2014 (11) TMI 205 - AT - Service Tax

Interest on delayed refund - refund of service tax paid on the services rendered to them in an SEZ unit - Whether the appellant is eligible for interest on the refunds sanctioned belatedly. - Held that - It is undisputed that the appellant had filed the refund of service tax paid on the services rendered to them in an SEZ unit - admittedly the refund has been ordered under Rule 5 of the Rules and there was a delay in sanctioning the refund, in the circumstances, the provisions of Section 11BB of the Act would clearly be attracted and as such the Tribunal was justified in holding that the provisions of clause (c) of the proviso to sub-section (2) of Section 11B and consequently Section 11BB of the Act are clearly applicable to the facts of the present case and as such the respondent is entitled to interest on delayed refund of Cenvat Credit as claimed by it. Another aspect of the matter is that when Section 11BB of the Act had newly been inserted by the Finance Act, 1995, the Government of India, Ministry of Finance (Department of Revenue) has issued Circular 130/41/95-CX., dated 30th May, 1995 (which finds reference in the impugned order of the Tribunal) issuing instructions regarding refunds claimed under Section 11BB of the Act. The Annexure thereto provides for the checklist of documents which are required to be filed with refund claims. Item No. 3 thereunder relates to Refund of credit of duty paid on excisable goods used as input in accordance with Rule 57FD . Thus, as per the instructions issued by the Central Government refunds under Rule 57F of the erstwhile Central Excise Rules, 1944 would be governed by the provisions of Section 11BB of the Act. Rule 57F of the said Rules made provision for the manner of utilisation of inputs and credit allowed in respect of duty paid thereon. Sub-rule (13) of rule 57F made provision for refund of accumulated credit in case where for any reason it was not possible to adjust the same in the manner provided under the said sub-rule. Sub-rule (13) of Rule 57F of the said Rules is more or less in pari materia to the provisions of Rule 5 of the Cenvat Credit Rules, 2002/2004. Thus, the instructions issued by the Central Government under the aforesaid Circular would also be applicable to refunds under rule 5 of the Rules, which instructions are binding on the revenue. - impugned orders rejecting the claim of interest of the appellant are incorrect - Decided in favour of assessee.

Summary

Issues:
- Whether the appellant is eligible for interest on belatedly sanctioned refunds under Notification No. 15/2009-ST.
- Interpretation of provisions under Section 11B and 11BB of the Central Excise Act 1944 in the context of refund claims.
- Compliance with circulars regarding refund claims of service tax paid on services rendered to SEZ units.
- Applicability of interest on belated sanction of refund claims under relevant legal provisions and judicial precedents.

Analysis:
1. The appeals were filed against the rejection of refund claims of interest on belated refunds. The First Appellate Authority upheld the rejection, prompting the appellant to challenge the decision. The appellant argued that interest should be paid on belatedly sanctioned refunds based on legal precedents like the Hon'ble Supreme Court and High Court decisions.

2. The main contention was whether the appellant was entitled to interest on the refunds sanctioned belatedly under Notification No. 15/2009-ST. The lower authorities concluded that provisions of Section 11B and 11BB of the Central Excise Act 1944 did not apply to the appellant's refund claims under the said notification, hence interest was not payable.

3. The appellant's counsel highlighted that the Board circulars mandated timely sanctioning of refund claims related to services rendered to SEZ units. They argued that non-compliance with these circulars should attract interest payment on belated refunds. The appellant relied on judicial decisions to support their claim for interest.

4. The Tribunal found that the lower authorities erred in not considering the basic premise that services rendered in SEZ units are exempted from service tax. The Tribunal referred to a previous case to emphasize that exemptions for SEZ units were being implemented through relevant notifications, and interest on belated refunds should be paid accordingly.

5. The Tribunal also noted that the Board's circulars clearly outlined the timeframes for processing refund claims related to services provided to SEZ units. Non-adherence to these time limits should trigger interest payment on belated refunds, as per the statutory provisions. The Tribunal disagreed with the lower authorities' interpretation and emphasized the importance of following the circulars.

6. Referring to a High Court judgment, the Tribunal reiterated that the provisions of Section 11BB of the Act should be applied to cases involving delayed refund sanctions. The Tribunal highlighted the significance of circulars issued by the Central Government in governing refund claims under specific rules, emphasizing the binding nature of these instructions on the revenue authorities.

7. Ultimately, the Tribunal concluded that the rejection of the appellant's claim for interest on belated refunds was incorrect. Citing legal precedents and statutory provisions, the Tribunal set aside the impugned orders and allowed the appeals, directing for consequential relief if applicable. The judgment emphasized the importance of adhering to legal provisions and circulars in processing refund claims to ensure timely and fair treatment for taxpayers.