2018 (12) TMI 1610 - AT - Service Tax

Refund of Interest - service tax on the construction services provided to Government organization during the period 01.04.2015 to 29.02.2016 - exemption as provided in Section 102 of Finance Bill, 2016 - rejection of refund was on the ground that Section 102 does not provide for refund of interest - Held that - As per Section 102 of Finance Act, 2016, the service tax is not leviable on the construction services provided to the government departments during the period 01.04.2015 to 29.02.2016 - Admittedly, the appellant paid the service tax during the said period and wherever there was delay, they had paid interest also. Since, the interest is a piggy-back of service tax and when service tax itself was not payable, the interest was also not payable. Since it was charged and paid by the appellant, it is refundable. Interest should be refunded - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund of interest paid along with service tax on construction services provided to government departments during a specific period.

Analysis:
The appellant paid service tax on construction services provided to government departments from 01.04.2015 to 29.02.2016. Section 102 of the Finance Act, 2016 retrospectively exempted services provided during this period to government departments. The appellant filed a refund claim for the service tax and interest paid. The refund of service tax was sanctioned, but the refund of interest was rejected by the sanctioning authority, citing Section 102 not providing for interest refund. The appellant appealed to the Commissioner (Appeals) against this decision, leading to the present appeals.

The appellant's representative argued that since service tax was not payable due to the retrospective exemption, there should be no payment of interest. Citing a similar case, the representative contended that any interest paid should be refunded along with the service tax.

The Revenue's representative reiterated the findings of the impugned order, opposing the refund of interest.

Upon careful consideration, the Member (Judicial) found that as per Section 102 of the Finance Act, 2016, service tax was not leviable on construction services provided to government departments during the specified period. Since the service tax itself was not payable during this time, any interest paid should also be refunded. The Member noted that interest is directly linked to service tax, and if the service tax was not payable, the interest should not have been charged or paid. Therefore, the interest paid by the appellant was deemed refundable along with the service tax. Consequently, the impugned orders rejecting the interest refund were set aside, and the appeals were allowed.

The judgment highlights the correct interpretation of the law regarding the refund of interest paid along with service tax in cases where the service tax itself was retrospectively exempted. It emphasizes the interconnected nature of service tax and interest, leading to the conclusion that if the service tax was not payable, interest should not have been charged or paid, warranting a refund of both amounts to the appellant.