit for refund purpose; and, (XI) that thus amount of Rs.2,38,00,000/- deposited by petitioner against service tax liability and which liability had not been set aside by CESTAT, was not refundable. 7. purport of aforesaid order of respondents declining refund to petitioner and which forms defence of respondents to this petition, is that since petitioner had deposited said amount of Rs.2,38,00,000/-, even though under protest, before preferring appeal to CESTAT and not by way of pre-deposit under Section 35F of Central Excise Act, notwithstanding appeal of petitioner against total demand of Rs.4,66,39,061/-, and in which said sum of Rs.2,38,00,000/- had been adjusted, being allowed, petitioner was not entitled to refund of Rs.2,38,00,000/-. 8. We have enquired from counsel for respondents, whether not aforesaid logic in order declining refund, leads to absurd situation where, respondents, notwithstanding their demand for entire sum of Rs.4,66,39,061/- (and against which sum of Rs.2,38,00,000/- deposited under protest had been adjusted) being set aside by CESTAT on ground of being barred by time, are entitled to appropriate amount of Rs.2,38,00,000/- already deposited by petitioner and demand with respect whereto has also been set aside. We have further enquired, whether not said logic treats Rs.2,38,00,000/- out of total demand of W.P.(C) 13114/2019 Page 7 of 14 Rs.4,66,39,061/- differently from balance, with respondents being entitled to recover/appropriate Rs.2,38,00,000/- but not being entitled to recover balance demanded amount. It was not case of respondents before Commissioner or before CESTAT or before this Court that deposit by petitioner of Rs.2,38,00,000/- even though under protest, was within time and only demand for balance amount was barred by time and thus amount of Rs.2,38,00,000/- should be permitted to be appropriated. Commissioner as well as CESTAT dealt with entire demand as one and set aside same and now same cannot be bifurcated. 9. Since emphasis of counsel for respondents, during hearing, also is on Circular providing for refund of pre-deposit amount being not applicable to deposit under protest, we have further enquired, how and under what head have respondents appropriated Rs.2,38,00,000/-, when entire demand of Rs.4,66,39,061/- of which it was part, stands set aside. 10. We have yet further enquired from counsel for respondents, whether not respondents, inspite of being State within meaning of Article 12 of Constitution of India and expected to not act to prejudice of its citizens, are acting as finders keepers , by inspite of having been held to be not entitled in law to entire amount of Rs.4,66,39,061/-, refusing to refund what has already been received and to which they have not been held to be entitled. 11. Though there is no clarity of circumstances under which petitioner deposited said sum of Rs.2,38,00,000/- during W.P.(C) 13114/2019 Page 8 of 14 audit/investigation but undisputed position remains that deposit was under protest and against anticipated liability and which liability though fructified by respondents was set aside by CESTAT and which order has attained finality. It is not case of respondents that said deposit was voluntary or by way of self-assessment and which has been accepted by respondents and in which case respondents could perhaps have argued that said deposit was voluntary and not refundable, as was case in Commissioner of Income Tax, Bhopal Vs. Shelly Products (2003) 5 SCC 461. On contrary, assessment done by respondents and demand raised in pursuance thereto, of Rs.4,66,39,061/- and whereagainst Rs.2,38,00,000/- was adjusted, has been set aside in entirety and as of today there is no assessment which had attained finality assessing liability of petitioner to tax of Rs.2,38,00,000/-. respondents as State can recover and/or retain as tax only such amounts which are assessed and found due as tax and which assessment has attained finality. respondents, as State, cannot retain even single paise of assessee, unless has been found due towards tax liability and which is not case here. At time when amount of Rs.2,38,00,000/- was deposited, there was no assessment and no demand. 12. respondents are reminded of Article 265 of Constitution of India prohibiting any tax to be levied or collected except by authority of law. respondents have also not pleaded case of petitioner being not entitled to refund, on ground of petitioner having passed of liability to another as illustrated in Nine Judge Bench s judgment of Supreme Court in Mafatlal Industries Ltd. Vs. Union of India (1997) 5 SCC 536. Allowing respondents to retain said amount, would also be W.P.(C) 13114/2019 Page 9 of 14 in violation of Section 72 of Contract Act, 1872, obliging person to whom money has been paid by mistake or under coercion, repay same. said provision enshrines principle of unjust enrichment and restitution and respondents State, by refusing to refund sum of Rs.2,38,00,000/-, are purporting to unduly enrich themselves. 13. We may however mention that counsel for petitioner also, perhaps to bring case of petitioner within Circular relied upon, has sought refund of amount by calling it pre-deposit , when it was not deposited by way of pre-deposit but under protest, even before any demand was raised and while petitioner was still being investigated against. Such deposits under protest, to ease rigors which Tax Authorities otherwise are entitled to impose, are not unknown and judicial notice has been taken thereof. However as long as amount deposited is under protest and in which protest, as held in Mafatlal Industries Ltd. supra no grounds are required to be stated, no right thereto accrues in favour of depositee till depositee is held entitled in law thereto. Thus, wrong nomenclature given by petitioner to deposit would not be ground for allowing respondents State to unduly enrich themselves. Division Bench of this Court in Indglonal Investment and Finance Ltd. Vs. Income Tax Officer (2012) 343 ITR 44 has held that refund provisions should be interpreted in reasonable and practical manner and when warranted, liberally in favour of assessee. 14. To be fair to counsel for respondents, he has only placed before us what is recorded in final rejection refund order but reasoning wherein is illogical and contrary to expected conduct from State and W.P.(C) 13114/2019 Page 10 of 14 unjustifiable. said order does not disclose any ground or statutory provision whereunder respondents State are entitled to retain said amount of Rs.2,38,00,000/-. 15. No statutory mechanism whereunder petitioner is entitled to seek refund in such circumstances also has been disclosed. It is thus not as if, we ought not to exercise our implicit discretion in exercising writ jurisdiction for reason of any statutory remedy being available to petitioner. When it is so and when reasons disclosed in order refusing refund are found to be illogical and de hors statutory provision and further when it is found that respondents State are illegally withholding money, case for issuing mandamus as sought is made out. 16. It is perhaps for this reason only that even while issuing notice of petition, directions for refund were made and which remain uncomplied with. 17. We are unable to find any justification for respondents to retain said amount of Rs.2,38,00,000/-. We have thus enquired from counsel for respondents, what should be rate of interest for which respondents should be held liable. 18. counsel for respondents states that as per statute, respondents are liable for interest @ 6% per annum only. 19. Per contra, counsel for petitioner has drawn attention to: (A) Sandvik Asia Ltd. Vs. Commissioner of Income Tax-I, Pune (2006) 2 SCC 508 where interest @ 9% per annum was awarded; W.P.(C) 13114/2019 Page 11 of 14 (B) Surinder Singh Vs. Union of India 2006 SCC OnLine Del 1863 (DB) where interest @ 12% per annum was granted on delayed refund; (C) Hello Minerals Water (P) Ltd. Vs. Union of India 2004 SCC OnLine All 2187 (DB) where interest @ 10% per annum was granted; (D) Hindustan Coca-Cola Beverages Pvt. Ltd. Vs. Union of India 2013 SCC OnLine Guj 1487 (DB) where interest @ 9% per annum and future interest @ 6% per annum was granted; and, (E) Ebiz.com Pvt. Ltd. Vs. Commissioner of Central Excise, Customs & S.T. 2017 (49) S.T.R. 389 (All.) where costs of Rs.50,000/- were imposed on Department. 20. In present case, as aforesaid, amount of Rs.2,38,00,000/- was deposited by petitioner of its own volition, during audit/investigation, though under protest and petitioner has not chosen to detail circumstances in which petitioner felt compelled to make deposit. petitioner for first time sought refund of said amount vide letter dated 2nd May, 2018. 21. Considering said facts, we do not find petitioner entitled to interest at any higher rate than @ 6% per annum from date of deposit i.e. 27th October, 2006 till end of May, 2018 i.e. 31st May, 2018. However, we do not find any justification for respondents retaining said amount thereafter and find respondents liable for interest with effect from 1st June, 2018 onwards and till date @ 7.5% per annum. While so enhancing rate of interest, we have also taken into consideration non- compliance by respondents of orders of this Court as detailed above, W.P.(C) 13114/2019 Page 12 of 14 leading to contempt notice being issued to respondents and in response whereto Ms. Niharika Gupta, Assistant Commissioner in Office of Division-Nehru Place, Central GST, Delhi East Commissionerate is present in Court. 22. respondents are expected to at least now, on or before 15th July, 2020 refund amount of Rs.2,38,00,000/- with interest @ 6% per annum from 1st November, 2006 to 31st May, 2018 and with interest @ 7.5% per annum from 1st June, 2018 till date of refund on or before 31st July, 2020. However, if said amount is not refunded by 15 th July, 2020, rate of interest with effect from 1st August, 2020 shall stand enhanced to 12% per annum. mandamus to said effect is issued to respondents GST Department. 23. We would be failing in our duty, if do not also record another contention of counsel for respondents. It was also contention of counsel for respondents that petitioner had concealed facts in petition, as disclosed in counter affidavit accompanied with documents. However, once respondents are not found entitled to monies of petitioner and/or are found to be unjustifiably retaining same, said argument would not entitle respondents to appropriate what is not due to them. 24. Having heard Ms. Niharika Gupta, Assistant Commissioner, we are of view that no purpose will be served in proceeding with contempt proceedings and contempt notice issued vide order dated 3rd March, 2020 is discharged. W.P.(C) 13114/2019 Page 13 of 14 25. respondents having however indulged in frivolous litigation, are burdened with costs of Rs.25,000/- payable to petitioner along with amounts with respect whereto mandamus has been issued. 26. petition is disposed of. RAJIV SAHAI ENDLAW, J. ASHA MENON, J. JUNE 10, 2020 bs W.P.(C) 13114/2019 Page 14 of 14 Team HR Services Private Ltd. v. Union of India & Anr